St.

Paul University Philippines

Tuguegarao City, Cagayan

School of Business, Accountancy and Hospitality Management

Requirements in INCOME TAXATION

Part 1 True or False Write True if the statement is correct and False if the statement is wrong. (Answer this
one in the Microsoft Forms. Part 1)

1. The power of taxation inherent in sovereignty. -TRUE

2. Regressive tax is imposed in the Philippines.- FALSE
3. Donor’s tax is a indirect tax.-FALSE
4. One of the inherent powers of the state is eminent domain.-TRUE
5. Tax evasion is known as tax dodging and is lawful. - FALSE
6. Community tax is a national tax.- FALSE
7. Taxes on distilled spirits, fermented liquors, and like are specific tax. -TRUE
8. The levying of tax is an administrative functions.- FALSE
9. Real estate tax is a local tax.- TRUE
10. Resident citizens are taxable only on their income derived from sources within the Philippines. -
TRUE
11. Sale of shares of stocks traded in the local stock exchange is subject to capital gain tax.-TRUE
12. Tax rate for sale of real property subject to capital gain tax is 5% and 10%. FALSE
13. A yearly compensation income of P200,000 is taxable. FALSE
14. Passive income is included in the computation of taxable income from compensation or business.
FALSE
15. Winnings is an example of passive income subject to tax. FALSE
16. Non resident and alien individuals are taxable on their income derived within and outside
Philippines.- FALSE
17. Winnings from PCSO amounting to P1,000,000 is not taxable.- TRUE
18. A non resident citizen is taxable on his income derived from Philippines only.
19. Capital gain from the sale, exchange or other disposition of real property located in the Philippines
classified as capital asset is taxable at 5%.- FALSE
20. Interest from long term deposits or investment in banks is exempt from tax.- TRUE
21. Income from compensation or business is subject to final tax. - FALSE
22. For non resident aliens not engaged in trade or business, the gross amount of income derived from
all sources within the Philippines is taxable at 25%. - FALSE
23. Business is required to file annual income tax return but no quarterly income tax.- FALSE
24. Dividends received by an individual from investment in stocks are exempt from tax. -TRUE
25. An overseas contract worker is taxable on his income within Philippines and outside Philippines.-
FALSE

Multiple Choice (Answer this one in the Microsoft Forms. Part 1)

1. The following are characteristics of taxation except
a. Legislative in character
b. For public purpose
c. Payable in money or property
d. Subject to territorial limitations
2. The following are objects of taxation except:
a. individuals
b. Corporations
c. Juridical persons
d. properties
e. transactions
f. none of the above

3. It is a tax of fixed proportion of the value of the property with respect to which the tax is assessed and
requires intervention of assessors or appraisers to estimate the value of such property
a. Specific
b. Special or regulatory
c. Ad valorem
d. Indirect
4. Percentage tax is an example of
a. Graduated tax
b. Regressive tax
c. Progressive tax
d. Proportional tax
5. Which statement is false? Income tax is
a. Always a direct tax
b. Always based someone’s ability to pay
c. Is tax on person’s income, emoluments or profits
d. Is tax on yearly profits arising from property, profession trade of business

6. One of the following is not among the basic principles of sound tax system. Which one is it?
a. Fiscal adequacy
b. Collection of tax
c. Theoretical justice
d. Administrative feasibility

7. Pertinent items of the gross income less itemized deductions optional standard deduction is
a. Tax rate
b. Tax due
c. Tax credit
d. Taxable income

8. Interest in currency bank deposit is subject to a final tax of

a. 5%
b. Exempt
c. 20%
d. 10%

9. Taxation is a means by which the national government attempts to

a. Shift wealth from the rich to the poor
b. Encourage full employment
c. Maintain price stability
d. All of the above

10. All of the following except one are inherent limitations. Which one is it?
a. Taxes may be levied only for public purpose
b. Government agencies are exempt from taxation
 c. The state may tax persons and properties under its jurisdiction
d. Can be delegated to other branches of the state
e. None of the above

11. One characteristics of a tax is that

a. It is generally assignable
b. It is generally based on contract
c. It is generally payable in money
d. None of the above

12. Passive income includes income derived from an activity in which the earner does not have any sub-
stantial participation. This type of income is
a. Subject to final tax
b. Included to taxable income subject to normal tax
c. Same as capital gains
d. Subject to capital gains tax

13. Which of the following is not a constitutional limitations of taxation?

a. Due process
b. Equal protection of the laws
c. Rule of uniformity and equity in taxation
d. Territorial jurisdiction

14. Which of the following is not an inherent limitation of the power of taxation?
a. Non delegation of the legislative power to tax
b. Non imprisonment for non payment of poll tax
c. International comity
d. Territorial jurisdiction
e. None of the above

