EXERCISES 5-1 1. None. The entire income is exempt because Minnie is a MWE. Basic salary P 48,000 !

ertime an" ni#ht$shi%t "i%%erential pay 14,000 &a'ar" pay 1(,000 ther bene%its) 1*th month pay P 4,000 +ess) Exemption *0,000 $ . Total ,not taxable.4,000 (. a. None. Procee"s o% li%e insurance policy payable upon the "eath o% the insure" are exclu"e" %rom #ross income.

b /ernan"o must report P(0,000 0,P1(,000 x 10- 1 100,0002 as income. . The rule is 3amounts recei!e" in excess o% the %ace amount o% the policy are usually taxable as interest45 hence, inclu"e" in the #ross income. c No. 6t "oes not matter 7hether the insure" is the mother or the 7i%e o% . the bene%iciary. The exclusion exists because li%e insurance bene%its closely resemble inheritances 7hich are not taxable. *. None, because 8n#el is not re9uire" to pay income tax on the entire amount he recei!e" as procee"s %rom insurance policy. The reason bein# that the insure" "i" not outli!e the policy. 6% ho7e!er, his %ather outli!e" the li%e insurance policy, 8n#el must report an income o% P.:,000 ,the %ace amount o% P100,000 minus the premiums pai" in the amount o% P(:,000-. 4. ;o"ol%o must report an income o% P.:,000. 8lthou#h ac9uire" by him, he is not re9uire" to report the !alue o% the inherite" properties in his income tax return because properties ac9uire" thru inheritance are sub<ect to estate tax4 the liability bein# on the estate an" not on the recipient o% the estate. :. a. The P(0,000 #i!en to co!er me"ical expenses are actual "ama#es, 7hile the other P(0,000 constitutes moral "ama#es. Both actual an" moral "ama#es are not sub<ect to tax. b The P1:0,000 a7ar"e" by the court %or 7innin# in the libel case is not . taxable. +ibel is inclu"e" in the phrase 3personal in<ury or sic=ness,3 7hich is exempt %rom income tax. c. Not inclu"e" in the #ross income. The amount o% P1(,000 bein# #i!en by the employer to its employees in case o% "isability are not salaries but compensation %or personal in<uries bein# su%%ere" by its employees.


Taxable. >alaries recei!e" by employees 7ho are unable to 7or= "ue to personal in<uries or sic=ness are taxable. 6t "oes not ma=e any "i%%erence bet7een recei!in# the salary 7hile he is 7or=in# an" recei!in# the same e!en 7hile the employee is unable to 7or=. Not taxable. The P?0,000 is in the %orm o% moral "ama#es 7hich is not capable o% pecuniary estimation. Besi"es, it is in the nature o% a return o% capital.


?. ?. No, because all the re9uisites %or exemption %rom income tax are present) ,1- Tan"a retire" at a#e ?0 7hich is more than the re9uire" a#e o% :0 years4 ,(- a pri!ate pension plan is maintaine" by the employer4 an", ,*- he 7or=e" 7ith >an @ose Aorporation %or more than 10 years. The la7 "oes not re9uire continuous ser!ice. There%ore, the 10$year ser!ice re9uirement is satis%ie" e!en i% he ha" a bro=en ser!ice 7ith the company. .. The amount is taxable to Nilo. >eparation pay is exempt %rom income tax i% the cause o% separation %rom ser!ice is "eath, sic=ness, physical "isability, or any cause beyon" the control o% the employee. None o% the abo!e$mentione" can be pointe" out as the !ery cause o% his separation %rom ser!ice. 6ne%%iciency in ser!ice "ue to %re9uent tar"iness cause" by hea!y tra%%ic is not beyon" the control o% the employee. Taxable. b Taxable. . c Not taxable. Bay 7as a7ar"e" 7ithout <oinin# the contest an" not . re9uire" to ren"er substantial %uture ser!ices. Moreo!er, the pri'e #i!en 7as in reco#nition o% an e"ucational attainment. C. The pri'e 7on by Torna"o is taxable. The %i#ht 7as not sanctione" by a national sports associations. 8s a matter o% %act, it 7as hel" in a !ery seclu"e" place. The main purpose o% the %i#ht is %or the #amblers to bet on their %a!orite %i#hter an" not to promote sports. 8ns7er) P*8,000 >alary ,P(0,000 x 1(8"") Bene%its Ahristmas bonus Pro"ucti!ity bonus (0,000 (,000 (40,0 00

8. a.


+oyalty a7ar" Aash #i%t 8nni!ersary bonus 1*th month pay Total +ess) Exemption 6ncome sub<ect to tax

*,000 1,000 (,000 (0,000 48,000 *0,000

18,0 00 (:8,0 00

EXERCISES 5–2.1: 1. ANSWER: D The entire amount o% procee"s o% the insurance policy recei!e" by the bene%iciary o% =e'e %rom /ilipinas +i%e 8ssurance Aompany is not taxable because they are more consi"ere" as in"emnity rather than as #ain or pro%it. ANSWER: B Procee"s o% li%e insurance +ess) Premiums pai" ,1,000 x 1( x (0>ub<ect to tax *. ANSWER: C Total amounts recei!e" ,:0,000 x 1(+ess) /ace !alue o% the policy Deeme" interest ,taxable4. ANSWER: C Total amounts recei!e" ,:0,000 x 1(+ess) 8mount o% premiums pai" ,1,000 x 1( x (0>ub<ect to tax :00,00 0 (40,00 0 (?0,00 0 ?00,00 0 :00,00 0 100,00 0 ?00,00 0 (40,00 0 *?0,00 0


Prob 5-2.2



Procee"s o% insurance +ess) Premiums pai" ,P10,000 x (06ncome sub<ect to tax (. ANSWER: D None because >onia "ie".
Prob 5-2.3

:00,0 00 (00,00 0 *00,00 0

ANSWER: D 6ncome %rom coconut lan" 6ncome %rom bus operation 6ncome sub<ect to tax
Prob 5-2.4:

:0,0 00 *0,000 80,000


B P :00,00 0 400,00 0 100,00 0

Procee"s o% li%e insurance policy +ess) 8mounts o% premiums pai" 8mount sub<ect to tax

Prob 5-2.5:


C P (00,00 0 P ?0,000 80,000 140,00 0 ?0,00 0

Procee"s o% insurance policy +ess) 8mount pai" upon assi#nment Premiums subse9uently pai" Taxable income
Prob 5-3.1



8pplyin# the principle o% Ebeyon" the control test,5 the separation %rom employment o% Mr. @acobo 7as "ue to a cause 7hich is 7ithin his

control, that is resi#nation4 7hile the cessation %rom employment o% Mr. Bintanar 7as ma"e 7ithout his control. There%ore, the separation pay recei!e" by Mr. @acobo is a taxable income 7hile the amount recei!e" by Mr. Bintanar is not taxable.
Prob 5-3.2



The retirement bene%it o% P*00,000 is taxable to @o!ito because he retire" at the a#e o% 48. To be exempt %rom the payment o% income tax, the taxpayer must be at least :0 years on the "ate o% his retirement. 6n the case o% the procee"s %rom insurance policy, the amount exempt is P40,000 ,P(,000 x (0- only 7hich represents the return o% the premiums pai".
Prob 5-3.3

ANSWER: B There is no sho7in# that Mario 7as in the ser!ice o% the same employer %or at least ten ,10- years, that he is at least %i%ty,:0- years o% a#e at the time o% retirement, that he has ne!er a!aile" o% the bene%it o% exclusion, an" that the retirement #ratuity came %rom a reasonable retirement plan maintaine" by his employer. The amount o% P(:0,000 is taxable because ;emus is only 4C years ol" upon retirement. To be exempt %rom income tax, the retirement a#e o% an employee must be at least :0 years.
Prob 5-3.4

ANSWER: D The money !alue o% the accumulate" lea!e cre"its #i!en to a retirin# #o!ernment o%%icial or employee is not sub<ect to tax ,A6; s. A8, et.al, (0* >A;8 .(-.
Prob 5-3.5

ANSWER: A The P1,000,000 is part o% +arryFs retirement pay an" not a #i%t. Aonsi"erin# that the re9uisites %or exemption %rom payment o% tax are satis%ie", the a""itional P1,000,000 is not taxable.

Prob 5-3.6


The separation pay recei!e" by +in#$lin# an" Gina are exempt because they are separate" %rom ser!ice "ue to re"un"ancy an" "isability. The amount represents "ama#es recei!e" on account o% personal in<uries . in this case the 7i%e. sic=ness. upon the "eath o% the insure" is exclu"e" %rom #ross income.H1I.P?00. Prob 5-4.2 ANSWER: A T7o monthsF salary 6ncrease in !alue o% car . T.0006ncome Prob 5-4.0 00 1:0.8-.00 0 1C0. causes 7hich are beyon" their control.The separation pay recei!e" by E!elyn is taxable because o% the !oluntary action on her part.00 0 ANSWER: C Payment %or the salaries Prob 5-4. The procee"s o% li%e insurance policies pai" to the bene%iciary. Prob 5–4. physical "isability. there%ore exclu"ible %rom #ross income 0>ec.000 shoul" not be "eclare" in the income tax returns o% the heirs.1 ANSWER: C nly the amount o% P*00. EXERCISES 5–4.000 correspon"in# to the income 7hich 7as lost "urin# the perio" o% treatment is taxable because e!en i% he "i" not meet an acci"ent. The reason is that li%e insurance procee"s represents in"emnity an" not income.000 $ 4:0.7hich inclu"es "eath-. EXERCISES 5–5 EXERCISE 5– . To be exempt. the causes %or separation must be either "eath. *( .B.3 40.0 00 ANSWER: D The amount o% P:00. or any cause beyon" the control o% the employee. that income 7oul" ha!e been taxable.4 ?0.

