TAX ON INDIVIDUALS

INDIVIDUAL TAXPAYERS

RESIDENT CITIZENS OF THE PHILNON-RESIDENT CITIZENS OF THE PHILRESIDENT ALIENSNON-RESIDENT ALIENS ENGAGED IN BUSINESS IN THE PHILSNON-RESIDENT ALIEN NOT ENGAGED IN BUSINESS IN THE PHILBorn and living in the PhilippinesLeaves the Phil as immigrant, works permanently or derives income from abroadHave stayed outside the Phil for more than 183 daysLives in the Phil but is not a citizen of the PhilComes to the Phil for a definite purpose,makes a temporary home in the Phil for more than one year by the end of the calendar yearNot living in the Phil and is not a citizen of the PhilMore than 180 days in the PhilNot living in the Phil and is not a citizen of the PhilComes to the Phil for a definite purpose and may be promptly accomplished

ILLUSTRATIONSMr. B was a non-resident citizen in 2007. He returned to the Philippines on June 5, 2008 to reside permanently in the Philippines. He had income from January 1 to June 4, 2008 from Philippine sources of P300,000 and foreign sources of P200,000. He had income from June 6 to December 31 of the same year of P600,000 from Philippine sources and of P400,000 from foreign sources. How can he be considered a resident tax payer and a non-resident tax payer?

ILLUSTRATIONSMr. C, a citizen of the Philippines left the Philippines on February 10, 2006 and returned only on January 1, 2008. What will he be between the years 2006 and 2007?Mr. D, an alien, came to the Philippines on June 5, 2006. He stayed in the Philippines until February 2, 2008. For the year 2006, what will be the status of Mr. D as tax payer? For the year 2007?

ILLUSTRATIONSMr. E, an alien, came to the Philippines on January1, 2008 and stayed up to February 1, 2008. During his stay in the Philippines he was actively in commerce with gross income of P1,000,000 and expenses related to income of P200,000. What type of taxpayer will Mr. E Be?Mr. F, an alien, came to the Philippines on January 1, 2008 as a tourist. He stayed up to September 2008. During his stay in the Philippines, he spends until in August where he sold his camera for P40,000 gaining an excess of P5,000 from the cost. What will he be as a taxpayer?

COMPUTATION OF CAPITAL GAIN TAXON SALE OF SHARES OF STOCK HELD AS CAPITAL ASSET (Domestic stock not listed and traded thru local stock exchange)On net capital gain:Not over P100,000Final tax of 5%In excess of P100,000Final tax of 10%ON SALE OF REAL PROPERTY IN THE PHILIPPINES HELD AS CAPITAL ASSETSP VS. FMV whichever is higherFinal tax of 6%

CAPITAL GAIN TAX ON SHARES OF STOCKCAPITAL ASSET- asset not used in the business.NET CAPITAL GAIN = SP CostSELLING PRICE amount in consideration of the sale (SP or FMV whichever is higher)COST purchase price + expense upon purchase

SOLVEMr. P sold his shares of stock from a domestic corporation which was held as capital asset to Mr. T for P250,000. His cost is P175,000. How much is the capital gain tax to be charged to him?Selling priceP250,000 Less: Cost 175,000 Net gainP 75,000 Final tax 5% CAPITAL GAIN TAXP 3,750Mr. S sold his shares of stock from a domestic corporation which was held as capital asset to Mr. T for P250,000 where the Fair market value at the time of sale is P300,000. His cost is P150,000. How much is the capital gain tax to be charged to him?Fair Market valueP300,000 Less: Cost 150,000 Net gainP150,000 Final tax 5% 100,000 P 5,000 Excess @ 10% 50,000 5,000 CAPITAL GAIN TAXP 10,000

