TAXATION INCOME TAX

NOTES IN ALLOWABLE DEDUCTIONS

ITEMS NO DEDUCTIBLE AND PERSONAL EXCEMPTIONS

ALLOWABLE DEDUCTIONS

1. Ordinary and necessary expenses

1. Ordinary and necessary expenses

Only expenses which are directly attributable to the development,

management, operation and/or conduct of the trade, business or exercise of
profession are allowed as deductions.

A reasonable allowance for salaries, wages, and other forms of compensation

for personal services actually rendered, including the grossed-up monetary
value of fringe benefit furnished or granted by the employer to the employee.

2. Substantiation Requirements No deduction from gross income shall be

allowed unless the taxpayer shall substantiate with sufficient evidence, such as
official receipts or other adequate records.

3. Bribes, Kickbacks and Other Similar Payments are not allowed as deductions
from gross income.

4. Special Expenses Allowable to Private Educational Expenses Private

educational institutions may at their option elect either:

a. To deduct expenditures considered as capital outlays of depreciable assets

incurred during the taxable year for the expansion of school facilities; or
b. To deduct allowance for depreciation.

2. Interest Expense

1. Interest Expense must be connected with trade or business of the taxpayer in

order to be allowed as deduction from gross income.

If the amount borrowed is momentarily deposited with bank and earns interest
subject to final tax, the interest expense deductible from gross income shall be
reduced by 33% of the interest income.

2. Optional Treatment of Interest Expense At the option of the taxpayer, interest

incurred to acquire property used in trade business or exercise of a profession
may be allowed as a deduction (outright) or treated as a capital expenditure
(depreciation).
3. Taxes

1. Taxes must be connected with trade or business of the taxpayer in order to be

deductible from gross income.

The following are non-deductible taxes:

a. Income tax
b. Income tax paid to a foreign country claimed as tax credit
c. Estate and donors taxes
d. Taxes assessed against local benefits of a kind tending to increase the
value of the property assessed (Special assessment).

4. Losses

1. Losses actually sustained during the taxable year and not compensated for by
insurance or other forms of indemnity shall be allowed as deductions:

a. If incurred in trade, profession or business

b. Of property connected with the trade, business or profession, if the loss
arises from fires, storms, shipwreck or other casualties, or from robbery,
theft or embezzlement
c. No loss shall be allowed as a deduction if at the time of the filing of the
return, such loss has been claimed as a deduction for estate tax purposes
in the estate tax return

2. Net Operating Loss Carry-Over The net operating loss of the business or
enterprise for any taxable year immediately preceding the current taxable year
which had not been previously offset as deduction from gross income shall be
carried over as a deduction from gross income for the next 3 consecutive years
immediately following the year of such loss.

Any loss incurred in a taxable year during which the taxpayer was exempt from
income tax shall not be allowed as deduction.

Net operating loss carry-over shall be allowed only if there has been no
substantial change in the ownership of the business or enterprise.

Net operating loss carry-over means excess of allowable deduction over gross
income of the business in a taxable year. (Gross income less allowable
deductions)

3. Capital Losses Loss from sales or exchanges of capital assets shall be

allowed only to the extent of the gains from such sales and exchanges.

Securities Becoming Worthless if securities become worthless during the

taxable year and are capital assets, the loss resulting therefrom be considered
as a loss from the sale or exchange on the last day of such taxable of capital
assets.
 4. Losses from Wash Sales of Stock or Securities

In the case of any loss claimed to have been sustained from any sale or other
disposition of shares of stock or securities where it appears that within period
beginning 30 days before the date of such sale or disposition and ending 30
days after such date, the taxpayer has acquired or has entered into a contract
or option to acquire substantially identical stock or securities, no deduction for
the loss shall be allowed unless the claim is made by a dealer in stock or
securities and with respect to a transaction made in the ordinary course of the
business of such dealer.

5. Wagering Losses Losses from wagering transactions shall be allowed only

to the extent of the gains from such transactions.

5. Bad Debts Expense

Debts due to the taxpayer actually ascertained to be worthless and charged off
within the taxable year except:
(1) those not connected with profession, trade or business
(2) those sustained in a transaction entered into between related parties.

