1

10

11

12

13

14

15

16
LEARNING OUTCOMES
At the end of this module, you are expected to:

1. Identify the various items of exempt income as provided by the NIRC and special laws;
and
2. Explain the scope of the income tax exemption of minimum wage earners and BMBEs.

Pre-Activity
Try to answer the following questions.
1. Are gifts received subject to income tax?
2. When are proceeds of life insurance subject to income tax?
3. What is the difference between retirement benefits and separation pay?

INTRODUCTION
As discussed from the previous module, exclusions from gross income are items of income which
are not reported anymore in the gross income in the income tax return. In this module, the
discussion will focus on those exempt income on regular income tax provided by the tax code
and other special laws.

PROCEEDS OF INSURANCE POLICIES

As discussed from previous modules, life is a capital item with infinite value, thus, proceeds from
life insurance policies as a result of the death of the insured is not taxable. This is only applicable
if the proceeds are paid to the heirs of beneficiaries. Proceeds, however, from sale of an insurance
policy or outliving a life insurance policy is taxable to the extent to the amount exceeding the
return on capital.
 Illustration 8.1
Solui applied for a P5,000,000 insurance policy requiring payment of P10,000 monthly
premiums for ten years.

Scenario 1: It is a life insurance policy on Solui and he dies after three years.
The whole amount of the P5,000,000 proceed is not taxable.

Scenario 2: It is a life insurance policy on Solui and he sells it for P600,000 after paying 52
months of premium. Solui dies after the buyer pays five months of premium.
The amount of P520,000 (52 months x P10,000) is a return of capital, therefore, it is not taxable.
The excess of P80,000 from the proceeds, however, is taxable to Solui since it constitutes a return on
capital.

The buyer of the policy shall be exempt on the P650,000 (P600,000 purchase price + P50,000 premiums
paid) received. The excess of P4,350,000 is taxable since he is not the heir or beneficiary.

Scenario 3: It is a life insurance policy on Solui and he dies at the end of second year. The heirs
received P5,100,000 six months after his death.
The excess of P100,000 over the face of the insurance policy constitutes an interest income which is a
return on capital, hence, taxable.

Scenario 4: It is a life insurance policy on Solui and he outlives the policy. He received the
maturity value of P1,400,000.
Only the total amount of premiums paid is exempt. The excess of P200,000 is an item of gross income.

Scenario 5: It is a property insurance for a building with a tax basis of P3,000,000. The building
was burnt.
The tax basis of P3,000,000 is an exclusion from gross income. Only the excess of P2,000,000 is taxable.

The exemption extends to that of corporations insuring their officers with the corporation as
the beneficiary. Premium paid on such are non-deductible against gross income.

GIFTS, BEQUESTS AND DEVISES

The value of property acquired by gift, bequest, devise, or descent: Provided, however, that
income from such property as well as gift, bequest, devise, or descent of income from any
property, in cases of transfers of divided interest, shall be included in gross income.
 Illustration 8.2
Mark received a restaurant business as a gift on April 1, 2020. On that date, the restaurant had
total properties amounting to P400,000 including P50,000 cash income earned since January 1,
2020. The restaurant posted an additional P150,000 cash income from April 1 to December 31,
2020.

The transfer of business properties worth P400,000 to Mark is a gratuity subject to transfer tax, not
income tax. However, the P50,000 donated income shall be included in gross income, but in the income
tax return of the donor. The P150,000 income of the donated property after the perfection of the donation
is included as item of gross income in the tax return of Mark, the donee.

COMPENSATION FOR DAMAGES

As a rule, amounts received through Accident or Health Insurance or under Workmen's
Compensation Acts, as compensation for personal injuries or sickness, plus the amounts of any
damages received whether by suit or agreement on account of such injuries or sickness are
excluded from gross income.

Nontaxable, if the compensation for damages is on account of

a. Personal physical injuries or sickness;

b. Any other damages recovered on account of personal injuries or sickness;
c. Exemplary and moral damages for out-of-court settlements including attorney's fees;
d. Alienation of affection, or breach of promise to marry; and
e. Any amount received as a return of capital or reimbursement of expenses.

