ANSWER KEY

PART I – MULTIPLE CHOICE Juan, an accountant of ABC Company, received for the
following for the year 2021:
1. B
2. C Basic Pay P 522,000.00
3. D Overtime Pay 12,594.72
4. C 13th month pay 57,750.00
5. D Other Bonuses during the year 52,360.00
6. A Cost of living allowance (COLA) 23,200.00
7. B Free-housing allowance 75,500.00
8. D Less: Claimed Deductions
SSS Contribution 13,500.00
PART II – SHORT PROBLEMS Philhealth Contribution 10,440.00
HDMF /Pag-Ibig Contribution 2,400.00
1. Juan dela Cruz is a Mexican born citizen who migrated to Pag-Ibig Housing Loan 68,140.00
the Philippines since 1990. In 2005, after acquiring SSS Multi-purpose Loan 21,456.00
citizenship in the Philippines, he married Anna Manalastas, Labor Union Dues 3,600.00
a half-Filipino and half-French celebrity in the Philippines.
For the year 2022, Juan dela Cruz is considered as: 5. The net taxable income of Juan is: _____________
__________________

ANSWER: RESIDENT CITIZEN Basic Pay P 522,000.00

Overtime Pay 12,594.72
2. Partners A, B, and C decided to incorporate their 13th month pay 57,750.00
partnership, ABC Builders, to acquire more capital from Other Bonuses during the year 52,360.00
interested incorporators. They convinced D and E to join Cost of living allowance (COLA) 23,200.00
them, and in 2022, they secured the certificate of Free-housing allowance 75,500.00
incorporation from the SEC for the new ABC Corporation. Total Gross Compensation P 743,404.72
The ABC Corporation shall be classified as Less: Non-Taxable Compensation
________________________. 13th month pay and Other Bonuses
(57,750.00 + 52,360.00 = 110,110) ( 90,000.00)
ANSWER: DOMESTIC CORPORATION
SSS Contribution ( 13,500.00)
3. If Juan is employed by a private company, the withholding Philhealth Contribution ( 10,440.00)
tax for August is: HDMF /Pag-Ibig Contribution ( 2,400.00)
Labor Union Dues ( 3,600.00)
Basic Pay P 42,500.00 Net Taxable Compensation P 623,464.72
Overtime Pay 1,049.56
Special non-working holiday pay 987.35 Alternative Solution:
13th month pay (only 70%) 29,750.00
Representation and Travel Allowance 4,000.00 Basic Pay P 522,000.00
Monthly load allowance 3,200.00 Overtime Pay 12,594.72
Economic Relief Allowance 7,500.00 13th month pay and Other Bonuses
Total Gross Compensation P 88,986.91 (57,750.00 + 52,360.00 = 110,110) 20,110.00
Less: Non-Taxable Compensation Cost of living allowance (COLA) 23,200.00
13th month pay ( 29,750.00) Free-housing allowance 75,500.00
SSS Contribution ( 1,125.00) Total P 653,404.72
Philhealth Contribution ( 587.50) Less: Contributions
HDMF /Pag-Ibig Contributio ( 200.00) SSS Contribution ( 13,500.00)
Net Taxable Compensation P 57,324.41 Philhealth Contribution ( 10,440.00)
HDMF /Pag-Ibig Contribution ( 2,400.00)
Withholding Tax Due P 8,497.85 Labor Union Dues ( 3,600.00)
Net Taxable Compensation P 623,464.72

4. If Juan is employed by a government agency, the Interests

withholding tax for August is:
Rico received the following interests, gross of any taxes, during
Basic Pay P 42,500.00 the year 2021:
Overtime Pay 1,049.56
Special non-working holiday pay 987.35 From peso-currency savings account P 17,000.00
13th month pay (only 70%) 29,750.00 From dollar-currency under the
Representation and Travel Allowance 4,000.00 foreign currency depositary system 23,560.00
Monthly load allowance 3,200.00 From Juan, a friend who lives in Cebu 10,200.00
Economic Relief Allowance 7,500.00 From a trust fund which was
Total Gross Compensation P 88,986.91 held for 7 years 12,250.00
Less: Non-Taxable Compensation
13th month pay ( 29,750.00) Compute the final tax on interest:
RATA ( 4,000.00)
Economic Relief ( 7,500.00) 6. If Rico is a resident Filipino _6,934.00__
SSS Contribution ( 1,125.00)
Philhealth Contribution ( 587.50) From peso savings account (17,000.00 x 20%)
HDMF /Pag-Ibig Contributio ( 200.00) From dollar-currency under FCDS (23,560.00 x 15%)
Net Taxable Compensation P 45,824.41

Withholding Tax Due P 5,622.85

 Sarah, a singer and a novelist, received the following royalties
7. If Rico is a non-resident Filipino _3,400.00__ for the month of August 2022:

From peso savings account (17,000.00 x 20%) Royalties from subscriptions P 3,830,000.00
in Spotify
8. If Rico is a resident alien _6,934.00__ Royalties from novels 6,433,700.00
published and sold
From peso savings account (17,000.00 x 20%)
From dollar-currency under FCDS (23,560.00 x 15%)
14. If Sarah is a Filipino citizen, the total final tax on royalties
9. If Rico is an NRAETB _3,400.00__ for August is: _____________

From peso savings account (17,000.00 x 20%) Royalties from subscriptions P 3,830,000.00
in Spotify
10. If Rico is an NRANETB _6,800.00__ Royalties from novels 6,433,700.00
published and sold
From peso-currency savings account (17,000.00 x 25%)
From Juan, a friend who lives in Cebu (10,200.00 x 25%) Total 10,263,700.00

