Professional Documents
Culture Documents
teacher to assess Recognition of Prior Learning (RPL) and pin point specific topics that need
emphasis during the discussion.
1. PRE-TEST
Modified Matching Type: From the line items in the box, prepare a pro-forma
bank reconciliation statement. Classify the items as to reconciling items per bank or per books.
Indicate whether the adjustment is an addition or deduction.
Outstanding checks Bank errors
Direct collections of the bank Book errors
Credit memo Customer’s NSF check
Deposit in transit Debit memo
Bank service charge
Learning Outcome(s):
Individuals
Resident citizens receiving income from sources within or outside the Philippines
o Employees deriving purely compensation income from two or more employers, concurrently or
successively at any time during the taxable year
o Employees deriving purely compensation income regardless of the amount, whether from a
single or several employers during the calendar year, the income tax of which has not been
withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or
refundable return
o Self-employed individuals receiving income from the conduct of trade or business and/or
practice of profession
o Individuals deriving mixed income, i.e., compensation income and income from the conduct of
trade or business and/or practice of profession
o Individuals deriving other non-business, non-professional related income in addition to
compensation income not otherwise subject to a final tax
o Individuals receiving purely compensation income from a single employer, although the
income of which has been correctly withheld, but whose spouse is not entitled to substituted
filing
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the Philippines
Non-Individuals
Business taxation refers to the taxes that businesses must pay as a normal part of business
operations. Whether you are a sole proprietor, partner, part of a limited liability company, or a
corporation, your business is responsible for adhering to tax regulations. Each type of business will
produce distinct tax consequences. Consider your business' tax concerns along with its non-tax
concerns, so that you'll know which type of entity will help your business prosper and grow, or make
it easier to pass on to heirs.
Gross-receipts tax.
Corporate franchise tax.
Employment withholding tax.
Excise tax.
Value-added tax (VAT).
All individual taxpayers are granted a personal exemption of P50,000. Additional exemptions of
P25,000 are given for each qualified dependent but only up to four dependents. For married couple with
children, only one spouse can claim the additional exemption for dependents. A qualified dependent is defined
as a legitimate, illegitimate or legally adopted child who is not more than twenty-one years old, unmarried,
not gainfully employed and chiefly dependent upon and living with the taxpayer. Also, a dependent that is
incapable of self-support because of mental or physical defect, regardless of age, is still considered a qualified
dependent.
Compensation Income. Refers to the income derived by an employee. The employee-employer
relationship is a critical factor. Employers are required by law to withhold income tax dues from their
employees’ salary. The withholding scheme is implemented because employees might not have
sufficient cash to pay for their income tax dues if aggregated to a one time annual payment. The
withholding tax deduction is computed based on the employee’s gross compensation (net of
mandatory contributions to SSS or GSIS, Philhealth and Pag-ibig Fund), tax status, timing of
compensation payments and using the published BIR withholding tax table. Periodic withholding,
income tax is computed at the end of the year based on all compensation income derived during the
year. (Example 1)
Non-taxable income, on the other hand, refers to income that is received but that is not subject to
taxation. However, even if such forms of compensation cannot be taxed, they still need to be
reflected in the tax return. Examples of non-taxable income are:
Gifts
Inheritance
Cash rebates from items bought
Child support payments
Welfare benefits
Meals and lodging
Let us drop in on XYZ Corporation again with Maricel and June. It is December 31 and we are computing for
the annual income tax due of these two employees. There were no changes in their compensation income
during the year.
Compute for income taxes due of Maricel and Jun.