Taxable, if the compensation for damages is a payment for

a. Actual damages for loss of anticipated profits;

b. Moral and exemplary damages awarded as a result of breach of contract;
c. Interest for nontaxable damages above: and
d. Any damages as compensation for unrealized income.
 Illustration 8.3
Mr. Sammy Haban, a supervisor in a Milling Company, was accidentally bumped by Zigzag
Taxi resulting to his severe physical injuries. The court decided that Zigzag would pay Haban
the following damages which Zigzag paid for a certain period of time:
Moral Damages 100,000
Exemplary Damages 50,000
Damages for permanent loss of earning capacity 200,000
Actual liquidated damages 50,000
Compensation for unrealized earnings 30,000

Only the P30,000 compensation is taxable for since it is a recovery of lost earnings. The remaining
P400,000 will be exempted from income tax.

INCOME EXEMPT UNDER TREATY

Income items that are excluded by international agreement to which the Philippine government
is a signatory are excluded from income tax. It must be recalled that treaty agreements override
provisions of our revenue tax laws in case of conflict under the exemption doctrine of
international comity.

RETIREMENT BENEFITS
Exempt from income tax are retirement benefits received under R.A. 7641 and those received by
officials and employees of private firms in accordance with a reasonable private benefit plan
maintained by the employer.

Requisites of Exemption
All of the following requisites must be satisfied to avail of the exemption.

a. This is the first time availment of retirement benefit exemption.

b. The retiring official or employee has been in the services of the same employer for at
least cumulative ten (10) years.
c. The retiring employee is at least fifty (50) years of age at the time of retirement.
d. The employer maintains a reasonable private benefit plan.
 Illustration 8.4
Yorla, a new year baby, started working on January 17, 1983 at the age of 22 years old.
Following is the timeline of her employment. All companies maintain a reasonable private
benefit plan.
Availed Retirement
Company Inclusive Dates Program?
Boom Aleck Co. January 15, 1983 – July 15, 1986 No
Loom Ipat Corp. July 16, 1986 – September 19, 2002 Yes
Naumay Inc. September 21, 2002 – October 14, 2011 Yes
Boom Aleck Co. October 17, 2011 – March 18, 2018 Yes

The benefit from Loom Ipat is taxable since Yorla was still 41 years old back then. The retirement benefit
from Naumay is still taxable since even though she was 50 years old, the years of service is less than 10
years. The retirement benefit from Boom Aleck is exempt even though it is not the first time that Yorla
avails the retirement program since the exemption is not availed for the former retirement benefits
received. In addition, Yorla satisfies the 10-year period of service and 50-year age.

SEPARATION AND TERMINATION BENEFIT

Requisite of Exemption
Either of the following requisites must be satisfied to avail of the exemption.

1. The separation or termination must be due to job-threatening sickness, deaths, or other

physical disability; and
2. The same must be due to any cause beyond the control of the employee or official such
as:
a. Redundancy
b. Retrenchment
c. Closure of employer's business
d. Employee lay-off
e. Downsizing of employer's business
f. Sickness or death of the employee

The phrase "beyond the control of the employee" connotes involuntariness on part of the
employee. In other words, the separation must not be of his making.

Limitation
The exemption of termination or separation benefits does not extend to:
 1. Backwages or illegal deductions repaid by the employer upon termination
2. Terminal leave pay or the commutation of accumulated unused leave credits

Availment
To avail of the tax exemption, the employee or his heirs shall request for a ruling or certificate of
exemption (CTE) from the BIR. The request for a CTE and other required documents shall be filed
at the RDO where the employer is registered.

Illustration 8.5
Kala is an employee of Goship Company which closed its business during the year. Kala's last
paycheck shows the following details:
Unpaid salary in the last two months 30,000
Current month salary 15,000
Separation pay 100,000

Scenario 1: Kala was chosen to be laid off first because she was the last person to be hired.
Only the P100,000 received is exempt. The backwages and current salary are taxable.

Scenario 2: Kala was chosen to be laid off first because she was had allergic rhinitis.
The whole amount of the last paycheck is taxable since the reason does not normally render the employee
incapable of working.

Scenario 3: Kala chose to resign first.

The whole amount is taxable as the resignation violates the beyond the employee’s control rule.

SOCIAL SECURITY BENEFITS

Received from Foreign Income
This would include social security benefits, retirement gratuities, and other similar benefits from
foreign government agencies and other institutions, private or public, received by resident or
non-resident citizens or aliens who come to settle permanently in the Philippines.
 Illustration 8.6
John was an OFW employed by Microsoft Corporation in the USA. John retired and returned
to permanently settle in the Philippines. He is paid a $2,000 monthly pension from Microsoft's
pension fund and another $800 monthly benefit from the US social security benefit.