All incomes of an NRAETB is subject to 25% final tax. In Royalty tax (10,263,700 x 10%) 1,026,370
this case, except for interest earned under FCDS and that
earned from long-term deposit, only interest from peso- Prizes and Winnings
currency savings account and from Juan are subject to
25% final tax. Juan dela Cruz received the following on several occasions:

11. Juan dela Cruz, a non-resident citizen, deposited his $ Grand Prize in a barangay P 9,800.00
2,000,000 savings in a two-year time deposit in ABC Bank, singing contest
a depositary bank under the expanded foreign currency Second Prize in “Tawag ng 35,000.00
deposit system. The bank pays 8% annual interest for Tanghalan”, a reality show on TV
deposits such as Juan's. Compute the final tax to be
Swertres Lotto 7,000.00
withheld by the bank in the first year if the dollar is
equivalent to P 57.00. __Zero_____ 6/55 Lotto (5 combinations) 100,000.00
Prize won in the ASEAN sports 30,000.00
The deposit is under the foreign currency depositary
competition sanctioned by the
system and the taxpayer is a non-resident citizen.
National Sports Authority
12. ABC Bank deposited a P 1,000,000 to DEF Bank that Prize win in the Ramon 1,000,000.00
matures after 3 years. The deposit earns 5% interest per Magsaysay Award for his
annum. How much shall be withheld by DEF Bank upon valuable transformative
maturity of the deposit? __Zero_____ leadership and selfless service to
their locality
The interest is not a passive income of ABC from DEF. As
a bank, ABC Bank is regularly engaged into depositing its 15. Compute the total final tax of the above prizes and
money to other banks. Hence, not qualified for withholding winnings. ___27,000____
tax on passive income.
Grand Prize in a barangay Added to gross
Royalties singing contest P 9,800.00 income; below
10,000 (prizes)
ASM Foods is a franchisee of McDonalds Philippines. The Second Prize in “Tawag ng 20% final tax
Tanghalan”, a reality show on TV 35,000.00
franchise agreement requires the former to pay the latter for a (prizes)
royalty for minimum of P 300,000 a month or 5% of the Swertres Lotto Exempt from
monthly sales, whichever is higher. During the third quarter of tax; below
7,000.00
the year 2022, the accounting records of ASM Foods reveal the 10,000 (lotto
following: winnings)
6/55 Lotto (5 combinations) 20% final tax
100,000.00
July Sales P 6,276,000.00 (lotto winnings)
Prize won in the ASEAN sports
August Sales 5,840,000.00
competition sanctioned by the
September Sales 7,235,000.00 National Sports Authority 30,000.00 Exempt

13. Compute the total final tax on royalties for the three- Prize win in the Ramon
month period. _____________ Magsaysay Award for his
valuable transformative 1,000,000.00 Exempt
Month Sales 5% Minimum leadership and selfless service to
July P 6,276,000.00 313,800 300,000 their locality
August 5,840,000.00 292,000 300,000
September 7,235,000.00 361,750 300,000 16. A concerned citizen furnished the BIR a statement
detailing the improper tax practices of a corporate
Month Royalty taxpayer. The information was a significant instrument to
July 313,800 the collection of the P 500,000 deficiency tax. How much
August 300,000 informer's reward, after the final tax, shall be given to the
September 361,750 informant citizen? _____________
Total 975,550
Collection resulting from reporting 500,000
Royalty tax (975,550 x 20%) 195,110 Times: Informant’s Reward 10%
Informant’s Reward (not to exceed 1M) 50,000
Times: Final Tax _ 10%
Tax on Reward 5,000
Amount given to Informant (net) 45,000

Dividends
17. ABC Company, a domestic corporation, owns 40% of the
shares of XYZ Company, another domestic corporation.
XYZ declared a total of P 200,000 dividends in 2021. How
much should be withheld from ABC’s share in the dividends
of XYZ Company? ___Zero___

Inter-corporate dividends are tax exempt.

18. ABC Company declares stock dividends to all its

stockholders of August 31, 2022 record. Juan, a Filipino
resident and one of the stockholders, received a total of
20,000 ordinary shares. The book value of the shares of
ABC Company after the dividend declaration is P 4.00,
while its market trading value is P 6.50. The dividends
were distributed on September 22, 2022. However, on
October 15, 2022, ABC Company recalls all stock dividends
declared and paid P 4.12 for each stock dividend held. How
much is the final tax on Juan upon the distribution of stock
dividends on September 22, 2022? _____________

On September 22, 2022, the dividends distributed were

stock dividends. Stock dividends are exempt from tax.

19. Using the same problem in no. 26, how much is the final
tax on October 15, 2022? ___8,240____

On October 15, 2022, the distribution of cash tantamount

to dividend distribution in exchange of stock dividends
previously distributed and subsequently recalled. Such
cash dividend is subject to 10% if the receiver is a resident
citizen

20. Using the same problem in no. 26, if Juan is a non-resident

citizen, the final tax on October 15 is: ___8,240____

On October 15, 2022, the distribution of cash tantamount

to dividend distribution in exchange of stock dividends
previously distributed and subsequently recalled. Such
cash dividend is subject to 10% if the receiver is a non-
resident citizen.

21. Using the same problem in no. 26, if Juan is a non-resident

alien engaged in trade or business, the final tax on October
15 is:
___16,480____

On October 15, 2022, the distribution of cash tantamount

to dividend distribution in exchange of stock dividends
previously distributed and subsequently recalled. Such
cash dividend is subject to 20% if the receiver is a an
NRAETB.

22. Using the same problem in no. 26, if Juan is a non-resident

alien not engaged in trade or business, the final tax on
October 15 is: ___20,600____

On October 15, 2022, the distribution of cash tantamount

to dividend distribution in exchange of stock dividends
previously distributed and subsequently recalled. Such
cash dividend is subject to 25% if the receiver is an
NRANETB.