Related parties mean:

a. Between members of a family. Family of an individual shall include only his
brothers and sisters (whether by the whole or half-blood), spouse, ancestors,
and lineal descendants;
b. Except in case of distributions in liquidation, between an individual and
corporation more than 50% in value of the outstanding stock of which is owned,
directly or indirectly, by or for such individual;
c. Except in the case of distributions in liquidation, between two corporations more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by or for the same individual;
d. Between the grantor and fiduciary of any trust;
e. Between the fiduciary of and the fiduciary of a trust and the fiduciary of another
trust if the same person is a grantor with respect to each trust;
f. Between a fiduciary of a trust and the beneficiary of such trust.

6. Depreciation Expense

1. Depreciation expense must be connected with trade or business of the taxpayer.

It includes amortization of intangible assets with definite life.

2. Methods of computing reasonable allowance

a. Straight-line method
b. Declining-balance method
c. Sum-of-the-years-digit method
d. Any other method which may be prescribed by the Secretary of Finance
upon recommendation of the Commissioner
7. Charitable and Other Contributions

1. Subject to limitation

Contributions to the following institutions or entities are subject to limitation:

Government of the Philippines or any of its agencies or any political

subdivision thereof exclusively for public purposes,

To accredited domestic corporation or associations organized and operated

exclusively for religious, charitable, scientific, youth and sports
development, cultural or educational purposes or for the rehabilitation of
veterans

To social welfare institutions

To non-government organizations

Limitation: Not in excess of 10% in the case of an individual, and 5% in the case
of a corporation, of the taxpayers taxable income derived from trade, business
or profession as computed without the benefit of this deduction.

2. Deductible in full

Donations to the following institutions or entities shall be deductible in full:

Donations to the Government of the Philippines or to any of its agencies or

political subdivisions, including fully-owned government corporations,
exclusively to finance, to provide for, or to be used in undertaking priority
activities in education, health, youth and sports development, human
settlements, science and culture, and in economic development.

Donations to Certain Foreign Institutions or International Organizations

Donations to Accredited Non-government Organizations Organized and

operated exclusively for scientific, research, educational, character-building
and youth and sport development, health, social welfare, cultural or
charitable purposes, or a combination thereof, no part of the net income of
which inures to the benefit of any private individual.

3. Valuation The amount of any charitable contribution of property other that

money shall be based on the acquisition cost of said property.

8. Research and Development Expenses

1. Research and Development Expenses incurred or paid by the taxpayer in

connection with trade or business are allowed as deduction from gross income.

2. Capitalized Research and Development Expenditures

Requisites:

Paid or incurred by the taxpayer in connection with his trade, business or

profession

Not treated as expenses under paragraph 1

Chargeable to capital account but not chargeable to property of a character

which is subject to depreciation or depletion
 In computing taxable income such deferred expenses shall be allowed as
deduction ratably distributed over a period of not less than 60 months as may be
elected by the taxpayer (beginning with the month in which the taxpayer first
realizes benefits from such expenditures).

9. Pension Trusts

For Current Service

The contributions of employer to pension trust for the benefit of employees for current
services are deductible from gross income.

For Past Services

The lump contribution of employer to pension trust for the benefit of employees for past
services are deductible from gross income but are to be distributed over a period of 10
consecutive years.

10. Additional Requirements for Deductibility of Certain Payments

Any amount paid or payable which is otherwise deductible from, or taken into account
in computing gross income or for which depreciation or amortization, shall be allowed
as a deduction only if it is shown that the tax required to be deducted and withheld
therefrom has been paid to the Bureau of Internal Revenue.

11. Optional Standard Deduction

Optional standard deduction (OSD) may be availed of by the individual (self-

employed) and corporate taxpayers in lieu of the itemized deductions.

For individual (self-employed) taxpayers the OSD is 40% of gross sales or receipts.

For corporations, the OSD is 40% of gross income.

12. Premium Payments on Health and/or Hospitalization Insurance

1. Conditions

a. The amount of premiums not exceed P2,400 per family or P200 a month paid
during the taxable year for health and/or hospitalization insurance taken by the
taxpayer for himself, including his family

b. Family has a gross income of not more than P250,000 for the taxable year.

c. In case of married taxpayers, only the spouse claiming the additional exemption
for dependents shall be entitled for this deduction.