000.000.:. scienti%ic. 8n a7ar" %or outstan"in# achie!ement is a #i%t. The P:..000 1.3 Bein# a resi"ent citi'en. The P*:0.000 is sub<ect to #ra"uate" tax to be reporte" in the income tax c. Moni9ue >alon#a is taxable on income 7ithin an" 7ithout the Philippines.000 is not taxable to her because contract 7or=ers are taxable only on income "eri!e" %rom sources 7ithin the Philippines4 The talent %ees "eri!e" %rom 6nter$6slan" Broa"castin# Net7or= amountin# to P100.1: ANSWER: C Talent %ee Pro%essional %ee Total amount taxable Aash pri'e Pay per !ie7 Talent %ee Taxable amount EXERCISES 55. The cash pri'e an" the e9ui!alent amount o% the 100 shares are sub<ect to (0J %inal tax because the a7ar"s #i!en are not in reco#nition o% reli#ious. Aonse9uently) a. an" not a taxable income.400.000 (:.000 is a pro%essional income sub<ect to #ra"uate" rates o% tax. charitable.1 ANSWER: D . 400. b.00 0 1(. artistic. PROBLEM 5-6.000. b.00 0 EXERCISES 5-5. return.000 !alue o% the car is sub<ect to a %inal tax o% (0J.00 0 ?.2 a.000 is taxable to her unless she has ac9uire" the status o% a contract 7or=er.000. c. The K:.:.000 1.5. literary or ci!ic achie!ement.000. The income o% K. e"ucational.000 !alue o% the trophy is not taxable to her because it is in reco#nition o% an outstan"in# achie!ement.00 0 *0. 6n 7hich case. the K.

..0 00 Aash #i%t +on#e!ity pay Total +ess) 8mount o% exemption Procee"s o% li%e insurance . None.00 0 (.0006ncome sub<ect to tax C:.000 *00.P(:.:00 *0.(.00 0 14. &oli"ay pay.1.*00.000 x 1(ther bene%its) 1*th month pay (:.*..0006ncome sub<ect to tax (.00 0 4(.:0 0 EXERCISE 5 – 7 1.. ANSWER: D nly option D has complie" 7ith the re9uisites %or exemption %rom tax o% retirement bene%its.000 :.>alary .000 ?.000 10. Aommissions &onoraria &oli"ay pay !ertime pay &a'ar" pay ther bene%its .:0 0 1 EXERCISES 5 – 8 1.4 .4. !i') .years4 . o!ertime pay.The a#e must be at least :0 years ol" at the time o% retirement4 an" .000 8.000 1 (00. ni#ht shi%t "i%%erential pay an" ha'ar" pay earne" by a minimum 7a#e earner shall li=e7ise be exempt %rom income tax.*?. ( Basic salary .The retirin# o%%icial or employee has been in the ser!ice o% the same employer %or at least ten .There must be a pri!ate pension maintaine" by the employer an" appro!e" by the B6.000 *0.The bene%it o% exemption can be .:00 ?.: 00 100.:00 *0.000 .000 1:.10..

5 +etter B re%ers to Etax exemption. ?1. is tax exempt . G. 1.:00. Terminal lea!e pay o% employees o% the #o!ernment are exempt %rom tax .-.. ct. >uch tax %ree income are not to be inclu"e" in the income tax return unless in%ormation re#ar"in# it is speci%ically calle" %or . C?01?.000 is exempt %rom income tax because it is #i!en as in"emni%ication %or the loss on the "estruction o% the company buil"in#. >eparation bene%its consistin# o% the mar=et !alueN'onal !alue o% the resi"ential lot. hence sub<ect to income tax an" 7ithhol"in# tax on 7a#es . ANSWER: C +etter 8 re%ers to E"e"uctions %rom #ross income.etirement per Aollecti!e Bar#ainin# 8#reement is consi"ere" !oluntary. :. ANSWER: A This is a case o% =ey insurance 7here the company insures the li%e o% its =ey employee.8 C04C-.e#s. !.A6. AastaMe"a. *. ANSWER: B The procee"s o% li%e insurance shoul" be "eclare" %or estate tax purposes i% the "esi#nation o% the bene%iciary 7as re!ocable.1$C8-. ANSWER: C The pro!ision exemptin# 3interest on #o!ernment securities3 has . ANSWER: A The P*. .B6.>ec.B6. ..5 +etter D re%ers to Etax cre"it. 1CC1-.ulin# No.ulin# No.a!aile" o% only once. ANSWER: C 8 monthly #ratuity o% P(0. 4. ?. (. The procee"s is not taxable to the corporation because it is consi"ere" as an in"emni%ication %or the loss o% the presi"ent 7hich is one o% the companyFs =ey employees.5 Exclusion re%ers to income recei!e" or earne" but is not taxable as income because exempte" by la7 or treaty. 0:?$C:-. . .. . 0.000 to a Me"al o% Lalor a7ar"ee is exempt %rom income tax .

&o7e!er. ANSWER: D Dismissal %rom employer "ue to ine%%iciency in ser!ice is a cause 7hich is not beyon" the control o% the employee. C. Pn"er the Ebeyon" the control test. . They are not sub<ect to %inal tax. ANSWER: A The phrase 3personal in<uries3 7hich are exempt %rom income tax inclu"es moral "ama#es a7ar"e" by the court on account o% mental an#uish experience" by one person "ue to libelous statements ma"e a#ainst him. exclu"e" %rom #ross income an" not sub<ect to 7ithhol"in# tax. ANSWER: D Dama#es recei!e" by a taxpayer "ue to physical in<uries or sic=ness are not taxable to him. There%ore.e%orm 8ct. 14. ANSWER: D interest on The pension %rom G>6> is not taxable 7hile the interest %rom the time "eposit is sub<ect to a %inal tax o% (0J. No. 10. the separation "ue to the economic con"ition is one 7hich is beyon" the employeeOs control. 11. the amount in excess o% P*0. "ama#es recei!e" as compensation %or lost pro%its are sub<ect to tax.been "elete" in the Tax . #o!ernment securities are no7 sub<ect to tax. ANSWER: C Pri'es amountin# to P10. &o7e!er.000 or less are to be inclu"e" in the computation o% #ross income. 1(. hence.000 are taxable to the employee.:00 #i!en by his mother to +uis is in the %orm o% a con"onation or #i%t an" not a taxable income. ANSWER: C The amount o% P1. 8.5 7hene!er an employee is separate" %rom ser!ice %or a cause or causes 7hich isNare beyon" his control. the separation pay recei!e" by him is not sub<ect to tax. 1*. ANSWER: D Thirteenth month pay an" other bene%its are exempt %rom income tax.

ANSWER: D The exemption %rom income tax on a 9uali%ie" senior citi'en "oes inclu"e exemption %rom !alue$a""e" tax.: 00 :. Moreo!er. ANSWER: B Exclusion %rom #ross income 1. ". Ain"y is alrea"y a 7i"o7 an" she is supportin# her "au#hter 7ho li!es 7ith her. Ses. the aunt is not li!in# 7ith the taxpayer.NETBc.esi"ent alien Within only e.:0 (4.:00 Q 1. a. "onorOs tax an" income tax on passi!e income. 8n aunt is not a 9uali%ie" "epen"ent %or purposes o% claimin# the status o% hea" o% %amily.000Months recei!e" . >6TP> / T8R8B+E 6NA ME a. Nonresi"ent citi'en Within only ".000 48. .NETB%. 8 taxpayer 7ho is separate" in be" an" boar" 7ith the spouse but not le#ally separate" maintains the status o% a marrie" taxpayer. Nonresi"ent alien Within only . Nonresi"ent alien Within only .1:. b.ETBA+8>>6/6A8T6 N (. No.P*. 1. Nonresi"ent citi'en Within only b. 8llen is 9uali%ie" as hea" o% %amily because o% his mother 7ho is "epen"ent upon an" li!in# 7ith him.:0 EXERCISES 61 1. Nonresi"ent alien Within only . ANSWER: A Monthly salary an" allo7ance .. estate tax. No. c... .@anuary to @une 1:8ctual amount o% salaries recei!e" Net income %rom trimobile 6ncome sub<ect to tax 4.000.0 00 1?. Ses.: (4.

@ohn has the ri#ht to claim the a""itional exemption because un"er . None. Elantra is allo7e" to claim "epen"ents on his %our chil"ren only. @ohn is "is9uali%ie" because he "oes not %urnish chie% support to his chil"ren. Aarina is 9uali%ie" as hea" o% %amily. he has actual custo"y o!er the t7o chil"ren. *. c. The mother is not a 9uali%ie" "epen"ent. None. 6% Marsha coul" pro!e that she pro!i"e" chie% support o!er the chil"ren. :. P 100. 6n the absence o% an a#reement. b.e. Ses. ". ?. >he is alrea"y more than (1 years ol". None. 4.e!enue . husban"s ha!e the ri#ht to claim a""itional exemption on the "epen"ent chil"ren. No. None. a. because not one o% them can claim P:0. b. The "au#hter is "is9uali%ie" because o% her a#e. >he is alrea"y a 7i"o7 an" has one "epen"ent "au#hter li!in# 7ith her. Both Decepe"a an" his sister cannot claim a""itional exemption on their %ather. Besi"es. 8""itional personal exemption can be claime" only on "epen"ent chil"ren. a. they 7oul" ac9uire only the status o% either sin#le or hea" o% %amily "epen"in# upon the circumstances surroun"in# the case. a. b. Gross compensation income +ess) Personal exemption 4(0.000. Marsha is "is9uali%ie" because the chil"ren are not li!in# 7ith her "espite the support she is exten"in#.0 00 . @ulio is the one 9uali%ie" to claim as hea" o% %amily because he is pro!i"in# chie% support to his mother 7ho is also li!in# 7ith him. 8t most. c. The rest are #i!in# only minimal amount o% support. 8 bene%actor o% a senior citi'en 7oul" be 9uali%ie" to ac9uire the status o% a hea" o% %amily re#ar"less o% 7hether such senior citi'en is a relati!e or not i% the senior citi'en is li!in# 7ith the taxpayer. b. None.000 7hich is the amount allo7e" to each marrie" in"i!i"ual taxpayer. a. both spouses 7oul" be "is9uali%ie" to claim a""itional exemption. e. 8unties are not 9uali%ie" "epen"ents %or purposes o% claimin# a""itional exemption.e#ulation ($C8.