Both the pension and the social security benefits are exempt. Note that these benefits were earned abroad
when the taxpayer was a non-resident Under situs rule, the foreign Income of non-residents is not taxable
in the Philippines. This holds true even if the taxpayer subsequently receives the income as a resident of
the Philippines.

SSS Benefits
This would be the social security benefits under RA 8282.

GSIS Benefits
These are benefits under RA 8291 including retirement gratuity received by government officials
and employees.

USVA BENEFITS
These are United States Veterans Administration – administered benefits under the law of the
United State received by any person residing in the Philippines.

Illustration 8.7
Mr. Jackson is a retired US serviceman from the Iraqi war. He married a beautiful Filipino and
settled in the Philippines. He is receiving a $1,000 monthly benefit from the USVA.

The USVA benefit is excluded in gross income. The same rule applies to USVA benefits for beneficiaries
of Filipino veterans who fought under the American flag in World War II.

MISCELLANEOUS ITEMS
Income from Domestic Securities
Exempt are those income derived on investments in the Philippines in loans, stocks, bonds, or
other domestic securities, or from interest on deposits in banks in the Philippines by:

a. Foreign governments
b. Financing institutions owned, controlled, or enjoying refinancing from foreign
government
 c. International or regional financial institutions established by foreign governments

These are exempt under the exemption doctrine of international comity.

Government Income
Exempt are those income derived by the government and its political subdivisions from:

a. Any public utility; or

b. Exercise of essential government function Government agencies and instrumentalities

The general rule with government agencies and instrumentalities is exemption because of their
public service nature. However, taxation applies when they engage in income-producing
activities which are proprietary or commercial in nature. This exemption does not extend to
government-owned and controlled corporations (GOCCs). GOCCs are generally taxable as
regular corporations because their operations are proprietary in nature.

Mandatory Payroll Deductions

These pertain to the employee share in the premium contributions to GSIS, SSS, PhilHealth, Pag-
Ibig and union dues. The portion of the salary thus contributed is exempt from income tax. Under
RMC No. 21-2011, the exclusion pertains only to the mandatory or compulsory monthly
contributions. Voluntary contributions to Pag-Ibig II, GSIS or SSS in excess of the mandatory
monthly contribution are taxable. Note that Pag-Ibig is now called the Home Development
Mutual Fund or HDMF. This will not be illustrated anymore since the same has been discussed
in your BAINTE1X class.

Personal Equity and Retirement Account

PERA is a contributor's voluntary retirement account established from qualified contributions of
the contributor and or his employer for the sole purpose of being invested in qualified PERA
investment products.

Contributions to PERA accounts are exclusions in gross income. This is an additional exclusion
and is separate with the exclusion for contributions to SSS or GSIS. Moreover, PERA contributors
are allowed to claim 5% of their PERA contributions as tax credit against any internal revenue
taxes.

PERA investment income are exempt from taxes (i.e. final tax, capital gains tax and regular
income tax). The PERA account assets will be distributed back to the contributor either in lump
sum, life pension or in installment upon reaching the age of 55 or to his heirs or beneficiaries upon
his or her death. PERA distributions are likewise exclusions in gross income of the contributor or
his heirs or beneficiaries as the case may be.
13th Month Pay and Other Benefits
The amount received as such by officials and employees of public or private entities not exceeding
P90,000. This will be further discussed in detail in Module 9.

Gains on Sale of Long-Term Indebtedness

Gains from sale of bonds, debentures, or other certificate of indebtedness with a maturity of more
than 5 years are exempted. This exemption is grounded upon the same assumption that long-
term indebtedness is diverted to the financing of long-term projects which is viewed as beneficial
to the development of the country. The term "gain" however, does not include "interest."

Illustration 8.8
On September 1, 2020, an individual taxpayer sold a 6-year term bond investment for
P1,100,000. These bonds bear 8% interest payable every December 31 were previously acquired
at P1,000,000 face value on January 1, 2020.

The interest accrued of P60,000 (P1,000,000 x 8% x 9/12) is taxable. The gain of P40,000 (P1,100,000
– P1,000,000 – P60,000) is exempt.

Gain on Redemption of Shares in a Mutual Fund Company

The term mutual fund company shall mean an open-end and close-end investment company as
defined under the Investment Company Act.

Mutual funds pool the money invested by different investors and invest the money to earn
investment income which shall add up to the net assets of the fund. A participating investor must
purchase participation shares from the fund at their Net Asset Value (NAV). Upon redemption
of his participation shares, the investor gains or losses by his proportionate share in the increase
or decrease in the Net Asset Value of the fund.