2. Taxpayers earning compensation income arising from personal services rendered

under an employer-employee relationship are not allowed any deduction except
Premium Payments on Health and/or Hospitalization Insurance.
 ITEMS NOT DEDUCTIBLE

1. Personal, living or family expenses

2. Any amount paid out for new buildings or for permanent improvements or
betterments made to increase the value of any property or estate;
3. Any amount expended in restoring property or in making good the exhaustion
thereof for which an allowance is or has been made
4. Premiums paid on any life insurance policy covering the life of any officer or
employee, or of any person financially interested in any trade or business carried
on by the taxpayer, individual or corporate, when the taxpayer is directly or
indirectly a beneficiary under such policy.
5. Losses for Sales or Exchanges of Property In computing net income, no
deductions shall in any case allowed in respect of losses from sales or exchanges
of property directly or indirectly

a. Between members of a family. Family of an individual shall include only his

brothers and sisters (whether by the whole or half-blood), spouse, ancestors,
and lineal descendants;
b. Except in case of distributions in liquidation, between an individual and
corporation more than 50% in value of the outstanding stock of which is owned,
directly or indirectly, by or for such individual;
c. Except in the case of distributions in liquidation, between two corporations more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by or for the same individual;
d. Between the grantor and fiduciary of any trust;
e. Between the fiduciary of and the fiduciary of a trust and the fiduciary of another
trust if the same person is a grantor with respect to each trust;
f. Between a fiduciary of a trust and the beneficiary of such trust.

PERSONAL EXEMPTIONS

1. Basic Personal Exemption

For single individual or married individual

judicially decreed as legally separated
with no qualified dependents P50,000
For Head of Family P50,000
For each married individual P50,000
In the case of married individuals where only one of the spouses is deriving gross
income, only such spouse shall be allowed the personal exemption.
Conditions to qualify as head of the family
1. With dependent (parent, brother, sister and child) [The child may be
legitimate, recognized natural or legally adopted.];

2. Living with the taxpayer and dependent upon him for chief support;

3. The brother, sister or child is:

a. Not more than 21 years of age (regardless of age if incapable of self-
support because of mental or physical defect
b. Unmarried
c. Not gainfully employed
 2. Additional Exemption for Dependents

The allowed additional exemption for dependents is P25,000 for each dependent
not exceeding 4.

The additional exemption for dependent shall be claimed by only one of the
spouses in the case of married individuals. The husband shall be deemed the head
of the family and proper claimant of the additional exemption in respect to any
dependent children unless he explicitly waives his right in favor of his wife in the
withholding exemption certificate.

In the case of legally separated spouses, additional exemptions may be claimed

only by the spouse who has custody of the child or children. The total amount of
additional exemptions that may be claimed by both shall not exceed the maximum
additional exemptions herein allowed.

Conditions to claim additional exemption

1. Dependent (Child) [The child may be legitimate, illegitimate or legally
adopted]
2. Living with the taxpayer and dependent upon him for chief support
3. The child is:
a. Not more than 21 years of age (regardless of age if incapable of self-
support because of mental or physical defect)
b. Unmarried
c. Not gainfully employed

3. Change of Status

If the taxpayer marries or should have additional dependent(s) as defined above

during the taxable year, the taxpayer may claim the corresponding additional
exemption, as the case may be, in full for each year.

If the taxpayer dies during the taxable year, his estate may still claim the personal
and additional exemptions for himself and his dependent(s) as if he died at the
close of such year.

If the spouse or any of the dependent dies or if any such dependents marries,
becomes twenty-one (21) years old or becomes gainfully employed during the
taxable year, the taxpayer may still claim the same exemptions as if the spouse or
any of the dependents died, or as if such dependents married, become twenty-one
(21) years old or became gainfully employed at the close of such year.

4. Personal Exemptions Allowed to Nonresident Alien Individual

A nonresident alien individual engaged in trade, business or in the exercise of a

profession in the Philippines is entitled to a personal exemption in the amount
equal to the exemptions allowed in the income tax law in the country of which he
is subject or citizen to citizens of the Philippines not residing in such country, not
to exceed the amount fixed in the Tax Code as exemptions for citizens or residents
of the Philippines.

EXEMPTIONS OF MINIMUM WAGE EARNERS

RA 9504 exempts minimum wage earners in the private and public sector from payment
of income tax. The exemption covers not only basic pay but also holiday pay, overtime
pay, night shift differential, and hazard pay received by said minimum wage earners.
TAXATION INCOME TAX

EXERCISE
(Allowable Deductions)
1. Which statement is wrong? Deductions for premiums on hospitalization and
health insurance is:

a. Allowed a citizen with gross compensation income only;

b. Allowed a citizen with business or profession income only;
c. Allowed a citizen with mixed income;
d. Only if the taxpayer is taking itemized deductions from gross income.