15. Those required to file a declaration of their estimated income for the current taxable year must file the
same on or before
a. April 15 of the current taxable year
b. April 15 of the following taxable year
c. August 15 of the current taxable year
d. November 15 of the current taxable year
 Part II Essay: Answer extensively

1. Discuss extensively the purpose/objectives of taxation .

The major goal of taxes is to generate income to cover massive government spending. The majority
of governmental functions must be funded by taxation. However, it is not the primary objective. In other
words, tax policy has certain non-revenue goals.
Taxation is, in fact, employed as a tool of economic policy in the contemporary world. It has an
impact on the overall amount of output, consumption, investment, industrial location and technology
selection, balance of payments, income distribution, and so on.

Economic growth is one of the primary goals of taxes. The expansion of capital formation is a major
determinant of any country's economic progress. Capital formation is thought to be the linchpin of
economic progress. However, LDCs are frequently hampered by a lack of money.

To address the lack of capital, governments in these nations deploy resources in order for fast capital
accumulation to occur. The government uses tax money to increase both public and private investment.
The savings-to-national-income ratio can be increased with good tax planning. The second goal is
complete employment. Because the level of employment is determined by effective demand, a
government that wishes to achieve full employment must reduce tax rates. As a result, disposable
income will grow, as will demand for products and services. Increased demand stimulates investment,
which leads to an increase in income and employment via the multiplier process. Third, taxes may be
utilized to guarantee price stability, which is a short-run goal of taxation. Taxation is seen as an effective
tool for reducing inflation. Private expenditure can be regulated by increasing the rate of direct taxes.
Naturally, the commodities market is under less pressure. Indirect taxes on goods, on the other hand,
feed inflationary tendencies. High commodity prices, on the one hand, discourage consumption while
encouraging saving. When taxes are reduced during a period of deflation, the opposite impact occurs.
Fourth, regulation of cyclical fluctuations—periods of boom and bust—is regarded as another goal of
taxes. During a downturn, taxes are reduced, and during a boom, taxes are raised, so taming cyclical
oscillations. Fifth, taxes such as customs tariffs are used to regulate imports of certain commodities with
the goal of decreasing the severity of balance-of-payments challenges and stimulating domestic
production of import alternatives. Finally, another extra-revenue or non-revenue goal of taxes is the
decrease of income and wealth disparities. This can be accomplished by taxing the wealthy at a greater
rate than the poor, or by instituting a progressive taxation system.

2. Enumerate and discuss briefly the different types of taxes. Give the specific tax.
Example income tax, property tax, VAT etc.

The Estate Tax

When the titleholder dies, estate tax is levied on their estate or properties. The heir apparent or the lawful
beneficiary of the estate shall satisfy this tax at a rate of 6% before transferring title to the heir's or
beneficiary's name.
Stamp Duty on Documents

This is the tax levied on contracts, loan agreements, certificates, and other legal documents that serve as
proof of ownership/obligation of a property or assets.

Taxation by Percentage

A percentage tax is a type of business tax levied on merchants or firms that lease or sell items, services, or
real estate. They are not VAT-registered, and their annual total sales are limited to P750,000.

Capital Gains Taxation

Capital Gains tax is the amount of money paid by an individual or a corporation when they earn from the
sale of a valued asset. These sold assets susceptible to capital gains include jewels, equities, real estate, and
other high-valued items.

Personal Income Tax

This is the tax levied on an individual's earnings, whether salary or profits, from his or her profession,
company, trade, or property at rates ranging from 5% to 32% depending on their income band.

The Withholding Tax

The amount withheld from an employee's pay and paid directly to the government for the employee's partial
income tax is referred to as withholding tax.

VAT stands for Value-Added Tax.

A value-added tax (VAT) is a consumption tax levied on a product when it adds value to its manufacture
and ultimate sale. Customers pay VAT because it is considered an indirect tax.

Excise Taxes

Excise tax is levied on items sold in the country and is classified as an indirect tax since it may be recovered
by the seller/producer by raising the price of these things. The TRAIN law emphasizes this. Excise taxes can
be placed on items that pose health hazards, such as liquor and cigarettes.

Local taxes in the Philippines

Local taxes are based on Republic Act 7160, generally known as the 1991 Local Government Code. Local
government units, on the other hand, levy these taxes and levies (provincial, city, municipality, and
barangay).

1. The Franchise Tax

This refers to the franchise tax, which is levied at a maximum rate of 50% of the previous year's gross
yearly earnings.