Illustration 8.9
A taxpayer bought 10,000 shares from Golden Dragon Mutual Fund at P120 NAV per share.
The taxpayer redeemed his shares when the NAV per share was P180.

The P600,000 gain, computed as [(P180 - P120) x 10,000], on redemption is excluded from gross income;
hence, exempt from taxation.

The exemption is apparently intended to mitigate double taxation. Most of the items of income
of mutual funds are subject to final tax at source. The subsequent distribution of these to the
investors at redemption should no longer be subject to income tax. On the other hand, the
exemption may have been intended to promote the growth of mutual funds which are widely
regarded as key participants in providing liquidity in most financial markets.

MINIMUM WAGE EARNERS

A minimum wage earner is an individual recipient of a minimum wage as fixed by the Regional
Tripartite Productivity Wage and Productivity Board of the Department of Labor and
Employment. A minimum wage earner is exempt from income tax on the minimum wage
including holiday pay, overtime pay, night shift differential pay and hazard pay. This exemption,
however, does not extend to gross income from business or profession. The presence of income
besides that obtain from employment does not impair the exemption.

BARANGAY MICRO-BUSINESS ENTERPRISE (BMBE)

BMBE is a business entity or enterprise engaged in the production, processing or manufacturing
of products or commodities, including agro-processing, trading and services, whose total assets
including those arising from loans but exclusive of the land on which the particular business
entity's office, plant, and equipment are situated, do not exceed P3,000,000. The term service
excludes those rendered by licensed professionals and partnership and corporations engaged in
consultancy, advisory and similar services which are essentially carried out through licensed
professionals. A BMBE shall include any individual owning such business entity or enterprise,
partnership, cooperative, corporation, association, or other entity incorporated and/organized
and existing under Philippine laws and registered with the office of the treasurer of a city or
municipality.

To qualify as a BMBE, an enterprise must not be a branch or a subsidiary of a large scale enterprise
and its policies, and modus operandi must not be determined by a large scale enterprise such as
in the case of franchises. To avail of the benefits and privileges of a BMBE, an applicant must
secure a certificate of authority to operate as a BMBE from the Office of the Treasurer of the city
or municipality that has jurisdiction.

Tax Exemption on Income from Operations

Aside from other incentives afforded by the law, the income of BMBE from their operation is
exempt; hence, excluded from the gross income subject to regular income tax. BMBEs file an
Annual Information Return in lieu of the income tax return. However, their non-operating,
passive, and capital gains are subject to the appropriate type of income tax.
 Illustration 8.10
William has a bakery with total assets of P4,000,000 inclusive of a lot with a book value of
P1,200,000.

Since the total assets, net of the land, is P2,800,000, William is qualified as a BMBE. If he obtained a
Certificate of Authority to Operate as BMBE, his income is exempt from regular income tax but is still
subject to other income taxation schemes.

COOPERATIVES
Cooperatives that transact business purely with members are exempt from all taxes and fees.
Cooperatives that transact business with non-members likewise exempt from all taxes and fees if
their accumulated reserve and undivided savings do not exceed P10,000,000. Otherwise, the
amount of allocated for interest on capitals is subject to regular tax. However, the income of any
cooperative from non-related sources is fully taxable to regular tax.

NON-STOCK AND NON-PROFIT ENTITIES

Non-stock entities that are not organized for profit are exempt from income tax on their income
from operations. However, their income from unrelated sources is taxable.

QUALIFIED EMPLOYEES' TRUST FUND

An employees' trust fund which forms part of a pension, stock bonus or profit sharing plan of an
employer for the benefit of some or all his employees is exempt from any income tax under the
NIRC.

Conditions for exemptions of employee trust funds:

a. Contributions are made to the trust by such employer, or employees, or both for the
purpose of distributing to such employees the earnings and principal of the fund
accumulated by the trust in accordance with such plan.
b. The asset of the fund shall not be diverted for other purposes other than the exclusive
benefit of the employees.
INCOME UNDER OTHER INCOME TAXATION SCHEMES
Those items of income discussed under Modules 5 and 6 which are within the scopes of Final
Income Taxation and Capital Gains Taxation are exclusions from Gross Income under Regular
Income Taxation.