2. Which of the following is not a requisite for insurance premium deductions?

a. The amount of premium deductible for insurance do not exceed P2,400 per
family.
b. The family gross income is P250,000 or more.
c. The family gross income is P250,000 or less.
d. Only the spouse claiming additional exemption is entitled thereto.

3. The deduction for premium payments on health and/or hospitalization insurance

is not available to:

a. An individual with gross compensation income only;

b. An individual with gross income from business or practice of profession,
whether he is availing of the optional standard deduction or the itemized
deduction;
c. An individual with mixed income;
d. Both husband and wife.

4. The family of an individual shall include his brothers and sisters, whether by the
whole of half-blood, spouse, ancestors and lineal descendants. In which of the
following does the concept not apply?

a. Non-deductible loss from sales or exchanges of property between members

of the family;
b. Non-deductible bad debts on transactions between members of the family;
c. Non-deductible interest expense between members of the family;
d. Deductible premiums on hospitalization and health insurance of a family.

5. No deductions shall be allowed where the transaction is between related

taxpayers for

A) Losses from sales or exchanges of property

B) Interest expense
C) Bad debts

a. A and B only c. A and C only

b. B and C only d. A, B AND C.
6. Statement 1: Only business expenses may be deducted from the gross income
of taxpayers.
Statement 2: Itemized deductions from gross income should be duly supported
by vouchers or receipts.

a. First statement is true while second statement is false;

b. First statement is false while second statement is true;
c. Both statements are true;
d. Both statements are false.

7. Statement 1: A net operating loss is the excess of allowable deductions over the
gross income from business for a taxable year.
Statement 2: A net operating loss which had been previously been deducted
from gross income shall be carried over as deduction only in the next year
immediately following the year of such loss.

a. True, true c. True, false

b. False, false d. False, true

8. Which of the following statements is wrong? The net operating loss carry-over
(NOLCO) is:

a. Available to a domestic corporation.

b. Available to registered general partnership in business in the Philippines.
c. Available to an individual business in the Philippines.
d. Not available to a general professional partnership in the Philippines.

9. Which statement is wrong? Contributions made by an employer to a pension

trust:

a. For lump sum payment to cover past service cost, is allowable as deduction
beginning with the year the payment was made.
b. For lump sum payment to cover past service cost is allowable as deduction
amortized for period of ten years.
c. For a lump sum payment to cover past period cost, may be amortized over a
period of more than, but not less than 10 years.
d. For present service cost, is deductible in the year that payment is made.

10. Which statement is not correct? Deduction for depletion:

a. Is allowed on wasting assets only.

b. For foreign corporations engaged in doing business in the Philippines, is
allowed only if the mine is located in the Philippines.
c. For domestic corporations shall be allowed only if the mine is located in the
Philippines.
d. Is separate from deduction for depreciation of building in the mine site.

11. Which statement is wrong? The rule that capital losses are deductible only to the
extent of capital gains is applicable:

a. To a corporation.
b. To an individual.
 c. To an individual taking the Optional Standard Deduction
d. To an individual taking the itemized deductions from gross income.

12. Which of the following items may be deducted from gross income?

a. Philippine income tax c. Foreign income tax

b. Estate or donors tax d. Special assessment

13. Which of the following taxes is deductible from gross income?

a. Special assessment c. Donors tax

b. Estate tax d. Business tax

14. Examples of taxes that are deductible, except

a. Occupation tax c. Privilege tax

b. Documentary stamp tax d. Income tax

15. Statement 1: Bad debt is an expense in the books of accounts when a provision
is made for it.
Statement 2: Bad debt is a deduction from the gross income when the account is
written off.

a. The first statement is true while the second statement is false.

b. The first statement is false while the second statement is true.
c. Both statements are true.
d. Both statements are false.