SOLVEMr. P sold his shares of stock from a domestic corporation which was held as capital asset to Mr. T for P350,000, a commission of P15,000 was given to the agent who negotiated the transaction. His share was originally purchased at P250,000 and paid a commission of P25,000 to the broker . How much is the capital gain tax to be charged to him?Fair Market value P350,000 Less: Commission 15,000 Net SP P335,000 Less Cost 250,000 Add Commission 25,000 275,000 Net Capital Gain 60,000 Final tax 5% 60,000 P 3,000

CAPITAL GAIN TAX ON REAL PROPERTYREAL PROPERTY land, building or anything attached to the soil with permanence.CAPITAL GAIN TAX Selling Price or Fair Market Value whichever is higher.TAX IS ON A PER TRANSACTION BASIS ONLY

SOLVEMr. X sold his land in the Philippines for P10,000,000 when the FMV is P9,000,000. He acquired the lot in 2000 with a cost of 5,000,000. The sale has gained him P5,000,000. How much is his capital gain tax on real property?Selling Price P10,000,000 Final tax 6%CAPITAL GAIN TAXP 600,000

#17The tax payer is a citizen of the Philippines, residing in the Philippines.

Selling price of land and building in the Philippines held as capital asset 4,500,000 Fair market value at the time of sale 5,000,000 Cost of the land and building 4,000,000 How much is the capital gain tax?

SOLUTION FOR #17

Fair Market Value5,000,000 X Final Tax 6%

CAPITAL GAIN TAX 300,000

INCOME SUBJECT TO TAX FOR A RESIDENT CITIZEN

CATEGORY ACATEGORY BCATEGORY CCapital Gain with Capital gain tax of5% & 10%6%Passive Income with final tax of7 %10%20%Other IncomeGraduated tax of 5% to 32%Tax due within 30 daysTax withheld at sourceTax is withheld at source. Income received is net of taxAnnual Income Tax ReturnQuarterly ITR

SOLVE #22The taxpayer is a resident citizen of the Philippines with the following data in a calendar year:Net Income from business 2,500,000 Interest on BPI-Savings Account 40,000 Interest on Allied Bank TD 50,000 Interest on Bonds BSP 30,000 Interest in foreign currency 100,000 Dividend from a domestic corp 40,000 Dividend from a foreign corp 20,000 Royalties from books authored 100,000Compute for the final tax of each passive income.How much is the passive income for the year, net of withholding income tax?

SOLVE #22The taxpayer is a resident citizen of the Philippines with the following data in a calendar year:FINAL TAX ON PASSIVE INCOMEInterest on BPI-Savings Account 8,000 Interest in foreign currency 7,500 Dividend from a domestic corp 4,000 Royalties from books authored 10,000

TOTAL FINAL TAX ON PASSIVE INCOME 31,500

SOLVE #22The taxpayer is a resident citizen of the Philippines with the following data in a calendar year:

Interest on BPI-Savings Account 32,000 Interest on Allied Bank TD 40,000 Interest on Bonds BSP 30,000 Interest in foreign currency 92,500 Dividend from a domestic corp 36,000 Dividend from a foreign corp 18,000 Royalties from books authored 90,000

TOTAL PASSIVE INCOME 338,500

OTHER INCOMECOMPENSATION INCOME Employer-employee relationshipBUSINESS or PROFESSIONSALE or EXCHANGE OF PROPERTY (not subject to the capital gain tax)INCIDENTAL SOURCES interest or dividend (not subject to final tax)

COMPUTATION COMPENSATION INCOMEGross Compensation Income Less: Deductions Personal ExemptionsEquals : Taxable Compensation Income Graduated rate applies 5% to 32%NOTES:SSS, Philhealth and Pag-ibig contribution are deducted from gross compensation income.Exclusions ceiling amount P30,000Paid premiums on hospitalization/health insurance-deducted from gross compensation income.