References:
Banggawan, R. (2019). Income Taxation. Pasay City: Real Excellence Publishing.
Valencia, G. & Roxas, E. (2016). Income Taxation. Baguio City: Valencia Educational Supply.
Reyes, V. (2019). Income Tax Law and Accounting under the TRAIN Law. Manila: GIC Enterprises & Co., Inc.
Ampongan O. (2018). Income Taxation. Mandaluyong City: Millennium Books, Inc.
Self-Check!
Basing on your readings, answer the following questions.
1. What is the difference between exclusions, exemptions and deductions?
2. Explain the tax phrase “exclusion from gross income”.
3. When are proceeds from an insurance policy taxable?
4. Why is gift not subject to income tax?
5. When is there an instance that a government instrumentality is taxable in its income?
6. Are income exempted under final income taxation an exclusion from gross income?
7. What are the requisites for the exemption of retirement benefits?
8. What are the tax benefits of Personal Equity and Retirement Account?

Exercise 8.1 TRUE OR FALSE

Determine whether the following statements are true or false.
___________1. Physical, exemplary and moral damages except damages except damages as
loss of profit are not taxable.
___________2. GSIS and SSS benefits are included in gross income to the extent they exceed
P90,000.
___________3. A BMBE must have net assets not exceeding P3,000,000.
___________4. The proceeds of life insurance received by employer from insurance policy
coverage taken and paid by such employer constitute taxable income.
___________5. An employee must have rendered a continuous 10 years of service to avail
exemption for retirement benefit.
___________6. If the minimum wage earner earns other income subject to regular income tax,
his statutory minimum wage becomes taxable.
___________7. The employer’s share to SSS, PhilHealth and HDMF contributions are an
exclusion to gross income.
___________8. Cooperatives, regardless of their classification, are taxable on income from
their unrelated activities.
___________9. Income subject to treaty obligation binding upon the Government of the
Philippines is exempted from income taxation.
___________10. Termination pay for any cause beyond the control of an employee is not
subject to tax, except I dismissal is with a cause.
___________11. Actual liquidated damages are taxable.
___________12. Income derived by foreign government in the Philippines is taxable.
___________13. Donated income is included in the gross income of the donee.
___________14. A general professional partnership can be registered as a BMBE.
___________15. Benefits of veterans of war or retired US army personnel are exclusions.
___________16. Hazard pay of minimum wage earner
___________17. Laundry service income of a minimum wage earner
___________18. Income from illegal gambling
___________19. Interest income on peso time deposits
___________20. Social security benefit received by a balikbayan from employer abroad

Exercise 8.2 MULTIPLE CHOICE

Choose the best answer from the choices provided.
______1. The following are exclusions from gross income, except
a. Proceeds of life insurance policies
b. Retirement benefits from plan approved by BIR
c. Gifts, bequests and devises
d. Prizes and winnings

______2. The following shall be excluded from gross income, except

a. Separation pay fie to sickness
b. Separation pay due to voluntary resignation
c. Separation pay due to death
d. Retirement pay of P3,000 per month

______3. The following are taxable recoveries for injuries except

a. Interest earned from nontaxable damages
b. Compensatory liquidated damages
c. Damages for loss of goods and other belongings
d. Damages for unrealized profit

______4. The following are the requirements to exempt retirement pay due to old age from
taxation, except
a. Must be SSS or GSIS retirement plan only
b. Equitable retirement program approved by the BIR Commissioner
c. The retiree should have been employed for at least 10 years and the retiring age
of at least 50 years old
d. Retirement pay should have been availed of for the first time

______5. The proceeds of insurance taken by a corporation on the life of the president to
indemnify it against loos in case of his death is
a. Part of taxable income of the corporation
 b. Taxable income of the corporation
c. Partly exempt, partly taxable
d. Exempt from income tax

Exercise 8.3 INCLUSION OR EXCLUSION

Write EX if the item is an exclusion from gross income, otherwise, write IN.
______1. USVA-administered benefits
______2. Dividend income derived in the Philippines by the Taiwan government
______3. Magsaysay Award
______4. Interest received from life insurance’s annuity
______5. Separation pay received resulting from business merger
______6. Separation pay due to voluntary resignation
______7. Overtime pay of minimum wage earner
______8. Interest income from bank deposits of a minimum wage earner
______9. Union dues
______10. PCSO winnings worth P10,000
______11. Proceeds from sale of land held as capital asset
______12. Income derived from smuggling
______13. GSIS retirement benefits
______14. Gains from redemption of shares in a mutual fund
______15. Premium contributions to Modified PAG-IBIG 2 savings

Problem 8.1 NON-RESIDENT TAXPAYER

Gina is a Filipino citizen residing in Australia. She earned the following during the taxable
year: P900,000 from compensation, P40,000 interest income from EFCDU, P60,000 dividends
from a domestic corporation. The interest income from EFCDU has a resident co-depositor.
How much of the P1,000,000 should be excluded from gross income?