16. Statement 1: Contributions by the employer to the pension trust for past service
cost is deductible in full in the year that the employer made the contribution; if he
is on the cash basis of accounting.
Statement 2: Contributions or donations given directly to individuals cannot be
deducted from gross income.

a. True, true c. True, false

b. False, false d. False, true

17. Which statement is wrong? Research and development costs:

a. When related to the acquisition and/or improvement of land and building must
be capitalized;
b. If not related to land and building, may be treated as an outright deduction;
c. If not related to land and building, maybe treated as a deferred expense
which may be amortized;
d. Cannot be deducted because it has unlimited life.
18. In 2014 XYZ Corporation had a shipment with a cost of P100,000 and insured the
same against marine perils for the same amount. The vessel carrying XYZ
Corporations property sunk and the insurance company refused to admit liability
under the policy. An action was brought to court and in 2020, the insurance
company compromised and agreed to pay P80,000. How much is XYZ
Corporations deductible loss in 2014?

a. P-0- c. P40,000
b. P20,000 d. P60,000

19. A Co. had investments in shares of B Co. that it acquired at a cost of P20,000. It
also had investments in shares of stock of C Co. that it acquired at a cost P40,000.
The value of the shares of stock of B Co. had decreased to P15,000, while the
shares of stock of C Co. are now worthless, and had to be written off.

The deductible loss is:

a. P45,000 c. P60,000
b. P40,000 d. P -0-

20. C Corp., a domestic corp., made borrowing from Westmont Bank, thereby incurring
interest expense of P50,000 for the taxable year, 2014. In addition, the corporation
earned for the same taxable year, interest income from savings deposit with
Maybank subject to final tax amounting to P40,000.

How much of the interest incurred by C Corp. shall be allowed as deduction from
gross income in 2014?

a. P15,600 c. P40,000
b. P24,426 d. P36,800

21. Safe Corporation incurred the following taxes during the taxable year 2014:

Documentary stamp taxes excluding surcharge of P100 and interest of P20,

P1,000
License taxes, including surcharge of P1,000 and interest of P200, P6,000
Philippine income tax, P100,000
Municipal tax, P2,000
Community tax, P1,500
Value-added tax, P90,000
Compromise penalty on taxes, P50,000

The amount of taxes deductible from gross income of Safe Corporation is:

a. P7,120 c. P7,420
b. P8,620 d. P9,300
22. For the taxable year 2014, ABC Corporation, a domestic corporation has the
following income and expenses:

Gross income P50,000

Contribution to IRRI 3,000
Contribution to a social welfare organization
(Non-Government Organization) 2,000
Contributions to religious organizations 1,200
Other deductions 15,000
Compute for the taxable income of ABC Corporation
a. P 21,000 c. P28,800
b. P 20,800 d. P28,000

23. Ms. X, in business, made a contribution of P12,000 to the Lapaz Catholic church.
She had a gross income from business of P400,000, and deductions, not including
the contribution, of P300,000. Of her contribution, how much will be allowed as
deduction from her gross income.

a. P21,000 c. P10,000
b. P12,000 d. P -0-

24. After 10 years of business operation, Generous Corporation established a pension

trust, to provide for the payment of pensions of its employees. Under the plan, for
that year, the corporation made a payment in the amount of P6,000 as liability
accrued for that year, and an amount of P100,000 to cover the prior years pension
liability. It was also established that the corporations annual liability to the plan is
P6,000. Compute for the deductible expenses of Generous Corporation on the first
year that the trust was established.

a. P17,000 c. P16,000
b. P 5,000 d. P 6,000

25. Statement 1: An illegitimate child dependent upon the taxpayer is a unit of

additional exemption;
Statement 2: A dependent child who marries within the year or who becomes
gainfully employed during the year is still a dependent with additional exemption
for the year.

a. True, true; c. False, false;

b. True, false; d. False, true.

26. A is single. He supports S, a widowed sister, age 20 years, unemployed and Ss

two minor children, all of whom live with A.
A is classified as

a. Head of the family c. Single

b. Married d. Legally separated with dependent
27. H and W are husband and wife without children. Due to some moral problems, W
abandoned H and lives separately in Hongkong.

Determine the status of H?

a. Head of the family c. Single

b. Married d. Legally separated with dependent

28. C is a single, working girl. She supports her mother Y and Ys second husband,
both jobless, living with and dependent upon C for support.