0 00 :0.000 1(0.000 8?.000 (8..0 00 :0.000 C:.000 .:.0.0 00 *4:.000 (:.0 00 :00.0 00 (. Gross compensation income +ess) Basic personal exemption Taxable compensation income Tax on P (:0.:. her %ilin# status is Esin#le.0 00 :0.:00 6% Aarina has no "au#hter to support.000 *?.00 0 *.0 00 ".:00 .Basic personal 8""itional Taxable income Tax on P (:0.5 4(0.00 0 1.8.0 00 1?0. :0.:.0 00 P :0. Aompensation income 1 @im +ess) Personal exemption Taxable compensation income Business income 1 Pat +ess) Expenses Net income +ess) Personal exemptions Taxable income b.0 00 110.000 1?0. Aompensation income 1 @im .0 00 :0.000 x *0J 6ncome tax c. a.0 00 ((:.000 x *0J 6ncome tax .

:0 *1. 00 .000 :0.:.000 (.000 ?(.(:0 4(.0.000 e.(:0 P 11. Tax on P 10.:0 (.0 00 ((:.00 0 1.0*4 1(:.:. Tax on P 10.(4.:00 *.000 (:.000 1:.:00 *1.00 0 8:.0 00 :0.. Tax on P (:0. Tax on P 40 x :J b..:00 8.000 x (:J 6ncome tax "ue 6ncome tax 1 @im 6ncome tax 1 Pat Total income tax 8.0 00 ((..000.(4:.0 00 (. Tax on P (:0.00 ((4.:4 . a.000 .00 0 P 8.:00 :00.000 (0?.000 11.000 x (0J 6ncome tax "ue Business income 1 Pat +ess) Expenses Net income +ess) Personal exemptions Taxable income Tax on P 140.:4 :0.40 x 10J 6ncome tax ".000 :0.:.+ess) Personal exemptions Basic personal 8""itional exemptions Taxable income Tax on P .80 x *0J 6ncome tax "ue %.00 :00 :00.000 x :J c.000 *:. Tax on P :00.0*4 11(.

0 00 (:.not excee"in# P10.?(*.oyalties on boo=s $ Passi!e income .1(J"eposits 10 a. 6nterest on preterminate" $ Passi!e income .:00 10.440. .(.000 *. ?.00 0 :00 *. . b.000 1:.100 . @uan . 41 *(4. >alary +ess) Personal exemptions Basic personal 8""itional exemptions . ". Di!i"en"s %rom "omestic $ Passi!e income .000 x *Taxable income Tax on P 10. >alary 6nterest on ban= "eposit &onorarium Pri'es 1CC.000 x (0J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable b.? 00- .000e.(:1.000 <.:. 1*th month pay $ Exempt up to P *0. 6ncome %rom %armin# $ Business income #. x *(J 6ncome tax "ue C a. 41 $ Aompensation $ Passi!e income 1 tax exempt $ Aompensation income $ r"inary business income .10Jh.000 .10Jcompany i.00 0 .000 1:0.00 :0. c.440.0 00 1(:.(:. Maria >alary +ess) Basic personal exemptions Taxable income 1(:. +otto 7innin#s $ Tax exempt %.:.0 00 :0.

?00 (00. 8.800 (00 1( (.000 x 4Total compensation income Tax on P *0.000 1 (.100 1:0 1( 1.000 C. Monthly insurance premium .000 :.000 (0. ?.:001(.maximumTimes number o% months in a year De"uctible health insurance premium c .400 No amount o% health or hospitali'ation insurance premium is "e"uctible because the total income o% the %amily excee"s P(:0.000 100.000 :0.?00.000 x 1:J 6ncome tax "ue 1:0.000 x (0J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable 6ncome tax 1 @uan 6ncome tax 1 Maria 6ncome tax payable 11 a .maximum Times number o% months "urin# the year De"uctible health insurance premium (00 8 1.:00 1. Aompensation income +ess) Personal exemption Basic personal 8""itional .000 :.000 b . Gross income +ess) 8llo7able "e"uctions .:00 1:.0 Tax on P .:00.000 .:00 (00. a .000 (.0 00 :0. :.000.0.(:. . :. Monthly insurance premium Times number o% months in a year De"uctible health insurance premium b .:00 *. " . Monthly insurance premium .

0 00 +ess) ptional stan"ar" "e"uctions (0. Aompensation income Business income Gross income +ess) De"uctions ptional .000 100.0 00 6ncome tax "ue P *0.00 0(.:0 0 Aase 1 1(:.00 0 +ess) Basic personal an" a""itional 1:0.0 00 *11.0 00 .000 :0.000 (*0.000 (:.00 0 .(:0 (00.18?.00 0 *10.Expenses Basic personal 8""itional exemptions Taxable income Tax on P *0.4.00 0 Aase ( 80.00 0 1::.0 00 1(4.) B .0 00 18?.::.000 (::.00 .000 x 10J0 Net income 180.00 0 :0.(00.40 0 :0.? 00 10:. 8N>WE.:0 ?.00 exemptions 0 Taxable income *0. Gross income 10:.00 0 1::.000 x 40J6temi'e" Personal exemption Total Taxable income EXERCISE 6 – 2 1.:00 *.000 (8.00 0 1 *.000 x 1:J 6ncome tax "ue c .4 00 18?..

000 ?00 (*.000NC:J+ess) Depreciation Total +ess) Basic personal exemption Taxable income (.00 0 8:.000 40.C:0.000 8*0.00 0 14?.00 0 1(0.0006ncome tax payable C:0.(4 0 (*C.Gross receipts +ess) Expenses Pri'e.000 x *(J 6ncome tax "ue +ess) Withhol"in# taxes Pro%ession . contest >alary .000 *.?.) D Tax on P :00.00 0 1(:.ent income .000 x 1:J>alary .100.(4 0 14(.000 1 *8.00 0 40.00 0 :.:0 0 (.) B 6nterest on lon#$term ban= "eposit Winnin#s in lotto 1*th month pay +i%e insurance bene%its +oan bene%its $ >>> ..?00 Q (.00 0 :0. 8N>WE.000 40.000 C0.400 (.000 x (0JDi!i"en" %rom A Aorp.000 x 1(JWinnin#s in ra%%le .*8.000 *(.000 x 10JTotal %inal 7ithhol"in# tax 4. 8N>WE.000 8.(0.00 0 *..*.*4 0 (.400.ent .400 (0.:00 1:0.40. ..C0 0 C(.000 (0.. 8N>WE.00 0 114.) B 6nterest on preterminate" "eposit .00 0 (0.000 *:.

esi"ent or citi'en (0J Tax table (0J (0J 10J Tax table (0J Exempt (0J Exempt :J 10J 10J ..Total income exempt %rom income tax EXERCISE 6 . 6nterest on ban= "eposit 7ith a ban= in the Pnite" >tates in P.NETBSE> N YES YES N YES N N . :.:00 (**.8 ETB (0J Not taxable (0J (0J 10J Tax table (0J Exempt (0J Exempt :J (0J (0J Exempt .000 8. only resi"ent citi'ens are taxable on income "eri!e" %rom sources 7ithin an" 7ithout the Philippines. (. Pri'es amountin# to P(0. 8ll others are taxable on income 7ithin only. Di!i"en"$"omestic corporation 4.2 6NA ME 1. 6nterest on "eposit %or 4 T years 1(. "ollar *. ANSWER: A Pn"er the Tax .1 1. . 6nterest on ban= "eposit 7ith Banco "e ro$ Php (.3 6NA ME 1..ent on apartment in Aana"a *.oyalties on boo=s Pri'es amountin# to P. Di!i"en"$%orei#n corporation .8.ent on apartment in the Phils. N. ?. Earnin#s %rom interest on money mar=et .. 4.oyalties on in!entions .8. Aash "i!i"en"s 1 "omestic corp.8. 1*.A SE> SE> SE> SE> . Winnin#s in lottery 10. EXERCISE 6–4. .e%orm 8ct.>.A SE> N SE> N N. 6nterest income un"er expan"e" %orei#n currency "eposit system EXERCISES 6–4.:J N. 6nterest on lon#$term in!estment 11.ETB-N. >hare o% partner in net income o% taxable partnership 14. Winnin#s in lotto 1 Philippines C.:0 0 .

Aana"a .0 00 . 10.>.000 4. ban= "eposit in SE> N SE> SE> SE> SE> N N SE> N N SE> N N YES N N YES N N YES N N YES P. Philippines Expenses.4.000 x (:Net income +ess) Personal exemptions Basic personal 8""itional Taxable income Tax on P:00.00 0 *:0.>. Probl ! 6– 4. +otto 7innin#s in the Phils. P. +otto 7innin#s in P.00 0 *.0 00 :.0.. .0 00 1. Aash pri'e on contest.000 x P(:Total #ross income +ess) De"uctions Expenses. ANSWER: C "#$%#& r '( r (') *+ .:.000 10. ANSWER: C "o+#l .. C.(00 ((0.00 0 1(0.0.>.000 (C?.0 00 1. 6nterest ban= "eposit 1 Phils.0 00 *.000 C(:.8.:.4(:.00 0 :. ?.K1:0. Aompensation income.000 4(1.:00. Aana"a . 6nterest. Phils.*.K(00.000 x *(J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable (.00 0 10J 1(:.8. Philippines Business income.000 (:.000.0 00 :0.000 411.8. 8.000 . Philippines Business income.3 1.:0.'+'.'*#l +#$ ( %#'): Di!i"en" %rom a "omestic company /inal tax rate 40.C. Aash pri'e on contest.