EXEMPTIONSTaxpayer (regardless of status) P50,000 Each dependent (max of 4) 25,000 each

SOLVEMr. A is an employee of XYZ Company with annual income of P200,000 net of exclusions and receives an allowance of P5,000 a month. How much will his taxable income be considering his status as married with 4 children ages 16, 18, 20 and 22?

hNet Salaries200,000 Add: Allowances 60,000 Gross Compensation Income 260,000 Less Personal Exemption 125,000 Taxable Income 135,000

Tax Due @ 70,000 8,500 Excess of 70,000 (65,000x20%) 13,000 TAX DUE FROM MR. A 21,500

SOLVEMr. B is a resident citizen who is married. He is employed and had the following data in a taxable year:Salaries, before deduction 335,615Allowances 20,598Payroll deductions: SSS Contribution 5,325 Philhealth 2,950 Pag-ibig Contribution 1,950 Labor Union dues 2,000 Payment of loan to employer 25,000

How much is the taxable income?

Salaries335,615 Add: Allowances 20,598 Gross Compensation 356,213 Less: Payroll deductionsSSS Contribution 5,325 Philhealth 2,950 Labor Dues 2,000Pag-ibig Contribution 1,950 Total 12,225 Net Compensation Income343,988 Less: Personal Exemption 50,000 Taxable Income293,988

COMPUTATION SELF-EMPLOYED OR PRACTICE OF PROFESSIONGross IncomeLess: Deductions for expenses and losses Personal ExemptionEquals : Taxable Income (Graduated Income Tax applied 5% to 32%)

SOLVEData from the record of Mr. Z are as follows:Sales 581,605 Sales Return 2% Cost of Goods sold397,600 Business Expenses114,200 Civil Status : Married, Compute for taxable IncomeCompute the Income Tax due

Sales 581,605 Less Sales Discount 11,632.10 Net Sales 569,972.90 Less Cost of Good Sold 397,600.00 Gross Profit 172,372.90 Less: Expenses 114,200.00 Net Income 58,172.90 Less Personal Exemption 50,000.00 Taxable Income 8,172.00 Income Tax DueNot over 10,000 X 5% 408.65

SOLVEMr. L, a resident citizen, single, had income from within and outside the Philippines, Data for the year are as follows:Gross Income within120,872.94 Gross Income outside190,425.30 Deductible Expense within 58,924.65 Deductible Expense outside 158,539.41How much was the income tax at the end of the year?

Gross Income within120,872.94 Gross Income outside190,425.30 Total Income311,298.24 Less: Deductible ExpenseWithin58,924.65Outside 158,539.41217,464.06

Net Income 93,834.18 Less Personal Exemption 50,000.00 Taxable Income 43,834.18Income Tax: due 30,000 2,500.00 In excess of 30,000 2,075.127Income Tax due 4,575.127

COMPUTATION MIXED INCOMEGross Compensation Income Add: Net Income from Business or Profession (Gross Income Expenses & Losses)Less: Personal ExemptionEquals : Taxable Income (Graduated Income Tax applied 5% to 32%)

SOLVEMr, X is a resident of the Philippines, married with 2 children ages 3,5, with income from business and a practicing accountant as well. He is receiving a monthly retainers fee from Guzman and Associates of P12,000 per month, with deductions totaling P37,875 for the year. He earns an income of P600,000 with expenses at P250,000. How much is the taxable income of Mr. X?Compute for income tax at the end of the year.

Gross Income600,000 Less: Expenses250,000 Net Income from business350,000 Add: Compensation Income 144,000 Less Deductions 37,875 106,125 Income before exemption456,125 Less: Personal ExemptionBasic 50,000 Dependent 50,000 100,000 Taxable Income356,125 Tax DueOver 250,000 50,000 Excess (356,125-250,000 X 30%) 31,837.5 Income Tax 81,837.5

INCOME TAX ON THE NON-RESIDENT CITIZENSources of Income within the PhilippinesCapital Gain Tax on sale within the Philippines 5% - 10%Real Property Tax on property within the Philippines 6%Passive Income from Foreign sources ExemptPassive Income within the Philippines 10%; 20%; 10%

SOLVEMs. P, is a citizen of the Philippines, resides and operates a business in Singapore. Her income in Singapore totals P1,680,000 with expenses totaling P975,000.Ms. P receives P20,000 dividend from PLDT.Ms. P has sold her property in Batangas for P350,000, receiving a gain of P95,000.How much is the taxable income of Ms. P?

