Problem 1 – Tax on business income; gross sales/receipts; 8% income tax option: VAT threshold breached

Mr. Pansin, married, had two dependent children below 21 years old. His business had the following
quarterly information (non-cumulative) for the year ended December 31, 20A1:
First Quarter Second Quarter Third Quarter Fourth Quarter
Gross sales P700,000 P800,000 P1,250,000 P1,500,000
Cost of sales 300,000 350,000 500,000 650,000
Business expenses 200,000 250,000 300,000 350,000

The gross sales are net of the following prompt payment discounts:

First quarter P80,000

Second quarter 100,000
Third quarter 120,000
Fourth quarter 130,000

Mr. Pansin signified his intention to adopt 8% income tax when he filed his first quarter income tax return
since he does not expect to breached the VAT threshold.

Required:
1. Determine the quarterly (cumulative) and annual income tax of Mr. Pansin for the
year ended December 31, 20A1.
2. Assuming Mr. Pansin opted to use the graduated income tax rates, determine his quarterly
(cumulative) and annual income tax for the year ended December 31, 20A1.

Problem 2 – Individual business income earners, mixed income; quarterly and annual; installment payment

Mr. and Mrs. Dalandan, Filipino resident citizens, have six qualified dependents. Mr. Dalandan was an
employee Pomelo Corporation for the year ended December 31, 20A1. Mrs. Dalandan, on the other hand,
was also an employee of Rambutan Company and at the same time had a trading business for the year
ended December 31, 20A1.

The following information pertain Mr. Dalandan’s compensation and benefits from Pomelo:

Salaries and allowances P300,000

13th month pay and other benefits 40,000
Payroll deductions
SSS contributions P5,000
Philhealth contributions 2,000
Pag-ibig contributions 1,800
Labor union dues 1,000

Pomelo properly and correctly withheld taxes on Mr. Dalandan’s compensation during the year.

Mrs. Dalandan, on the other hand, had the following information regarding her compensation and benefits from
Rambutan:

Salaries and allowances P360,000

13th month pay and other benefits 50,000
Payroll deductions
SSS contributions P6,000
Philhealth contributions 3,000
Pag-ibig contributions 2,200
 First Quarter Second Quarter Third Quarter Fourth Quarter
Sales P50,000 P90,000 P70,000 P80,000
Cost of sales 25,000 50,000 40,000 42,000
Expenses 10,000 15,000 14,000 18,000
Rambutan properly and correctly withheld taxes on Mrs. Dalandan’s compensation during the year.
Moreover, the following information relate to the trading business of Mrs. Dalandan for each of the
quarters:

Mr. and Mrs. Dalandan opted to pay their income tax liabilities, if any, on installment.

Required:
1. Determine the income tax withheld on compensation of Mr. Dalandan for the year ended
December 31, 20A1.
2. Determine the income tax withheld on compensation of Mrs. Dalandan for the year ended
December 31, 20A1.
3. Determine the quarterly income tax liability of Mrs. Dalandan on her business income for
the year ended December 31, 20A1. Determine the deadline for filing of her tax returns and
payment of taxes.
4. Determine the annual income tax liability of Mrs. Dalandan for the year ended December 31, 20A1.
5. Determine the amount of tax that will be paid by Mr. and Mrs. Dalandan in filing their annual
income tax return for the year ended December 31, 20A1. Determine the deadline for filing of
their tax return and payment of tax.
6. Prepare the quarterly and annual income tax returns of Mr. and Mrs. Dalandan for the year
ended December 31, 20A1. Please fill-up all the required boxes. Please put “XXX” for those
boxes where no information are provided.
7. Determine the attachments to the quarterly and annual income tax returns of Mr. and Mrs.
Dalandan for the year ended December 31, 20A1.
8. Determine the annual income tax liability of Mrs. Dalandan for the year ended December
31, 20A1 if she opted for the 8% income tax on her business income.

Problem 3 – Tax on mixed income; resident and non-resident citizen; resident alien and non-resident alien

Mr. Liwayway, single, had the following gross compensation income from employment and
income from business for the year ended December 31, 20A1:

Gross compensation income P520,000

Gross income from business 300,000
Cost of services 80,000
Business expenses 100,000

The gross compensation income included thirteenth month pay of P40,000 and SSS, Philhealth and Pag-
ibig contributions of P12,000.

Required:
1. Assuming Mr. Liwayway is a resident citizen and his business income was derived from
sources within the Philippines, determine his taxable income and income tax liability for the
year ended December 31, 20A1.
2. Assuming that Mr. Liwayway is a non-resident citizen and his compensation income was
derived from sources outside the Philippines, determine his taxable income and income tax
liability for the year ended December 31, 20A1. Assume further that the gross compensation
does not include thirteenth month pay and other statutory contributions.
3. Assuming that Mr. Liwayway is a resident alien and his business income was derived from
sources outside the Philippines, determine his taxable income and income tax liability for the
year ended December 31, 20A1.
4. Assuming that Mr. Liwayway is a non-resident alien engaged in trade or business and his
business income was derived from sources outside the Philippines, determine his taxable
income and income tax liability for the year ended December 31, 20A1.
5. Assuming that Mr. Liwayway is a non-resident alien not engaged in trade or business and his
business income was derived from sources outside the Philippines, determine his taxable
gross income and income tax liability for the year ended December 31, 20A1.

Problem 4 – Tax on resident citizens; foreign tax credits

Mrs. Namukadkad is a resident citizen, without dependent. She was locally employed by Bulaklak Corporation.
However, she had a business in Australia. She received gross compensation income of P351,000 (net of SSS,
Philhealth and Pag-ibig contributions) for the year ended December 31, 20A1. This amount still included
thirthteenth month pay of P27,000.

Moreover, she generated sales of P450,000 with cost of sales of P120,000 and incurred business expenses of
P100,000 in Australia. She opted to pay the graduated income tax rates. She paid income tax of P30,000 in
Australia. Mrs. Namukadkad opted to claim the foreign income tax paid as tax credit.

Required:
1. Determine the taxable income of Mrs. Namukadkad for the year ended December 31, 20A1.
2. Determine the income tax due after tax credit of Mrs. Namukadkad for the year ended
December 31, 20A1.
3. Determine the income tax due after tax credit, if any, of Mrs. Namukadkad for the
year ended December 31, 20A1 assuming that she opted to claim the foreign
income tax as deduction.
4. Assuming that 60% of sales, cost of sales and business expenses pertain to business
operations in Australia and the remaining 40% pertains to her business in New Zealand, and
she paid foreign income tax of P20,000 in Australia, and P10,000 in New Zealand, determine
the income tax due after tax credit of Mrs. Namukadkad for the year ended December 31,
20A1.