00 0 0 *.00 0 *:0.000 C.00 0 10J :.000 x 4Taxable income :0. Philippines Net income +ess) Personal exemption Basic personal 8""itional exemption .00 0 100.:.000 x 40JNet income +ess) Basic personal exemption Taxable income 4. ANSWER: A R (') *+ .140.>hare in income o% business partnership /inal tax rate Total %inal tax *.*:0. OSD.00 0 :0.000.0 00 *:0.(10. ANSWER: B "#$%#& r '( # r (') *+ #l' *.K(00.'+'.00 0 ((0.0 00 *.00 0 .0 00 1(0.00 0 (:0.0.00 0 4. Philippines Business income. Aompensation income.000 1(0.P(:.*:0.00 0 (. Philippines Business income.(80.000 x (:Total +ess) ptional "e"uctions .00 0 100.* o%+ ) +o #/#'l o. Aompensation income Business income. Philippines Gross income +ess) Expenses. Aana"a .00 *.000 1:0.00 0 :.**0.00 0 :.0 00 :0.

0 00 40.ate /inal tax *:0. Philippines Net income +ess) Personal exemption . ANSWER: D No*r (') *+ #l' * E"B.00 0 :0.00 0 :00.00 0 1*0. ANSWER: A "#$%#& r b .*. ANSWER: D "#$%#& r '( NRA NE"B.:40.0 00 ((0.00 0 (0.. Business income.'+'.(C0.lo7erTaxable income *:0.0 00 (00.0 00 (.0 00 (:0. Philippines Di!i"en" %rom a "omestic company >hares in net income o% a partnership Gross income .:. Philippines +ess) Expenses. Net income +ess) Basic personal exemption Taxable income (:0.00 0 110.000 :0.0 8.00 0 440.00 0 (:J 110. Business income.00 0 1.00 0 .o! ( # *o*r (') *+ .00 0 ?. ANSWER: D Lalue o% inheritance +otto 7innin#s Procee"s o% li%e insurance Total exemption .

ANSWER: A >alary .:0 0 100.000 C0.CC.2 ANSWER: ..00 0 (1:.00 EXERCISE 65.000 x (Taxable income :0.00 0 :?.000NC:JNet income +ess) Personal exemptions Basic personal 8""itional .3 1.000 Q :.(:.1 ANSWER: D ptional stan"ar" "e"uctions are allo7e" only on pro%essional or business income o% an in"i!i"ual taxpayer.00 0 :0. De"uctions shoul" not be ma"e %or items not or"inarily use" in computin# the cost o% #oo"s sol". B The term #ross income means total sales.00 0 1(:. pro!i"e" that he has si#ni%ie" in the tax return his intention to a!ail o% sai" "e"uctions. business Total +ess) Pro%essional an" business expenses .:..:0 0 ?0.00 0 *((.000 Q .00 0 (((.ent income . Aorporations can a!ail also o% optional stan"ar" "e"uctions EXERCISE 65.00 0 1:8.:0 0 104.000Gross income. PROBLEM 6-5.:0 0 .000Pro%essional income .8*. less cost o% #oo"s sol" plus any income %rom in!estments an" %rom inci"ental or outsi"e operations or sources.

.000 (C.ent income Pro%essional income Total +ess) ptional "e"uctions .000 14.000 100..:0 0 (0.00 0 ?0.:0 P 1(:.000 x (:J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable ((.?0.?(: 4*.000*.00 0 (.000 .000 8(.Tax on P 140.(:0 (C.:0 1:.00 0 110.P(.00 0 :0.000 C0.:.0 00 :0. ANSWER: D ((.000 Pro%essional income .00 0 (?C.ent ..00 0 1?C.:00 x (:J 6ncome tax "ue +ess) Tax cre"it Withhol"in# tax on $ Wa#es P :.00 0 1?:.00 0 .000 (8.1(: >alary Gross receipts on business .000$:.1(: 1:.00 0 104..000 6ncome tax payable 2.000 x 40JNet income +ess) Personal exemption Basic personal 8""itional Taxable income Tax on P 140..: 00 .:.

4.?00 Gross business income +ess) ptional "e"uction .000 (:.000 x 40JNet +ess) Personal exemptions Taxable income EXERCISES 6-6. :. ANSWER: C 8n ille#itimate chil" is no7 consi"ere" as a 9uali%ie" "epen"ent %or purposes o% claimin# the status as hea" o% %amily. ANSWER: B The amount o% basic personal exemption allo7e" to N. %or personal..000 Q *00x 1( +ess) Personal exemption Basic personal 8""itional exemption Taxation income (. ANSWER: C .000 Personal exemptions are arbitrary amounts allo7e" in the nature o% a "e"uction %rom the amount o% #ross compensation income an"Nor net business an"Nor pro%essional income. *.-.. . They are sub<ect to %inal tax base" on the entire #ross income "eri!e" %rom sources 7ithin the Philippines.000 1(.:.>ec.1: PERSONAL EXEMP"IONS 1.1:0.00 0 ?0.?00 :0. ANSWER: C 8. (.000 C0.000 Gross compensation income ..PROBLEM 6-5.8 ETB must not excee" the amount o% exemption bein# allo7e" in the Philippines. C.000 :0. ANSWER: C . li!in# or %amily expenses o% an in"i!i"ual . ANSWER: A Nonresi"ent aliens not en#a#e" in tra"e or business in the Philippines are not allo7e" to claim personal exemptions. as the case may be.4 1. ANSWER: B 1:0.000 40.e#s.

8 chil" pursuin# his stu"ies else7here is "eeme" li!in# 7ith the taxpayer. i% the latter "oes not 7ai!e his ri#ht to claim the a""itional exemption or he is a nonresi"ent an" his income is not purely "eri!e" %rom sources 7ithout.. C. althou#h mentally "e%ecti!e shall not 9uali%y as "epen"ent because he is not actually %inancially "epen"ent %rom the taxpayer. 8 chil" o% a marria#e 7hich has been "eclare" !oi" ab initio is a 9uali%ie" "epen"ent %or purposes o% a""itional exemption. 10. Nonresi"ent aliens 7ho shall come to the Philippines an" stay therein %or an a##re#ate perio" o% more than 180 "ays are "eeme" N. ANSWER: B 6n cases o% personal exemptions. ANSWER: D No matter ho7 bi# is the income o% the 7i%e as compare" to the husban". 8 "epen"ent recei!in# a salary o% P1. ANSWER: C The husban" is the proper claimant o% the a""itional exemptions except 7hen he "oes not "eri!e any income %rom sources 7ithin the Philippines or he explicitly 7ai!es his ri#ht in %a!or o% his 7i%e. ANSWER: D 8 moron. 7hether or not relate" to him. he 7ill al7ays claim the a""itional exemption. 6lle#itimate chil"ren are no7 consi"ere" as 9uali%ie" "epen"ents %or purposes o% a""itional exemption pro!i"e" that all the other re9uisites are complie".>enior citi'ens are not consi"ere" as 9uali%ie" "epen"ents by its bene%actor %or purposes o% claimin# the a""itional exemptions. ANSWER: D The term Ebene%actor o% a senior citi'en5 pertains to any person 7ho ta=es care o% a senior citi'en as his "epen"ent. ?. only N.8 ETB. .000 monthly is not consi"ere" as #ain%ully employe". &e is consi"ere" Ea7ay temporarily5 %rom the taxpayerOs home. 8. .8 ETB are sub<ect to the la7 on reciprocity.

000 1?4. ho7e!er. The personal exemptions allo7e" shall be the lesser amount bet7een that allo7e" in his country an" the amount %ixe" as exemption %or citi'ens or resi"ents in the Philippines. ANSWER: B (:.000 .00 0 :0.EXERCISES 6-6. ille#itimate .0 00 8 nonresi"ent alien en#a#e" in tra"e or business is allo7e" to claim basic personal exemptions as "e"uction %rom #ross income.000 x 4Total 4.000 :0. Thus.0 00 :0. *.000 100.7hich inclu"es reco#ni'e" natural chil"or le#ally a"opte" chil"ren can 9uali%y as "epen"ent %or purposes o% claimin# a""itional exemptions. The total personal an" a""itional exemptions is) Personal exemptions 8""itional exemptions) +e#itimate chil" 6lle#itimate chil" . ANSWER: D :0.00 0 Basic personal exemptions) &usban" Wi%e 8""itional exemptions .0 00 (:. nly le#itimate. ANSWER: C The taxpayer is 9uali%ie" as hea" o% %amily because o% the le#itimate an" reco#ni'e" natural chil". allo7e" to claim a""itional exemption.2 1.reco#ni'e" natural chil"Total (.00 0 :0. They are not.(:. common la7 husban" an" 7i"o7e" mother o% common la7 husban"s are "is9uali%ie".00 0 100. ANSWER: B Basic personal exemption ?4.