Working and living in Singapore Ms. P. is not subject to Business tax.Final Tax on passive income P2,000 Capital Gain tax on sale of real property P21,000

SOLVEMr. X is a Filipino citizen, married with six underage children, engage in business both in the Philippines and Thailand. He has been managing the business in Thailand for three years now.The details are as follows:Gross Income-Philippine branch 1,850,000 Gross Income-Thailand branch 2,000,000 Expenses in Philippines 950,600 Expenses in Thailand 1,180,600 Cash deposited in a Thailand bank 700,000 Winnings in a lottery in Thailand 50,000 COMPUTE FOR THE TAXABLE INCOME OF MR. XCOMPUTE FOR INCOME TAX DUE FOR THE YEAR?

Gross Income Phil1,850,000 Less Expenses Phil 950,600 Net Income 899,400 Less: Personal ExemptionBasic50,000Dependent(4) 100,000 150,000 Taxable Income 749,400Income Tax DueOver 500,000 125,000 Excess of 500,000 X 32% 79,808 Income Tax Due 204,808

INCOME TAX ON THE RESIDENT ALIENSources of Income within the Philippines

Capital Gain Tax on sale within the Philippines 5%/10%

Real Property Tax on property within the Philippines 6%

Passive Income from Foreign sources Exempt

Passive Income on interest from foreign deposit 7.5%

Passive Income within the Philippines 10%; 20%; 10%

SOLVEMr. Y is a Canadian citizen but living in the Philippines for more than two years. He is married and have 3 dependents. His income includes the following:Dividends from domestic corporation 50,000 Gain on real property sold in Canada 3,500,000Business Income-Philippines 2,500,000Expenses 1,950,000How much is the taxable income?How much is the income tax due?

SOLUTIONBusiness income-Phil2,500,000 Less Expenses1,950,000 Net Income 550,000 Less Personal ExemptionBasic 50,000Additional 75,000 125,000 Taxable Income 425,000Income Tax due Over 250,000 50,000 In excess of 250,000 X 30% 52,500Total 102,500

SOLVEMr. S is a citizen of a foreign country, married a Filipina, residing in the Philippines with 3 children.Data for the taxable year:Deposit from a foreign bank25,000 Dividend from a foreign corporation 15,000 Capital gain on sale of stock-domesticSFT48,000 Capital gain on sale of the wifes realSFT property not considered conjugal with SP of 5,000,000 and FMV of 6,000,000 1,200,000 Net Income from the business in the Phil 450,000 Net Income from business outside the Phil 650,000How much is the taxable income?How much is the income taxes due from Mr. S?

SOLUTIONDividend from a foreign corporationexemptCapital gain on sale of stock-foreign exempt

Net Income 450,000 Less: Personal ExemptionBasic50,000 Dependent75,000 125,000 Taxable Income 325,000

Income tax Due on income 50,000In excess 22,500 Income Tax 72,500

INCOME TAX ON THE NON-RESIDENT ALIEN ENGAGED IN BUSINESSSources of Income within the PhilippinesCapital Gain Tax on sale within the Philippines 5% - 10%Real Property Tax on property within the Philippines 6%Passive Income from Foreign sources ExemptPassive Income within the Philippines 10%; 20%; 10%EXEMPTION-The Income tax law on exemption or the NIRC law on taxation whichever is LOWER.No additional exemption is allowed.