Determine the status of C?

a. Head of the family c. Single

b. Married d. Legally separated with dependent

29. H, married, has the following dependents:

A Legitimate child, 8 years old, living with the grandmother;

B Legitimate child, 18 years old, studying in US;
C Legitimate grandchild, 7 years old;
D Nephew by natural adoption, 12 years old;
E Brother, 27 years old, physically defective.
Determine the personal exemption of H.
a. P25,000 c. P32,000
b. P33,000 d. P75,000

30. G is a widow supporting the following dependents living with her:

A live-in partner, who is single;

B Child, 2 years old, with live-in partner;
C Child 2 months old, with X, a married man
Determine the personal exemption of G.
a. P25,000 c. P100,000
b. P33,000 d. P40,000

31. H and W are legally separated. Custody and support of their 3 minor children were
awarded by court to W.

Determine the personal exemptions of H and W.

H W
a. P46,000 P32,000
b. P32,000 P46,000
c. P50,000 P125,000
d. P49,000 P20,000
32. X is a widower with the following dependents:
A Child, 17 years old, married in May 2013
B Child, 19 years old employed January 2013 with a salary of P10,000 per month
C Child, 21 years of age on November 14, 2013
D Child, 23 years old, employed abroad in December, 2013, with salary of
P20,000 per month
Determine the personal exemption for 2013.
a. P25,000 c. P125,000
b. P24,000 d. P39,000

33. Assume that Mr. E, married, had:

Gross income from business, Philippines P220,000

Business expenses, Philippines 80,000
Gross income from business, foreign 75,000
Business expenses, foreign 20,000
He had, living with and dependent upon him for support, the following:
(a) The mother of Mrs. B;
(b) The father of Mr. B;
(c) A legitimate child, fifteen years old;
(d) A brother of Mrs. B, twenty-five years old, single, physically incapable of self-
support;
(e) A sister of Mrs. B, twenty-one years old, unemployed.
If the taxpayer is a resident citizen, the taxable income is
a. P195,000 c. P100,000
b. P120,000 d. P140,000

34. In No. 33, if the taxpayer is a resident alien, the taxable income is

a. P195,000 c. P65,000
b. P155,000 d. P140,000

Nos. 35 and 36 are based on the following information:

X, married, with two dependent children, had the following income and expenses
in 2014:
Salary, net of withholding tax of P5,000 P55,000
13th month pay 5,000
Gross receipts from profession, net of WT of P7,000 83,000
Rent income, net of 5% withholding tax 57,000
Gross receipts from business 125,000
Professional and business expenses 56,500
Premiums on health insurance 6,000
35. The income tax payable by X if he availed of the itemized deductions

a. P28,125 c. P44,900
b. P17,125 d. P41,360
36. The income tax payable by X if he availed of the optional standard deductions

a. P 4,500 c. P51,050
b. P50,225 d. P51,650
37. Ann Corporation has the following data during the year:

Gross sales P1,540,000

Cost of sales 645,000
Expenses 460,460
If Ann Corporation availed of the optional standard deductions, the taxable income
shall be
a. P537,500 c. P741,000
b. P434,540 d. P279,000
38. Tax credit for foreign income tax paid or incurred is allowed to a citizen of the
Philippines or a domestic corporation.

Statement 1: When a taxpayer is qualified to take a tax credit for foreign income
tax paid, he may take a deduction instead for such tax;
Statement 2: When there are several foreign countries to which income taxes were
paid, a taxpayer qualified, and who opts to take tax credit, must take all the income
taxes paid to foreign countries as tax credit.

a. Both statements are correct;

b. Both statements are wrong;
c. The first statement is true, but the second statement is false;
d. The first statement is false, but the second statement is true.
39. ABC Co., a domestic corporation, had the following data for 2013:

Taxable income, Philippines P1,000,000

Taxable income, X Foreign Country 600,000
Taxable income, Y Foreign Country 400,000
Income tax paid to X Foreign Country 250,000
Income tax paid to Y Foreign Country 120,000
Philippine income tax paid, three quarters of the year 110,000
The Philippine income tax still due, after credit for foreign income taxes paid is:
a. P218,000 c. P570,000
b. P356,000 d. P190,000
40. A Domestic Corporation furnished you the following data for 2014, its taxable year:

Sources Gross Income Deduction Income Tax Paid

Phil P2,000,000 P1,600000 P-0-
Japan 500,000 300,000 P65,000
Thailand 200,000 300,000 P-0-

The corporation wishes to claim foreign income tax paid as tax credit. Compute
the income tax due/payable after the tax credit.

a. P175,000 c. P140,000
b. P110,000 d. P120,000