:.000 00 (.(:.00 0 4.000 *?.(:.000 x *Total personal exemptions :. A*(0 r: A Gross compensation income +ess) Personal exemptions Basic personal 8""itional .000 0 1(0.000 108.000 (4.000 1(:. CLASSI2ICA"ION O2 INDI3ID4AL INCOME "AXPA5ERS 1. 1(0.(:. ANSWER: D .000 x **2Taxable income ?.00 0 C?.000 *?.0 1:0.000 Q0(:.000 1(:.00 0 :0.000 180.000 ((0.00 0 (0. A*(0 r: C Gross compensation income +ess) Personal exemptions Basic personal 8""itional .000 EXERCISES 6 – 1.000 :0.000 x 4Taxable income .0.. ANSWER: D Pro%essional %ees 8llo7ances Total +ess) Expenses >alaries Tra!elin# expenses %%ice supplies .000 :0.:0.000 .8""itional exemption .00 100.000 (04.00 0 100.000 x (Taxable income .ent expense Taxable income be%ore exemption +ess) Personal exemption .

000 are sub<ect to a %inal tax o% (0J.-.000 ON 6EAL"6 AND7OR 1.but sub<ect to limitations. marrie".%rom the #ross income o% an in"i!i"ual taxpayer. ANSWER: A . .e#s. ?. . 4. Aash "i!i"en"s recei!e" by in"i!i"uals as stoc=hol"ers o% a corporation are sub<ect to a %inal tax o% 10J. *. ANSWER: C 6nterest an" "i!i"en"s . . :.00 0 :0.8 ETB+ess) Personal exemption Taxable income EXERCISES 6–8. (.8 NETB. resi"ent aliens..taxpayer is N. :. or hea" o% %amily.000 14. ANSWER: D The tax base %or resi"ent citi'ens.N. 7hile nonresi"ent aliens NETB are taxe" on the entire #ross income "eri!e" %rom sources 7ithin the Philippines.oyalty income on musical compositions are sub<ect to a %inal tax o% 10J. ANSWER: A 8n alien 7ho comes to the Philippines %or a "e%inite purpose 7hich in its nature may be promptly accomplishe" is a transient . re#ar"less o% his status.1.>ec.8 nonresi"ent alien not en#a#e" in tra"e or business .e. ANSWER: ANSWER: D B Pri'es amountin# to more than P10. an" nonresi"ent citi'ens is taxable income. ANSWER: D Premiums pai" by the taxpayer %or health insurance o% his %amily is a "e"uction .is not entitle" to claim personal exemption. i. 6nterest on "ollar "eposits are sub<ect also to a %inal tax o% (0J. PREMI4M PA5MEN"S 6OSPI"ALI8A"ION INS4RANCE ?4. sin#le.

000.2 Aase 1) Aase () Aase *) Aase 4) None because the total #ross income o% the spouses excee"s P(:0. The "e"uction on health insurance can be claime" by the 7i%e bein# the claimant o% the a""itional exemption on "epen"ents. the entire amount is exempt %rom income tax. Thirteenth month pay.000.400 (00.8. inclu"in# other bene%its. The husban" can only claim a maximum amount o% P1. are exempt %rom tax up to P*0. that the employee is not a minimum 7a#e earner. ANSWER: A >alary bein# a compensation income is returnable.? 00 EXERCISES 6-9 1.000 "urin# the year re#ar"less o% the nature o% his income.000 (. &ence. part o% the taxpayerOs #ross income.?00 because only P(00 is allo7e" as "e"uction e!ery month. Aonsi"erin# that 1* th month pay is P8. P1.400 or P(00 a month. The husban" is allo7e" to claim the "e"uction e!en i% in the meantime no "epen"ent is 9uali%ie" %or a""itional exemption.. The amount o% health or hospitali'ation insurance allo7e" is limite" to P(.000 (:.(00 x 1(Taxable income EXERCISE 6. ho7e!er. ANSWER: D Premiums pai" on health insurance is "e"uctible %rom #ross income o% an in"i!i"ual taxpayer i% the income o% his %amily "oes not excee" P(:0. :0.(. Pro!i"e".0 00 .. Gross compensation income +ess) De"uctions Basic personal 8""itional exemption 6nsurance premiums .(00. *. compute" as %ollo7s) P(00 x 8 U 1. ANSWER: C Aompensation income earners are not allo7e" "e"uctions except personal exemptions an" insurance.000 only.?00. None.40 0 1((. .

?.000 ((. ANSWER: D Gross compensation income +ess) Personal exemptions Basic personal . ANSWER: D .000 (:.000 *4.000 (1?.000 188.000 **..000 (.:00 .:.000 Q (:. *.40 (.000 *.000 ((.000 :0.000 :0. Nonresi"ent citi'ens are taxable only on income 7ithin.e%er to the solution to Problem ?.P1C1.000 *0..000 *:0.000 x *Taxable income Tax on P *0.:? :0.hea" o% %amily8""itional .40 1:.000 140.(:.:00.C1*..:.000 x (:J 6ncome tax "ue :*. ANSWER: A >alary .000 (1C.000 18. ANSWER: D None. ANSWER: C Aompensation income 8"") Pro%essional income +ess) Expenses Total +ess) Exemptions Basic personal 8""itional Taxable income Tax on P140.:00 1(..000 .00 41*.000 1?C.00 0 *(.:00 (10.000 1(:.000 :.000 .0008"") Taxable other bene%its 1*th month pay ther bene%its Total +ess) Exemption Total +ess) Personal exemption Taxable income Tax on P 140.:? 4.000 (?*.000 1:.000 48.:? x 1:J 6ncome tax "ue (.(.

*C0.:4C.000 (10.000 x (:J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable ..000 :*4.000 1.:*C.000 :(?.*.000 x ?0Jx8:J Basic personal exemption 8""itional exemption Taxable income 8. . ANSWER: A Basic salary Aost o% li!in# allo7ance &a'ar" pay Gross compensation income 8"") Net income %rom pro%ession Pro%essional income +ess) Expenses Total #ross income +ess) Personal exemption Taxable income Tax on P (:0.000 4.00 (. .000 C.? ?..14C.0 00 4:C.00 8C. .0?0. .8?1. restaurant Taxable other income .?00.C00.000 :0.0 0 ((0.:*C.:0 (:.:0 C00.C* (.8C0.000 (:..00 C.(00..000 1?0.:*C. ANSWER: D Gross income..? x *0J 6ncome tax "ue +ess) Withhol"in# tax on 7a#es 6ncome tax payable .:00.(C.? :0.00 *. 00 *0C.000 x 80JTotal +ess) De"uctions Business expenses ..000.? :0.8?1.(:(.000.:0 (:..?00.C* :(.(:0 (C.00 ?. .? P1:?.?0C.000. 00 (:C.

8.000+ess) Personal exemptions Basic personal 8""itional Taxable income Tax on P .4?:.:0 0 ((.(4 x (0J 6ncome tax "ue +ess) Withhol"in# tax 6ncome tax payable 8..1.000 (*.C?:. Phils..400 88.0 0 4. Phils.:00..hea" o% %amilyTaxable income Tax on P (:0.(8. (4 :0..000 40:.000 (C(.00 C1.C.:00:0.000 +ess) Expenses. 00 1(:.:00 Pro%essional income Di!i"en" %rom %orei#n corporation .400 10 .4*8.. . ANSWER: B Basic salary .8.000 :0.:00 C0. 00 .. Phils.(4?. ?: (.:00 x ?0Total +ess) Personal exemption .0.000 4(8.000 x *0J 6ncome tax "ue 40. ANSWER: B Gross compensation income .000. (4.000 1(8.00 0 *8. (4 11 .000 *.4*8..4:8.(: Q (.(10.:(1?.4*8.(4 Q ?. ANSWER: B Business income. :N1 $ 1(N*1 :40. ?: 1(.:.000 :0.000. Business income.000 . 40 .4*8. Phils.000 (1. 1N1 $ 4N*0 +ess) Expenses.14.( : .000 1..48.

+ess) Personal exemption Taxable income Tax on P C?:.000.(? .1 C.00 0 :0. 1C- :0. *8*.000 x (Taxable income 14 .000 48.000 :00.00 0 100.00 0 100.(: x :J +ess) Withhol"in# tax 6ncome tax payable 1( .14.14.0 0 C?:.(: .841.(:.P8. *8*. C4- ((0.000 100. ANSWER: B 6ncome tax "ue o% 8lex 6ncome tax "ue o% Paloma 8##re#ate amount payableNre%un" 1* .000 :0. A*(0 r: B >alary $ 1N1 to ?N*0 . 4:. ANSWER: C Gross compensation income +ess) Personal exemptions Basic personal 8""itional Taxable income 1: .00 ..000 48. ANSWER: A Gross compensation income +ess) Personal exemptions Basic personal 8""itional .0 00 1(0. :. 4*1.4:8.000 (00.00 0 :0.000 x ?8"") Procee"s o% insurance :0.