SOLVEMr. V, married, a citizen and businessman in country X, engaged in business in the Philippines for twelve months in a calendar year. The following data on his income follows:

Gross Income-Phil 700,000 Capital gain-sale of stock from Domestic Corporation 15,000 Gross Income-Country X 680,000 Business Expense-Country X 250,000 Business Expense-Phil 550,000 Interest on savings-Country 15,000 Interest on savings-Phil 7,00050,000

TAXPAYERCOUNTRY XNIRCALLOWED P/ESINGLE30,00050,000HEAD OF THE FAMILY18,00050,000MARRIED55,00050,000

SOLUTIONGross Income-Phil700,000 Business Expense-Phil550,000 Net Income150,000 Less Personal Exemption 50,000 Taxable Income100,000 Income Tax Due70,000 8,500 In excess of 70,000 6,000 Income tax due 14,500

Capital gain tax 750 Interest on savings-Phil 1,400

INCOME TAX ON THE NON-RESIDENT ALIEN NOT ENGAGED IN BUSINESSSources of Income within the Philippines FINAL TAX OF 25%Capital Gain Tax on sale within the Philippines FINAL TAX OF 5% - 10%Real Property Tax on property within the Philippines FINAL TAX OF 6%NO PERSONAL EXEMPTION IS ALLOWED

SOLVEMr. Y is a subject and resident of a foreign country. He is married with a qualified dependent child. His income is from Philippine and foreign sources.Income, Philippines95,742 Income, foreign country of which subject45,978 Dividend from a non-resident corporation20,000

How much is the income tax expense for the year:If he is a non-resident alien engage in business in the Philippines and the given income is net income. (Assume full reciprocity on personal exemption)?If he is a non-resident alien not engage in business in the Philippines, the given income is gross income?

SOLUTIONMr. Y is a non-resident engage in business in the Philippines:

Income from the Phil95,742 Less: Personal exemptionBasic50,000Additional25,00075,000 Taxable Income20,742 Income tax due10,000 500 In excess of 10,000 X10% 1,074.20 Income tax due1,574.20

Mr. Y is a non-resident not engage in businessGross Income95,742X Final Tax 25%Final Tax23,935.50

QUARTERLY INCOME TAX OF INDIVIDUALSFirst quarterly returnApril 15 CY Second quarterly returnAugust 15 CY Third quarterly returnNovember 15 CY Final or annual returnApril 15 SY

ILLUSTRATIONMr. A, a resident citizen, married, with 5 qualified dependent children, had as of September 30, 2007, a taxable income from business of P680,000 and income tax payment thereon of P182,600. For 2007, he had a gross income of P320,000 from which there was a withholding income of P51,800. The following were the cumulative data on business for each of the first three quarters, and end, of the year:

First QSecondQThird Q YearGross Inc 400,000 780,000 1,300,0001,800,000CG-sale of stock-domestic 50,000 50,000Interest-PhCur 10,000 20,000 30,000 40,000Expenses/Loss 200,000 410,000 620,000 730,000

Mr. A, a resident citizen, married, with 5 qualified dependent children, had as of September 30, 2007, a taxable income from business of P680,000 and income tax payment thereon of P182,000. For 2007, he had a gross income of P320,000 from which there was a withholding income of P51,800. The following were the cumulative data on business for each of the first three quarters, and end, of the year:First Q SecondQThird Q YearGross Inc 400,000 780,000 1,300,000 1,800,000CG-sale of stock-domestic 50,000 50,000Interest-Ph Cur 10,000 20,000 30,000 40,000Expenses/Loss 200,000 410,000620,000 730,000

FIRST Q SECOND Q THIRD Q YEARGross Income 400,000 780,000 1,300,000 1,800,000Less Exp/Loss 200,000 410,000 620,000 730,000Balance 1,070,000Add Comp Inc 320,000Total 1,390,000- Personal Exem 150,000Taxable Income 200,000 370,000 680,000 1,240,000Income Tax 37,500 86,000 182,000 361,800Less IT paid1st Quarter (37,500) (37,500) (37,500)2nd Quarter (48,500) (48,500)3rd Quarter (96,600)IT withheld on compensation inc (51,800)INCOME TAX STILL DUE 37,500 48,500 96,600 127,400

SOLVEPROBLEM #31 PAGE 48

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