Solution
Maricel Gomez
Compensation (January to December) P300,000
13th month pay 25,000
Total compensation income 325,000
Less:
13th month pay 2 25,000
Personal deductions 50,000
75,000
Taxable income 250,000
Tax formula (p50,000+30% in excess of P250,000)
Tax Due 50,000
Less: Tax withheld (P4,166.67 X 12) 50,000
Tax payable P0
Jun Mercado
Compensation (January to December) P300,000
13th month pay 25,000
Total compensation income 325,000
Less:
13th month pay 25,000
Personal deductions 50,000
Additional deduction for 1 qualified dependent 25,000
100,000
Taxable income 225,000
Tax formula (P22,500+25% in excess of P140,000)
Tax Due 43,750
Less: Tax withheld (P3,645.75 X 12) 43,750
Tax payable P0
Example 1
Income Derived from Business or Practice a Profession. The tax payments of business
organized as sole proprietorships are made in the name of the owners. The owner is considered an
individual taxpayer who derived income from business. A sole proprietor has two options. He can
choose itemized deduction in which case he will use the Statement of Comprehensive Income that
we have learned to prepare from the previous chapters. For a sole proprietor is to use the optional
standard deduction scheme. Instead of itemized deduction, the proprietor can claim deductions up
to a maximum of 40% of gross receipts. Gross receipts is equal to net sales plus other taxable
income. This means that the business taxable income is equivalent to 60% of gross receipts.
Optional Deduction
Principles and Purposes of Taxation
The principles of income taxation in the Philippines require Filipino citizens residing in the Philippines and
domestic corporations to pay taxes on their income wherever it may come from, whether from inside or
outside the Philippines. Payment of taxes
Basic concepts by which a government is meant to be guided in designing and implementing an
equitable taxation regime. These include:
(1) Adequacy: taxes should be just-enough to generate revenue required for provision of essential
public services.
(2) Broad Basing: taxes should be spread over as wide as possible section of the population, or
sectors of economy, to minimize the individual tax burden.
(3) Compatibility: taxes should be coordinated to ensure tax neutrality and overall objectives of
good governance.
(4) Convenience: taxes should be enforced in a manner that facilitates voluntary compliance to the
maximum extent possible.
(5) Earmarking: tax revenue from a specific source should be dedicated to a specific purpose only
when there is a direct cost-and-benefit link between the tax source and the expenditure, such as use
of motor fuel tax for road maintenance.
(6) Efficiency: tax collection efforts should not cost an inordinately high percentage of tax revenues.
(7) Equity: taxes should equally burden all individuals or entities in similar economic circumstances.
(8) Neutrality: taxes should not favor any one group or sector over another, and should not be
designed to interfere-with or influence individual decisions-making.
(9) Predictability: collection of taxes should reinforce their inevitability and regularity.
(10) Restricted exemptions: tax exemptions must only be for specific purposes (such as to
encourage investment) and for a limited period. (11) Simplicity: tax assessment and determination
should be easy to understand by an average taxpayer.
All individual taxpayers are granted a personal exemption of P50,000. Additional exemptions of
P25,000 are given for each qualified dependent but only up to four dependents. For married couple with
children, only one spouse can claim the additional exemption for dependents. A qualified dependent is defined
as a legitimate, illegitimate or legally adopted child who is not more than twenty-one years old, unmarried,
not gainfully employed and chiefly dependent upon and living with the taxpayer. Also, a dependent who is
incapable of self-support because of mental or physical defect, regardless of age, is still considered a qualified
dependent.
References:
http://www.businessdictionary.com/definition/taxation-principles.htmlhttps://corporatefinanceinstitute.com/
resources/knowledge/finance/taxable-income/https://www.bir.gov.ph/index.php/tax-information/income-
tax.html
https://www.upcounsel.com/business-taxation-meaning
Fundamentals of Accountancy, Business & Management 2 Book by Dani Rose C. Salazar. 2017
Activity
Refer to the BIR withholding tax table. Determine the withholding income tax deduction for
each pay period of the taxpayers in the following scenario:
1. Maria Dela Vega is paid a monthly compensation of P20,000 (net of mandatory contributions).
Maria is a single parent of a 10 year old girl.
2. Lawrence Sison’s salary is P18,000 (net mandatory contributions) paid semi-monthly.
Lawrence is single with no qualified dependents.
3. Luz Martinez is paid a weekly salary of P2,500 (net mandatory contributions of SSS, Philhealth
and Pag-ibig fund). Luz is a widow with five children ages 4 to 15 years old.
POST-TEST
Using the same information in Problem 1 and assuming no changes occurred during the year,
compute for the annual income tax due for the above three tax payers.