Problem 8.2 MINIMUM WAGE EARNER

Raymond, a minimum wage earner, reveals the following income and expenses during the
taxable year.

Basic Pay 96,000 PhilHealth Contribution 2,000

Overtime Pay 5,000 HDMF Contribution 1,500
13 Month Pay
th 8,000 Cellphone Repair Revenue 200,000
SSS Contributions 3,000 Operating Expenses 80,000
How much is the total exclusions from gross income? ..
Problem 8.3 RETIREMENT BENEFITS
Goship Company has three employees retiring on June 30, 2020. All of these employees
rendered a continuous service since being hired by the company. No one has previously availed
of tax exemption on retirement benefits and Goship maintains a reasonable retirement benefit
plan. Each receives an equivalent of 150% if his monthly salary in every full year of service.

Name of Employee Date of Birth Date Hired Final Salary

Phunsukh Wangdu January 16, 1968 June 17, 2011 15,000
Farhan Qureshi August 3, 1972 December 1, 2008 28,000
Raju Rastogi February 22, 1969 May 15, 2010 60,000
Fill out the table below as to the taxability of their retirement benefits.
Taxability P. Wangdu F. Qureshi R. Rastogi
Taxable
Non-Taxable
..

Problem 8.4 COMPENSATION FOR DAMAGES

Mr. Rambo Tan, an entrepreneur, met an accident and was able to claim the following damages.
Actual damages for realized profit 100,000
Actual damages for lost products 200,000
Exemplary damages due to injuries 50,000
Moral damages due to injuries 50,000
Interest on nontaxable damages 20,000
Attorney’s fees 80,000
Answer the following questions.
1. How much of the damages is taxable?
2. How much of the damages is non-taxable?

Problem 8.5 TERMINAL PAY

The following amounts were received by the heir of deceased employee from his employer:
Terminal pay 60,000
Proceeds of life insurance 500,000
SSS Death benefit 10,000
Abuloy from friends and relatives 40,000
Answer the following questions.
1. How much of the receipts is taxable?
2. How much of the receipts is non-taxable?

Problem 8.6 NON-STOCK, NON-PROFIT ENTITY

A non-stock, non-profit charitable entity received the following during the taxable year.
Contributions from the public 1,400,000
Income from sale of merchandise 500,000
Gain on the sale of properties 300,000
How much is the total exclusion from gross income subject to regular tax?
Problem 8.7 COOPERATIVE
Koop Eratiba, a multi-purpose credit cooperative, had the following income during the taxable
year.
Income from related activities 400,000
Income from unrelated activities:
Dividends from stocks 20,000
Income from time deposits 18,000
Rent Income 60,000
Answer the following questions.
1. How much of the income is taxable?
2. How much of the income is non-taxable?

Problem 8.8 DONATIONS

Suerte Monte, received the following during the year.
Donated properties 200,000
Income from donated property before donation 50,000
Income from donated property after donation 30,000
Inherited properties 100,000
How much is taxable to Miss Monte?

Problem 8.9 INCOME UNDER TAX TREATIES

Jor Kwang, a foreign ambassador to the Philippines, received the following items of income
during his stay in the Philippines.
Salary for consular services 800,000
Honoraria received in speaking engagements in the Philippines 200,000
Capital gains on investment made in the Philippines 300,000
If there is no tax-exempt treaty, how much is the total reportable income for Philippine income
tax?

Problem 8.10 COMPENSATION INCOME

A purely employed individual received her monthly basic pay of P50,000. She also deducted
union dues of P100 per month.
How much is the taxable compensation?

Problem 8.11 USVA BENEFITS

Lolo Monico was one of the US military men of the Armed Forces of the United States under
the Commonwealth Army of the Philippines serving from July 26, 1941 through June 30, 1946.
As a US veteran, he receives the following monthly benefits from the USVA.
Compensation $750
Pension 200
Clothing Allowance 30
Health Benefits 30
The conversion rate is $1:P50.
How much should be excluded from gross income during the taxable year?

Problem 8.12 INCOME OF FOREIGN GOVERNMENT

The government of Japan invested in the Philippines with earnings within as follows:
Interest income from bonds 10,000,000
Dividend income received from JFC stocks 3,000,000
Gain on sale of listed domestic securities 2,000,000
How much should be excluded from gross income?