1 State the objectives, nature, and basis of taxation.

2 Explain the constitutionality of taxation and summarize the Philippine Tax Laws and Taxes.

3 Discuss the classification of individual income taxpayers and the categories of income and tax rates

4 Enumerate allowable deductions and explain the kinds of personal exemptions allowed.

5 Are there individuals exempted from income tax? Who are they?

6 Give and simply explain examples of corporate income and allowable deductions

7 Explain withholding taxes, and tax credits applicable.

The Philippine Womens' University ETEEAP - Accounting Cluster Income Taxation (Expanded Tertiary Education Equivalency Accreditation Program) (Under Alfonso S. Bestoyong, CPA, MBA) A Important Notes on Income Taxation 1 2 3 4 5 6 7 (your answer/s must be at least one page per question, and please quote your reference) State the objectives, nature, and basis of taxation. Explain the constitutionality of taxation and summarize the Philippine Tax Laws and Taxes. Discuss the classification of individual income taxpayers and the categories of income and tax rates Enumerate allowable deductions and explain the kinds of personal exemptions allowed. Are there individuals exempted from income tax? Who are they? Give and simply explain examples of corporate income and allowable deductions Explain withholding taxes, and tax credits applicable. YOU MAY TYPE YOUR ANSWER STARTING BELOW THIS NOTE: The Philippine Womens' University ETEEAP - Accounting Cluster Income Taxation (Under Alfonso S. Bestoyong, CPA, MBA) B Income Tax Preparation for Individual Taxpayer (Business and Compensation) Kur Da Pio - Income Tax Return Taxation on Individuals: Compensation and Business Income Kur da Pio has asked you to prepare his income tax return for the year ended (current year). The following pertains to his compensation income and business income. a Business income from his mini-department store attended to by his wife b Monthly salary as supervisor in a manufacturing company c 13th month salary for the current year d Interest income from bank deposits for four quarters (net of withheld tax) e Living quarter & meals during overtime jobs ( for convenience of employer) f Monetized unused vacation leave payment for 10 working days g Medical cash allowance to dependents (P125 per month) h Rice subsidy per month (good variety) i Uniforms and clothing allowance for the year j Actual medical assistance on healthcare needs and check-ups k Laundry allowance per month l Employee achievement award for safety achievement with monetary value m Christmans gifts and company anniversary celebrations (P2,500 each) n Other benefits not included as part of de minimis (from E to L) o 14th month bonus p Advance rental deposit received under property lease r Royalty received for property which produces timber s Third prize award from a commercial contest t Damage recovered in a patent infringement suit u Lotto winnings v Cost of Sales (80% of Business income for the year) 80% w Business expenses - allowed as deductions x Taxes - allowed as deduction (not part of business expense) y Bad Debts - allowed as deduction (not part of business expense) z Charitable contributions to accredited associations for religious purposes aa The taxpayer is married with five (dependent) children - refer to (latest) basic & personal exemption bb Premium paid on health and hospitalization insurance cc Withheld tax on compensation (by his employer) during the year 455,000 45,000 45,000 2,566 27,600 15,000 1,500 1,500 4,000 10,000 300 10,000 5,000 12,000 45,000 25,000 30,000 10,000 45,000 12,000 364,000 45,500 18,200 4,550 10,000 2,400 81,000 C Instructions: The answer sheet outlined below is your guide to answering these questions Points 1 Gross Business Income (prepare your schedule of computation below) 2 2 Gross Compensation Income (prepare your schedule of computation below) 2 3 Other Income received (prepare your schedule of computation below) 2 788,000 TOTAL GROSS INCOME (as computed for your guide) 4 Less: Total allowed business deductions (excluding charitable contributions) - schedule 2 5 Less: Charitable contribution allowed based on 10% limit (as computed for your guide) 2,275 6 Less: Basic personal exemption (prepare schedule of computation below) 2 7 Less: Additional exemptions (prepare schedule of computation below) 2 8 Less: Premium paid on health and hospitalization insurance (if any) 2 220,525 TOTAL ALLOWABLE DEDUCTIONS (as computed for your guide) 9 NET TAXABLE INCOME 2 10 TOTAL TAX DUE 2 [(Refer to Sec 24 (A)] 11 TOTAL TAX STILL PAYABLE 2 POINTS ALLOCATED >>>>>>>>>>>>> 20 D Instructions: Using BIR form 1701, transfer your DETAILED computations/anwers indicated above BIR form used POINTS ALLOCATED >>>>> to the proper columns as indicated. BIR form answers POINTS ALLOCATED >>>>> TOTAL POINTS >>>>>>>>>>>>>>>>>>>>>>>>> end of this worksheet Note: Sample of computation schedule 1 Business income from his mini-department store attended to by his wife v Cost of Sales (80% of Business income for the year) Gross Business Income 2 Gross Compensation Income 455,000 (364,000) 91,000 20 20 60 The Philippine Womens' University ETEEAP - Accounting Cluster Income Taxation (Under Alfonso S. Bestoyong, CPA, MBA) E Corporate Income Tax Problem Solving Phonie Raria Corporation A Philippine corporation has the following financial information for the current taxable year PAR T I C U LAR S Philippines Gross Income (Sales less Cost of Sales) 15,000,000 Allowable deductions - business and other expenses) 9,000,000 (excluding contributions, fringe benefits expenses) Actual contributions to Phil. Government for public purpose 1,000,000 Actual Fringe Benefits accorded to CEOs 2,500,000 Corporate income tax paid to foreign country Quarterly income tax paid (3 quarters) 620,000 Net Operating Loss Carry Over (NOLCO) - 2 years ago 93,529 Minimum Corporate Income Tax (not yet claimed) 24,600 The corporation was late in filing its return for 10 days due to hectic schedules China 3,000,000 1,530,000 80,000 F Instructions: The answer sheet as outlined below is your guide to solve the above problem (40 POINTS) P A R T I C U L A R S Philippines China Total Gross Income (Sales less Cost of Sales) Less: Business expenses and allowable deductions Allowable deductions - business and other expenses) Actual contributions to Phil. Government for public purpose (deductible in full when contribution was for public purpose) Actual Fringe Benefits accorded to CEOs 2,500,000 Divide by current grossed-up value rate Grossed-up Monetary Value Multiply by tax rate Fringe Benefit Tax (note: FBT is already computed for you) 2,500,000 - 2,500,000 68.00% 3,676,471 32.00% 1,176,471 ### Net Operating Loss Carry Over (NOLCO) - 2 years ago Total Business Expenses and Deductions TAXABLE INCOME Multiply by: Current Corporate Tax Rate TOTAL TAX DUE before withheld taxes and foreign tax credit Less: Withholding taxes and Foreign Tax credits 30.00% Minimum Corporate Income Tax (not yet claimed) Quarterly income tax paid (3 quarters) Corporate income tax paid to foreign country Taxable Income-China Limitation 80,000 1,530,000 15,300,000 Total Taxable Income Limitation - 1 country Allowed Foreign Tax Credit Note: Limitation is already computed for you TOTAL TAX DUE before surcharge and interest Add: 25% Surcharge Add: 20% Interest TOTAL TAX DUE STILL PAYABLE end of this worksheet 810,000 81,000 (80,000)