whi h was issued by $ssistant Commissioner . %ooperatives not falling $nder this article shall be governed b( the s$cceeding section. In the said ruling. Considering the members’ deposits with the cooperatives are not currency bank deposits nor deposit substitutes.. among whi h is the alleged exemption of interest in ome on members0 deposit 1over and above the share apital holdings2 from the )*3 final withholding tax. This interpretation was reiterated in BIR Ruling "#$%&'(%)**+. as amended 'y &A ).000 *C8. Roldan upon the request of the ooperatives for a onfirmatory ruling on several issues.).ames /.tober &. do not app#y to members o" cooperatives and to deposits o" primaries with "ederations. The petition has merit.(-)(. it is a declared policy o# the State to #oster the creation and growth o# cooperatives as a practical vehicle #or promoting sel#0reliance and harnessing people power towards the attainment o# economic development and social 1ustice.) and for domestic corporations $nder +ection 2/(0)(. Section 24(B)(1) and Section 2 (!)(1). which read4 1# . )**+.000 448. respective#y$ Given that petitioner is a credit cooperative duly registered with the Cooperative Development Authority (CDA). one o# which is providing cooperatives a pre#erential ta3 treatment. dated . There is nothing in the ruling to suggest that it applies only when deposits are maintained in a bank. 2. Section 2 (!)(") o# the $%&C must 'e read together with &A ()*+.000 :0.2-.+ess) Premium payments .P:. 0 100. 2he legislative intent to give cooperatives a pre#erential ta3 treatment is apparent in Articles (" and (2 o# &A ()*+. %a& %reatment o" Cooperatives. that sin e interest from any !hilippine urren y bank deposit and yield or any other monetary benefit from deposit substitutes are paid by banks. . the State e3tends all #orms o# assistance to them. 2hus. Rather. there"ore. /nder Article 2 o# &A ()*+. 3 0$l( registered cooperatives $nder this %ode 'hich do not transact an( b$siness 'ith non4members or the general p$blic shall not be s$b5ect to an( government taxes and fees imposed $nder the "nternal #even$e 6a's and other tax la's. the ruling learly states.000 400. Exemption of interest income on members’ deposit (over and above the share capital holdings) from the 20% Final Withholding ax. as amended 'y &A ).2-. without any qualifi ation.000 Cooperatives are not required to withhold taxes on interest from savings and time deposits of their members based on a BIR Ruling.000 x (0Gross income +ess) Personal exemption Taxable income EXERCISE 6-10. he !ational "nternal #even$e %ode states that a &final tax at the rate of t'ent( percent (20%) is hereb( imposed $pon the amo$nt of interest on c$rrenc( ban) deposit and (ield or an( other monetar( benefit from the deposit s$bstit$tes and from tr$st f$nds and similar arrangement x x x* for individ$als $nder +ection 2. the BIR opined that4 xxxx 3. ooperatives are not required to withhold the orresponding tax on the interest from savings and time deposits of their members. to encourage the #ormation o# cooperatives and to create an atmosphere conducive to their growth and development.

deserve a pre#erential ta3 treatment 'ecause o# the vital role they play in the attainment o# economic development and social 1ustice. 2his e3emption e3tends to mem'ers o# cooperatives. 6t is taxable as a corporation. the <oint un"erta=in# 7ill be automatically "issol!e". 8tien'a. we hold that petitioner is not lia'le to pay the assessed de#iciency withholding ta3es on interest #rom the savings and time deposits o# its mem'ers. 2here#ore. they shall exercise a common pro%ession %or certi%ie" public accountants. %n #act. %n closing. savings. Gi#i an" @ay<ay ha!e %orme" a #eneral pro%essional partnership. The <oint !enture is not taxable as a corporation . %a& and 'ther (&emptions. E3tending the e3emption to mem'ers o# cooperatives. The %i!e entrepreneurs ser!e" as the incorporators. %t must 'e emphasi5ed that cooperatives e3ist #or the 'ene#it o# their mem'ers. 8 #eneral pro%essional partnership is not sub<ect to income tax. The business or#ani'ation %orme" possesses the %eature applicable to a <oint stoc= company.1# . c. on the other hand.B6. 2hus. By contributin# P100. The re#istration 7ith the >ecurities an" Exchan#e Aommission is not an in"ispensable re9uisite in its %ormation. including their mem'ers. this should 'e construed to include the mem'ers. All told. 22. as well as the delin6uency interest o# 2-7 per annum. although the ta3 e3emption only mentions cooperatives. the primary o'1ective o# every cooperative is to provide goods and services to its mem'ers to ena'le them to attain increased income. . cooperatives.ulin# 8*$0*-. would 'e consistent with the intent o# the legislature. The t7o corporations ha!e %orme" a <oint !enture because it is clear that their intention is to accomplish a sin#le pro<ect 7hich upon completion. limiting the application o# the ta3 e3emption to cooperatives would go against the very purpose o# a credit cooperative. ".000 each 7ith the intention o% "i!i"in# . 6n this case. e. 3 %ooperatives transacting b$siness 'ith both members and nonmembers shall not be s$b5ect to tax on their transactions to members. . investments. CHAPTER 7 EXERCISES 1 – 1 1 a. Bau'on an" Aarmona ha!e %orme" a business partnership 7hich is taxable as a corporation. 7hate!er pro%it is obtaine". By or#ani'in# an accountin# an" au"itin# %irm. and productivity. the business or#ani'ation %orme" 7ill %all un"er the phrase Epartnership no matter ho7 create" or or#ani'e".5 7hich is inclu"e" in the "e%inition o% a corporation. !ot'ithstanding the provision of an( la' or reg$lation to the contrar(7 s$ch cooperatives dealing 'ith nonmembers shall en5o( the follo'ing tax exemptions8 x x x. b. The business or#ani'ation %orme" is a corporation.

Domestic corporation b. 1 !7". 000 :. 000 :.*N10 x *. Nonresi"ent %orei#n corporation >itus o% 6ncome Within an" 7ithout Within only Within only Tax Base Taxable income Taxable income Gross income V6t is an international carrier (See Comm vs.000. BOAC.:00. 000 :. Do! (+'.000.or%or#+'o* >ales 1 "omestic +ess) Aost o% #oo"s sol" .000.. 000 10. .0 00 *. 000 :.0 00 1.0 *.000.( .000. 6n 7hich case.00 0 .0 00 *: J . .0 00 *.0 00 *0 J ?00. et al.000.. R (') *+ .0 00 1.0 00 (.000. * # .000.0 (008 *.0 00 (. .000. 65773-74.0 00 .or ':* .000.0 00 1.0 00 .000.00 0 (00C *.esi"ent %orei#n corporation V c.or%or#+'o* >ales 1 "omestic >ales 1 abroa" Gross sales +ess) Aost o% #oo"s sol" Gross income +ess) Expenses Domestic /orei#n Total expenses Taxable income . Alassi%ication a.000.000. GR Nos. April 30.000.000.ate 6ncome tax b .0 00 (.000.0 00 (.00.:00.0 00 1. 000 10. the tax base can be Gross Philippine Billin#s.

0 00 :00.000Gross income +ess) Expenses on "omestic sales Taxable income . Ses.0 00 400.000.00 0 *.ate Normal income tax +ess) Minimum income tax .00 0 00 1.000 *.000.0 00 400. 10.1C0.ate o% tax 6ncome tax .400. compute" as %ollo7s) Gross income 1 (010 +ess) Expenses Taxable income .0 00 *.ate 6ncome tax 00 1.0 00 :00.:.4.year perio" shall commence in (00? a . 00 *00.000. .:00.000 .:.400.:00.000 100.000 *0J 1:0.00. Ba#o Aorporation shall be co!ere" by the application o% the MA6T . b.0 00 4 a.00 0- The countin# o% the %our .0 00 *0 J 1.:.00 0 *.000 7hile the (J o% the #ross income 7hich represents the minimum corporate income tax is P100.000 *0 J C0. No*r (') *+ .000 x (JExcess MA6T :.0 00 1.0 00 1.0(0.0 00 *: J 1. the corporation shall be sub<ect to a minimum income tax in (010 because the normal income tax is PC0.or ':* . e%%ecti!e (010.or%or#+'o* >ales 1 "omestic Siel" %rom "eposit substitute Gross income .0 00 4..000 *: J 1.

8:0..?4 0 11<== = .4C:.0 00 4. 162<== = (008 :. 6t shall be co!ere" only in (010 or on the 4 th year %ollo7in# the year in 7hich it 7as re#istere" 7ith the Bureau o% 6nternal .:(0.0 00 1.(00.0 00 :40.1.00 0 *: J 8C.*. 4.4. .4::.*C0.(:0.*?0+ess) Aarry %or7ar" o% excess MA6T 6ncome tax payable ? a >ales (00.ate o% tax Normal 6ncome tax MA6T) (00.1.000 x (J(008 .0 00 *0.000 x (J(00C . : ... 8C.?4 0 42<61 = ?.*C0.00 0 .000.4::. 000 8:0.year %ollo7in# the year in 7hich the corporation 7as re#istere" 7ith the B6. 4.4::.:80.0 00 1.1.C:.4 00 ?C.00 0 ?(0.00 0 4?.0 00 *:.80 0 1?(.(:0 (00C (.000 x (J6ncome tax Excess MA6T 1 (00.0 00 1.0 00 (::.000 1 (4. 000 *..::0.0 00 *.*::.::0. .(00.0 00 (C:..00 0 4?.0?0.000 8C..?00 *: J (4.00 0 *0 J 1?(. .0 00 .e!enue.0 00 4..00 0 8?0.0 00 1.00 0 1.0 .0 00 .*?0 . The corporation is not co!ere" by the MA6T %rom (00: to (00C..1.0 00 *.100 . Gross sales >ales returns an" "iscounts Aost o% #oo"s sol" Total Net 8"") Aapital #ain Gross income +ess) De"uctions Taxable income .(:0 (.0 00 1.480.0 00 (00.:.

+ess) Aost o% sales Gross income +ess) "e"uction ptional stan"ar" .0 00 Taxable income . .00 0 00 (1:.0 00 *.. .C00.?:.:00.0 00 :...400. >ales returns an" allo7ances >ales "iscounts Net sales +ess) Aost o% #oo"s sol" 6n!entory..000 x (J.4 :0 (.00 0 1:.0 00 1..18.0 00 1.0 00 *: J .?:. *0.000.0 00 *:. Gross sales .8C8. 40 .?00.*.8..00 0. c .0 00 1. 000 1. December *1 Gross income +ess) peratin# expenses (. @anuary 1 Purchases /rei#ht$in Purchase returns an" allo7ances Purchase "iscounts Goo"s a!ailable %or sale 6n!entory.00 0*.:.0 00 (00.000 ..00 0 . 000 400. 6ncome tax "ue 1..ate o% tax Normal 6ncome tax b MA6T .?00.0 00 (.4 :0 ..CC8.8.8:.