2. Basic Real Property Tax

Agricultural, commercial, industrial, mineral, residential, and timberland are the six categories of properties
included under basic real property tax coverage.
 3. Tax on Sand, Gravel, and Other Quarry Resources

LGUs shall collect a maximum of 10% of the fair market value in the site per cubic meter of quarry
resources (such as gravel, sand, common stones, soil, and sand picked from public lands or rivers).

4. Tax on the Printing and Publishing Industry

These taxes are also collected when books, posters, pamphlets, cards, tarps, and other print items are
published or printed.

5. Fixed annual tax on delivery trucks and vans

Every year, local governments collect P500 from delivery vehicles such as trucks and vans transporting
goods (beverages, food, cosmetics, tobacco, etcetera).

6. Tax Expertise

Individuals whose occupations need government examination, such as board examinations or licensure, are
subject to this form of tax. Lawyers, surgeons, engineers, architects, and other professions are among those
liable to this tax.

7. The Amusement Tax

Films, theatrical plays, concerts, and all other types of entertainment are taxed. It is frequently included in
the entry fee or entrance tickets.

8. Taxation in the Community

A community tax is a tax on the general population that requires you to pay a certain amount based on your
income classification. The initial price is P5, with an extra P1 rise for every P1,000 of revenue.

3. Read articles about the TRAIN Law. How does this law affect us as taxpayers?
What do you think is the impact of this to the economy of our country?

"With the exception of the wealthy, the TRAIN reduces the Personal Income Tax (PIT) for all taxpayers." Per-
sonal taxes will effectively be decreased for 99 percent of Philippine taxpayers. Furthermore, minimum-wage
employees are still free from PIT. TRAIN exempts people with yearly taxable income of less than PHP 250,000
from paying personal income tax, while the remainder of taxpayers, excluding the highest, would experience
lower tax rates ranging from 15% to 30% by 2023. It makes it possible for more people to be tax exempt. More
people benefited from this tax scheme, especially those who are working and have mixed earnings. Train law
also sets consistent tax rates for the estate tax and donor's tax, making it easy to calculate tax liabilities.

4. Discuss what are those transactions subject to capital gain tax and final tax. Give example of a
transaction and show the computation of final tax.

-Every natural or juridical person, resident or non-resident, must file the Capital Gains Tax Return (BIR Form
No. 1707) in triplicate for the sale, barter, exchange, or other onerous disposition of shares of stock in a domes-
tic corporation classified as capital assets and not traded on the local stock exchange. Final Withholding Tax is
a type of withholding tax that is imposed on certain income payments and is not deductible from the payee's in-
come tax liability on other income subject to ordinary tax rates for the taxable year.

Part 3 Application Answer for the following problem

1. Illustrate how a payroll master compute for the income tax of an employee. Give two
examples.

1.

SAMPLE 1
 SAMPLE 2

2.
 This sort of business is classified as a non-VAT-registered entity in the first category. To compute
percentage tax, multiply your total sales or revenues by a 3 percent tax rate, as shown in the chart above.
Assume your company earned a total of P500,000 this quarter.

As per experience also, I filed for the quarterly percentage tax by adding all my gross sales for the 3
following months, example is January, February and March less the deduction and get the 3 percent of it to
make the Quarterly percentage payable amount.
WITH VAT

The regular corporate income tax (RCIT) is 30% of net taxable income. The excess MCIT paid over the RCIT is
recognized as a tax credit against the RCIT due in the following three years. The 30% tariff also applies to non-
resident foreign firms. The tax is calculated on gross income rather than net income.

Part IV Research.

1. Select 3 countries of your choice and research about their tax system. Record your discussion on
their tax system in the MS Team in not more than 20 minutes. (Just open the MS Teams in our
subject, click meet now, discuss your findings and record it. As if you are the teacher. You may
use powerpoint if you want to.).

MAAM PRESENTATION WILL BE POSTED IN MS RECORD TEAMS..

Part V Learning Insights/Realizations

Write your learning insights on the different discussions made on the subject and also your
realization in enrolling in the ETEEAP Program .

In Income Taxation, I have learned the value of taxes in which taxation is central to the existence and
functioning of a nation, as well as to the functioning of its lower levels of government. Taxing citizens is a vital
method of financing the most essential public sector activities, such as the courts, the legal system, national defense
and police protection. In addition, it provides the means for producing social programs, such as public health
services, education and welfare. Finally, taxation is one of the most important ways in which a community’s
distributional goals may be attained.

I realized in enrolling ETEEAP program is something costly but of course valuable, in all ways. In a way that it
helps me to fast track the diploma which I always dream of.

Thank you very much for all the learnings Maam Marj, it’s a great pleasure that you become one
of our teacher. Keepsafe always maam. Godbless!

Good luck and God bless!!