ILLUSTRATION 5

A resident citizen taxpayer provided the following information:

Gross business income, Philippines P2,000,000

Gross business income, Canada 3,000,000
Business expenses, Philippines 1,400,000
Business expenses, Canada 2,050,000
Interest income- BDO Philippines 100,000
Interest income- BDO Canada 50,000
Dividend income from domestic corporation 125,000
Dividend income- resident foreign corporation 75,000
Dividend income- nonresident foreign corporation 102,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Philippine lotto winnings 10,000
Philippine Charity Sweepstakes winnings 500,000
Singapore sweepstakes winnings 200,000
Other winnings- Philippines 50,000
Prizes- Robinsons Manila 8,000
Prizes- SM Manila 20,000
Prizes- SM Shanghai China 30,000

Determine the following:

1. Taxable income
2. The amount of final taxes for passive income
Solution
1. Taxable income
 Answer: P2,105,000
Gross business income, Philippines P2,000,000
Gross business income, Canada 3,000,000
Business expenses, Philippines (1,400,000)
Business expenses, Canada (2,050,000)
Interest income- BDO Canada 50,000
Dividend income- resident foreign corporation 75,000
Dividend income- nonresident foreign corporation 102,000
Interest income received from a depository
bank under FCDS, Philippines 50,000
Singapore sweepstakes winnings 200,000
Prizes- Robinsons Manila 8,000
Prizes- SM Shanghai China 30,000
Taxable Income P2,015,000

 Taxable income means ordinary income subject to graduated tax rates

 Interest incomes on bank deposits from sources outside the Philippines
and dividend income from foreign corporations are subject to basic tax
 PCSO/Philipine lotto winnings:
Under TRAIN Law: exempt if not exceeding P10,000; subject to 25% FWT
if the amount exceeds P10,000
 Prizes not exceeding P10,000 are subject to basic tax. On the other hand,
prizes more then P10,000 from sources within the Philippines are subject
to final tax
 Prizes derived from sources outside the Philippines are subject to basic
tax

2. The amount of final tax on passive income:

 Answer: P154,000

Interest income- BDO Philippines (20%) P100,000

Dividend income from domestic foreign corporation (10%) 12,500
Interest income received from FCDU deposit (15%) 7,500
PCSO Winnings (P500,000 x 20%) 100,000
Other winnings- Philippines (P50,000 x 20%) 10,000
Prizes- SM Manila (P20,000 x 20%) 4,000
Total final tax on passive income P154,000