6ncome tax payable Aash in ban= To recor" payment o% income tax "ue %or (00?. b .000 40J 1?0. 400. 6% the income %rom unrelate" acti!ity is more than the income %rom relate" the 8rts Pni!ersity 7oul" be sub<ect to a tax rate o% *:J until (008 an" *0J e%%ecti!e (00C.00 0 (40.?:. C .00 0 The rate o% tax applicable to the e"ucational institution is 10J because the income %rom unrelate" acti!ity "oes not excee" :0J o% the entire #ross income.000 :0. The corporation is not allo7e" to carry %or7ar" an" cre"it the (00? excess MA6T a#ainst the income tax liability %or (00.0 00 b . a .000 ?:.000 1 :0. b .0 00 ?:. To recor" income tax liability usin# the normal income tax rate. MA6T is #reater than the normal income tax %or sai" year.000- 1:.0 00 c.000 . (00? Pro!ision %or income tax 6ncome tax payable To recor" income tax liability usin# normal income tax.000 8:. De%erre" char#es 1 MA6T 6ncome tax payable To recor" excess MA6T .. Pro!ision %or income tax 6ncome tax payable 8:. (00. a . a .000 1:.Gross income . :0. since the (00.ate Taxable net income 8 .

1 .?:.000 C:.%or taxable year (00? is close" to . To recor" payment o% income tax "ue %or (00.C?1. /or taxable year (010 7hen the expire" portion o% excess MA6T . De%erre" char#es 1 MA6T 6ncome tax payable " .:?0.etaine" Earnin#s account "ue to its non$application the entry is) .0 00 (:0.000 1.*0 0 1.000 100.000.. The accountin# entries in (008 an" (00C shall be similar to (00? an" (00.:00.00 0 6% /atima Pni!ersity is a non$stoc=.00 0 100.000 8. excess MA6T a#ainst the normal income tax liability %or (008 an" (00C since the (008 an" (00C MA6T are #reater than the Normal 6ncome Tax %or sai" year.000 1:. 11 a 1:. 6% /atima Pni!ersity is a #o!ernment e"ucational institution it 7ill not report any income %or income tax purposes because #o!ernment e"ucational institutions are exempt %rom income tax.000 48.etaine" earnin#s De%erre" char#es 1 MA6T 10 .c.000 1:.* 00 1:. * . To recor" application o% excess MA6T. 6ncome tax payable Aash in ban= (008 The corporation is not allo7e" to carry %or7ar" an" cre"it the (00? an" (00. abo!e.000 1 :0.0 . Gross receipts 4. non$pro%it e"ucational institution no income shall be reporte" %or income tax purposes because non$ stoc= non$pro%it schools are not sub<ect to income tax. Tuition %ees >chool canteen Dormitories Boo=stores Aar stic=ers Total ( .

0 00 ?80.000 x (0J.8..is uni%ormly compute" as %ollo7s Gross sellin# price . +ess) Aost o% sales Gross income +ess) De"uctions Taxable income .ate 6ncome tax b .%inal taxP 110.. The %inal 7ithhol"in# tax to be pai" by the corporation .000 C1.?(0.?(0.000 8.000 4(.000 x (0JTax on interest .000Net capital #ain .4 00 .0 00 00 1.000 1:.P110 x 1.4 00- 1( .000 10..000 :J :00 EXERCISES 7–2 7–2.(00.81:.*00. .0 00 (.*.0 00 *: J C1.000 100.400 1.0 00 (.:.:. Taxable income Siel" %rom "eposit substitutes 6nterest income Total +ess) Di!i"en"s pai" 6ncome tax pai" Tax on "eposit substitutes .000+ess) Aost .0 00 .0 00 (..ate o% tax Aapital #ains tax .1 .0 00 *. .:00.00 0 (.eser!e" %or buil"in# construction 6mproperly accumulate" earnin#s *..P100 x 1.. resi"ent %orei#n or nonresi"ent %orei#n.:.4(.7hether "omestic.

ANSWER: D Gross income +ess) De"uctions Taxable income ...P?*(.hi#her8:(. The corporation is re#istere" 7ith B6.e!enue.00 0 ((. ANSWER: A ANSWER: C A*(0 r: D /or purposes o% MA6T.2 1.?00 1. 4. /irms re#istere" 7ith B6. it shall be sub<ect to MA6T e%%ecti!e (008. in (004.hi#her- PROBLEM 7-2.000 *0 J 1:.000 x (J6ncome tax payable .. in any year shall be co!ere" by MA6T a%ter the lapse o% three calen"ar years. ANSWER: C Minimum Aorporate 6ncome Tax :0.000 . 000 800.00 0 :(.040 ?*(.040 1.P8:(. There%ore.000 *: J .000 x (J6ncome tax payable .?40 1(.0 0 1(.ate o% tax Normal income tax MA6T .ate o% tax Normal income tax MA6T . (. the taxable year in 7hich business operations commence" shall be the year in 7hich the "omestic corporation is re#istere" 7ith the Bureau o% 6nternal .. A*(0 r: C Gross income +ess) De"uctions Taxable income .00 0 ?10.1.?40 :. *.

1st Wtr .000 40. (n" Wtr .etaine" earnin#s De%erre" char#es $ MA6T ANSWER: B (00: (00? (00.00 0 (*0.000 *0.normal income tax(. ANSWER: A . *r" Wtr .000 *0.000 *0.000 10.000 (0.00 0 . 100.00 0 ?0.000 *0. ANSWER: C 6ncome tax.000 :.000 4(. Total excess o% MA6T o!er N6T @ournal entry) 6ncome tax payable De%erre" char#es 1 MA6T PROBLEM 1-2.000 *0.00 0 4.000 (0.000 *0.000 10.000 10.000 4(.000 4(.+ess) Normal income tax Excess o% MA6T o!er N6T Entry) De%erre" char#es $ MA6T 6ncome tax payable (. 1st Wtr . (n" Wtr 1 MA6T *.000 40.N6T 1 hi#her+ess) Taxes 7ithhel" 1 Prior year Taxes 7ithhel" 1 1st 9tr 10.000 *0.0.00 0 100.000 **0.000 (..000 (0. ANSWER: B 6ncome tax.000 (0.000 *.N6T 1 hi#her+ess) Taxes 7ithhel" 1 Prior year Taxes 7ithhel" 1 1st 9tr Excess MA6T prior year 6ncome tax "ue.MA6T 1 hi#her+ess) Taxes 7ithhel" 1 Prior year Taxes 7ithhel" 1 1st 9tr Taxes 7ithhel" 1 (n" 9tr Net income tax payment 1 1st Wtr 6ncome tax "ue.3: 1. ANSWER: B 6ncome tax.

00 0 10.000 *0.000 40.Taxes 7ithhel" 1 (n" 9tr Taxes 7ithhel" 1 *r" 9tr Net income tax payment 1 1st Wtr MA6T pai" in the (n" Wtr Excess MA6T in prior year 6ncome tax "ue.000 4.000 (0.000 (*0.000 *0.000 *0.000 (0.00 0 ?. *r" Wtr $ N6T 4.:. ANSWER: A 8nnual income tax .0.000 *:.0.000 40.000 :0:.N6T 1 hi#her+ess) Taxes 7ithhel" 1 Prior year Taxes 7ithhel" 1 1st 9tr Taxes 7ithhel" 1 (n" 9tr Taxes 7ithhel" 1 *r" 9tr Taxes 7ithhel" 1 4th 9tr Net income tax payment 1 1st Wtr Net income tax payment 1 *r" Wtr MA6T pai" in the (n" Wtr Excess MA6T in prior year 6ncome tax "ue.000 (*0.0.00 0 . /inal Wtr $ N6T :. /inal Wtr $ N6T *0.000 *0.000 400.000 *:.000 40.000 .0.000 (*0.0 00 ::0.000 40.0 00 .:.000 40.00 0 1?:.000 .MA6T 1 hi#her+ess) Taxes 7ithhel" 1 Prior year Taxes 7ithhel" 1 1st 9tr Taxes 7ithhel" 1 (n" 9tr Taxes 7ithhel" 1 *r" 9tr Taxes 7ithhel" 1 4th 9tr Net income tax payment 1 1st Wtr Net income tax payment 1 *r" Wtr MA6T pai" in the (n" Wtr 6ncome tax "ue. ANSWER: C 8nnual income tax .000 40.00 0 10.00 0 .

ANSWER: D ANSWER: D ANSWER: C 1C :00. :.0006mproperly accumulate" taxable income .0 00 (.00 0 C00..:C:.0 00 *00.:.:0.000 1.. ANSWER: A Gross income +ess) De"uctions Expenses N +A Taxable income .00 0 1.ate o% tax 6ncome tax "ue (.000 *: J *1:. ANSWER: D Taxable income 8"") 6nterest on ban= "eposit .1 1 ANSWER: .4C:.?0 0 PROBLEM 4.000 *1:.1?.0 00 *00.000 11?.0 00 10 J 1?. .?.00 0 (.C:0.00 0 1.000 (0.0 00 C00.?.0:0.(0.000N80JProcee"s o% insurance N +A Di!i"en"s %rom 8BB Total +ess) Di!i"en"s pai" 6ncome tax pai" 6nterest on ban= "eposit .000 1.0 00 81C.00 0 .0 00 (.000 4.ate 6mproperly accumulate" earnin#s tax *. 4.(00.EXERCISE 1–3 1.

allo7ances an" bonus ther operatin# expenses Aonstruction o% a""itional classrooms /urniture an" e9uipment Taxable income .1( : C.:00.00.400. .000 11.400.1.. *0 o% the National 6nternal .(00.0 .000 10 J :*.000 400.00 0 1.*00.000N(0 x ?N1(00 Taxable income .(*0..1.: 0 (.0 00 10.000 Depreciation o% a""itional school %acilities) Alassrooms .00 0 ANSWER: B 8 public elementary school is also a #o!ernment e"ucational institution.000N(0 x 48..1.0 00 C.?00. They are exempt %rom income tax un"er >ec.e!enue Ao"e.000 1.?00.000 180..000 ther operatin# expenses (.(: 0 10J (1.0 00 :*0.:0 CN1(/urniture X e9uipment 10.00 0 *:0.Gross income +ess) Expenses >alary.0:8.ate o% tax 6ncome tax (.*00.000 (.(*0.00 0 11. allo7ances an" bonus ?. ?.400.ate o% tax 6ncome tax *. ANSWER: D Tuition %ees Miscellaneous %ees 6ncome o% boo=store 6ncome o% school canteen Gross income +ess) Expenses >alary.

