4/14/2021 5 - Final Income Taxation Flashcards | Quizlet

5 - Final Income Taxation

Terms in this set (46)

1. Final tax 4 features of final income taxation

2. Tax withholdong at sources
3. Territorial imposition
4. Imposed on certain passive income and
persons not engaged in business in the
Philippines

Taxpayer and government convenience rationale of final income taxation

those that are earned with very minimal involvement from the
Items of passive income taxpayer and are generally irregular in timing and amount and is best
used with the final withholding scheme for passive income

1. NRA-NETBs 2 of the types of taxpayers that have high risk of non compliance, and
2. NRFCs are thus subject to final income

25% general final tax rate of nra netb

30% general finak tax rate of nrfcs

1. Interest or yield from bank deposits or 9 passive income subject to final tax
deposit substitutes
2. Domestic dividends, in general
3. Dividend income from a Real Estate
Investment Trust
4. Share in the NI of a business
partnership, taxable associations, joint
ventures, joint accounts, or co-ownership
5. Royalties, in general
6. Prizes exceeding 10k
7. Winnings
8. Informer's tax reward
9. Interest income on tax-free corporate
covenant bonds

final tax rate on interest earned from short term deposits for
20%
individuals and corporations

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Individuals (except nra netb) - exempt final tax rate on interest earned from long term deposits for
individuals and corporations
Corpos - 20%

Short term deposits deposits made for a period of less than 5 years

Long term deposits or investment deposits made for a period of 5 years or more
certificates

< 3 yrs - 20% final tax rate on pre-termination of long-term deposits of individuals
3-4 - 12%
4-5 - 5%
> 5 yrs - 0%

Those of cooperatives' exempted savings and time deposits from final tax

1. Deposit substitute 5 other applications of the final tax on interest

2. Government securities
3. Money market placements
4. Trust funds
5. Other investments evidenced by
certificates prescribed by BSP

an alternative form of obtaining funds from at least 20 persons at any

Deposit substitute one time other than deposits through the issuance, endorsement, or
acceptance of debt instruments for the borrowers' own account

Residents - 7.5% final tax rate on foreign current deposit under foreign currency
Non - exempt depositary banks

(for both indiv & corpo)

50% is exempt while 50% is subject to 7.5% final tax rate on interest from joint accounts (by resident and non res)
final tax rate on forex deposits

1. Lending activities 5 interest income subject to regular income tax

2. Inv in bonds
3. Prom. notes
4. Foreign sources
5. Penalty for legal delay or default

any distribution mad any corpo to its shareholders out of its earnings
Dividends
or profits and payable to its shareholders

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1. Cash 5 types of dividends

2. Property
3. Scrip
4. Stock
5. Liquidating

Cash div dividend paid in cash

dividend paid in non cash properties including stocks pr securities of

Property div
another corpo

Scrip div dividends paid in notes or evidence pf indebtedness of the corpo

Stock div dividends paid in stocks of the corpo

Liquidating div dividends for the distribution of corpo net asset

1. Stock dividends 2 dividends whose income are not for taxation purpose
2. Liquidating dividends

1. Subs5days in the corpo5 when5y6655yy65yyy5nuttytransfer 55 is stock exceptionally taxable

Stock div are given in lieu of cash div or when does substantial alteration in ownership in the corpo occur?
when corpo declared an optional stock or
cash dividend

NONE. It is absolutely not subject to exception to the non taxability of stock split
income

Individuals - 10% (nra etb - 20%, nra netb dividend tax rules for dvdnds from domestic corpos
-25%)

Corpos - exempt (nrfc -30%, or 15% in

some cases)

Regular tax for both individuals and dividend tax rules for dvdnds from foreign corpos
corpos

1. inter corporate 2 exempt dividends

2. dvdnds from coops dvdnds

why are corporate (and business partnership) recepients of dividends

To eliminate the impact of double taxation
exempted from taxation?

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1. Real estate investment trusts (REIT) 5 entities taxable as corporation and thus subject to 10% final tax
2. Business partnerships
3. Taxable associations
4. Taxablr joint ventures, joint accounts or
consortia
5. Taxablr co-ownerships

a publicly listed corporation established principally for the purpose

REIT
of owning income-generating real estate assets

1. Non resident alien or nrfcs entitled to 3 recepients of reit dividends exempt from final tax
claim preferential tax pursuant to
applicable tax treaty
2. Domestic corpos or rfcs
3. Overseas filipino investors (only until
aug 12 2018)

Deemed constructively received by for the last or remaining 4 exempted (from final tax) entites, how is
PARTNERS, MEMBERS, OR VENTURERS net income received?

Point of determination of income, NOT at for the last or remaining 4 exempted (from final tax) entites, when
the point of actual distribution does the final tax of 10% apply?

1. Share in residual profit (ONLY THIS IS inclusions of share in net income of business partnership
SUBJECT TO FINAL TAX if the other 2 are
expensed, and are thus subject to regular
tax to receiving partner)
2. Salary provisions
3. Interest & bonus to a partner

penalty tax imposed to corpos that accumulate earnings beyond the

10% Improperly accumulated earnings tax
reasonable needs of business

Books (in print), literary works, and musical tax rule for royalties from sources within Ph. for individuals
compositions - 10%

Other sources - 20%

Books (in print), literary works, and musical tax rule for royalties (PASSIVE) from sources within Ph. for corpos
compositions - 20%

Other sources - 20%

Regular income tax tax imposed for royalties (passive or active) from sources abroad

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1. Received w/o effort to join contest 2 prizes exempt from final tax
2. From sports competitions sanctioned by
their respective national sport
organizations

1. Recepient was selected w/o any action 2 requisites of exemption for prizes
on his part to join
2. He is not req to render substantial future
servicesvas a condition to receive price or
reward

... the

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