GROSS or TAXABLE?
FALSE
Who is generally taxable on income from sources within and without the Philippines?
A resident citizen and a domestic corporation.
Does a return of capital count as income?
NO
What regular financial payout or fund is commonly provided to individuals after they finish their years of service and retire?
PENSION / RETIREMENT PAY
What is the income that is ultimately subject to income tax after applying the applicable tax rules?
Taxable Income
What taxpayer is a Filipino citizen who resides in the Philippines?
Resident Citizen
What category of income does interest income belong to?
Passive Income
What do we call the removal of otherwise taxable items from the reach of taxation?
TAX EXCLUSION
TRUE or FALSE: “Accounting income and taxable income are always the same.”
FALSE
What do you call a foreign corporation engaged in trade or business in the Philippines?
Resident Foreign Corporation (RFC)
What are the payments received as a result of an employer-employee relationship called?
Compensation
Name three (3) types of monetary benefit or payout that is generally excluded from gross income.
LIFE INSURANCE/ COMPENSATION FOR INJURIES OR SICKNESS/ 13TH MONTH PAY
TRUE or FALSE: Income may still be considered gross income even if it comes from an illegal source.
TRUE
What is the difference between an NRA-ETB and an NRA-NETB?
An NRA-ETB is a nonresident alien engaged in trade or business in the Philippines and is generally taxed on taxable Philippine-source income, while an NRA-NETB is not engaged in trade or business and is generally taxed on gross Philippine-source income under the applicable final tax rules.
Give the three tests that the Supreme Court has set that an item must pass before it enters gross income.
It is a flow, not the fund; It is realized; It is received, actually or constructively.
Pedro receives ₱2,000,000 in life insurance proceeds after his father’s death. The insurance company holds the proceeds under an agreement and pays Pedro ₱100,000 in interest. Which amount is excluded from Pedro’s gross income, and which amount is taxable?
The ₱2,000,000 life insurance proceeds are excluded, while the ₱100,000 interest is included in gross income and is taxable.
A taxpayer says: “I will simply take every peso I received, subtract every expense I incurred, and the result will be my taxable income.”
Is this correct? And why?
NO. Taxable income is a legal concept. The Tax Code determines which income is pertinent and which deductions are legally authorized.
Person A is a Filipino citizen who permanently works and resides in Canada. He earns ₱1,500,000 from his employment in Canada and ₱300,000 from renting out an apartment in Manila.
Is Person A a resident citizen, and are both incomes generally subject to Philippine income taxation?
No. Person A is generally a nonresident citizen because he permanently resides and works abroad. As a nonresident citizen, he is generally taxable only on income from sources within the Philippines; therefore, the ₱300,000 Philippine rental income is generally subject to Philippine income taxation, while the compensation earned from services performed in Canada is generally foreign-source income.
Person A, president of Company X, had his Manila apartment rent and utilities paid directly by the corporation because his position required entertaining business guests. The company also paid for his wife's trip to New York, where she assisted in approving building plans for a proposed company structure. Are all the expenses counted as taxable compensation income?
No, only the expenses for housing and utilities is taxable. The excess over that amount was a corporate business expense for entertaining clients, not a benefit to the employee. Allowances and benefits furnished primarily for the employer's convenience or business purposes are not compensation income; only the portion that primarily benefits the employee, measured by what he would otherwise have spent, is included in gross income.
A Filipino athlete wins ₱5 million in an international sports competition held in the United States. The competition is sanctioned by the appropriate national sports association. The athlete argues: “Because Philippine law excludes this prize from income tax, I don’t have to pay tax on it anywhere.” Is the athlete correct? Why or why not?
No. Section 32(B)(7)(d) excludes the prize from Philippine income tax, provided the statutory requirements are met. It does not automatically exempt the prize from taxation in the United States. Whether U.S. tax applies depends on U.S. law and any applicable tax treaty.