:0 0 ANSWER: B The importation o% laboratory e9uipments are exempt %rom customs "uties i% the school is a pri!ate e"ucational institutions. ANSWER: D PROBLEM 1–4.00 0 1.00 0 10J 110.C00. 40*2.0 00 (.2 1.000. 4. 8 non$pro%it e"ucational institution is sub<ect to an income tax rate o% 10J. "irectly an" exclusi!ely %or e"ucational purpose is exempt %rom real property tax.00 0 10J *:.400.000. "irectly an" exclusi!ely %or .400.:00.00 0 *.:00.ate o% tax 6ncome tax "ue (. e!en i% rente" only by the school. >ec.0 00 ?. The portion o% the school buil"in# is sub<ect to real estate tax because it is not bein# use" actually. ANSWER: C Gross income +ess) De"uctions peratin# expenses Depreciation.0 00 10. i% bein# use" actually.8 non$stoc=. 042 o% the Aonstitution.0 00 (:..00 0 ?.ate o% tax 6ncome tax "ue *.:. ANSWER: A Gross income +ess) De"uctions peratin# expenses Aost o% buil"in# Taxable income .00 0 10.0 00 8. non$pro%it e"ucational institution is exempt %rom tax un"er 8rticle R6L.(.4(:.000N:0x?N 1(Taxable income .100. The school buil"in#. ?.:.

PNB P .00 0 *1:.(0086ncome tax (.1.e"ucational purpose.40. 4. P. P>8 . ANSWER: C Gross income.oyalties.>.00 0 ?0:. P>8 Taxable income .00 0 10.ate o% tax . Philippines 6nterest on ban= "eposit. ANSWER: A Gross income.00 0 ?C0. nly income recei!e" by non$ stoc= non$pro%it e"ucational institutions an" #o!ernment e"ucational institutions are exempt. 1.: 0 . Philippines +ess) Expenses.8. ANSWER: C EXERCISES 1 – 5 PROBLEM 1–5.00 0 4(:.00 0 4(:.ate o% tax .00 0 (40. +ess) Expenses..00 0 4:0.40. ANSWER: A Gross income.40. +ess) Expenses Taxable income .00 0 . Phils. The income %rom operation is taxable.(: 0 .00 0 :0.00 0 *:J (11. Philippines Gross income.00 0 P *1:.(0086ncome tax *.00 0 *:J 110.

ANSWER: A .0 00 Gross income.3 ANSWER: (00. Phils.(00.:00.>.(00C6ncome tax PROBLEM 1– 5.*00. P.ate o% tax .00 0 *0. +ess) De"uctions Gross income. Phils.000 1(0.000 ?0.ate o% tax .ate . .00 0 *:J (?(. P>8 +ess) De"uctions Taxable income .0 00 *: J :(:. Philippines +ess) Expenses.Total .000 x P401.0 00 1.000 C (. Philippines +ess) De"uctions Taxable income .(0086ncome tax PROBLEM 1– 5.:0 0 PROBLEM 1– 5.800.00 0 1:0.00 0 *0.00 0 80.K1(:.2 ANSWER: D Gross income.00 0 *0J 4:. Gross income.4 1.:0. ANSWER: B Gross income.000 400.000 800.0 00 1.(008/inal tax 4.00 0 .

000N: x 401.00 0 .000 Gross income.000 +ess) Expenses.00 0 *.0 00 C(0..00 0 1.: J *0.0 00 800.000.>.:(0.1:(. Philippines (.?0. ANSWER: C Gross income. &B . ANSWER: B Gross income.(00.ate o% tax 6ncome tax *.0 00 1. &B .480.ate o% tax 6ncome tax :.000 x P40(.P:.000N:x40(.00 0 400.0 00 *.0 00 *0 J 1.0 00 (. Philippines .840.000 +ess) Expenses. Philippines Taxable income .840. ANSWER: D Gross income.0 00 800. P.0 00 *0 J *?0.00 0 1.000 *0J 1(0.ate o% tax 6ncome tax (.(00.K?(.000 1. . Philippines +ess) Expenses.000 Taxable income .440.(00. Philippines +ess) Expenses.ate o% tax /inal tax 4 ANSWER: A Gross income .K*4:.(00.K(*0.

400.00 0 EXERCISE 1 – 6 1.000.000 *0 J 1(0.0 00 1:J ?. ANSWER: A Exempt %rom branch pro%it remittance tax.ate o% tax Branch pro%it remittance tax 4.000 1.ate o% tax Branch pro%it remittance tax ?.0 00 (: J *00.ate o% tax /inal tax 400.ate o% tax 6ncome tax 8mount remitte" to mother company .00 0 (80.000 $ 1(0. ANSWER: B Gross income .: J :4.(00.000. .. ANSWER: A (.000.000.00 0 40. ANSWER: C Net income a%ter tax .000 1:J 4(.(00.0 00 4.00 0 1. ANSWER: C 40. ANSWER: B Gross income .0 ANSWER: B Net income a%ter tax .Taxable income . *.ate o% tax /inal tax 8.

.00 0 4.0 00 41.oyalty Di!i"en" Total +ess) Branch pro%it remittance tax 8mount to be remitte" to hea" o%%ice :. Non$pro%it cemeteries are exempt %rom income tax.000.. ANSWER: B ANSWER: D 00 *. (. an" P&6A are exempt %rom income tax. *. ANSWER: C ANSWER: C 8ll assets o% a non$stoc= non$pro%it e"ucational institution are exempt %rom customs "uties on importation.000. EXERCISE 1–1.8 C. General pro%essional partnerships an" co$o7nerships are not sub<ect to income tax. P8GA . >>>. ?. ANSWER: D Domestic corporations an" resi"ent %orei#n corporations are taxe" base" on taxable income.0 00 4. 8..0 00 ?. is no7 sub<ect to income tax per . ANSWER: A 8n in"i!i"ual permanently resi"in# in the Philippines is classi%ie" as resi"ent re#ar"less o% 7hether he is a citi'en or not.:00. .:00.:00.(. ANSWER: B Auentas en participacion is consi"ere" as a corporation sub<ect to corporate tax.0 00 G>6>. M4L"IPLE C6OICE "6EOR5 1. .. 8 <oint !enture 7hich is %orme" %or the purpose o% un"erta=in# ener#y operations 7ith the #o!ernment are exempt %rom tax.

C:. thereby enrichin# itsel% at the expense o% its la7$abi"in# citi'ens .(:.000 4:0.(. Thus) .000 1*0. 4.(0086ncome tax P(. CASE PROBLEM Excess income taxes pai" in a year that coul" not be applie" as tax cre"it to taxes "ue the %ollo7in# year may be re%un"e" the next year.000 .000 *:J 4:.. ANSWER: B >ales . Technicalities an" le#alisms..C?8. They are taxe" base" entirely on #ross income "eri!e" %rom sources 7ithin the Philippines.000 N11(J+ess) Aost o% sales Gross income +ess) Expenses 6nclusi!e . Thus. incurrin# no tax liability to 7hich a pre!ious yearOs tax cre"it coul" be applie". 6% a taxpayer su%%ere" a net loss in (00?.solutio in"ebiti-.?:0. shoul" not be misuse" by the #o!ernment to =eep money not belon#in# to it. pro!i"e" that the claim %or such a re%un" is ma"e 7ithin t7o years a%ter payment o% the tax. the unuse" amount o% the excess may still be re%un"e".ate o% tax . :. ?.:00 EXERCISE 7–8.0 00 C(:.Nonresi"ent %orei#n corporations are not allo7e" to claim "e"uctions %or purposes o% income taxation. 000 1. i% the excess income taxes pai" in (00: ha!e not been entirely use" by a taxable corporation a#ainst its 9uarterly income tax liabilities %or (00?. . The rule on tax sparin# cre"it applies only 7hen the "i!i"en"s are recei!e" by nonresi"ent %orei#n %rom a "omestic corporations.*8?.400 N 11(JExclusi!e Taxable income . ho7e!er exalte". there is no reason %or the B6.000 *4:. ANSWER: B ANSWER: D ANSWER: D Di!i"en"s recei!e" by in"i!i"uals %rom a "omestic company are sub<ect to %inal tax o% 10J. to 7ithhol" a tax re%un" 7hich ri#ht%ully belon#s to the taxpayer.

:1 C.....(.%ile" (00?-) 6ncome tax "ue +ess) Tax cre"it .0 0 1*.:(*.C(C.4(. (00. %ile" 4N1:N0:TS (00: . :1 4. .C*.may be re%un"e"- 1*.C(C.excess tax O0:Balance ..TS Y04.Excess tax .: 1V V Alaim %or re%un" shoul" be ma"e not later that 8pril 1:.18.C*.0.

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