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Problem Exercises - Taxation

This document discusses several tax scenarios under Philippine tax law: 1) Non-resident aliens staying less than 180 days are entitled to a personal exemption on income from the Philippines. 2) Employees can deduct up to P2,500 in health insurance premiums from gross income if they earn less than P250,000 annually. 3) A Filipino citizen living in the US must pay taxes on worldwide income. 4) Capital gains from stock sales are taxable for resident Filipino citizens. 5) Prize money for a professional Filipino boxer is taxable income, and taxes paid to other countries can be claimed as a foreign tax credit or deduction. 6) Cash dividends

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Danny Labordo
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1K views

Problem Exercises - Taxation

This document discusses several tax scenarios under Philippine tax law: 1) Non-resident aliens staying less than 180 days are entitled to a personal exemption on income from the Philippines. 2) Employees can deduct up to P2,500 in health insurance premiums from gross income if they earn less than P250,000 annually. 3) A Filipino citizen living in the US must pay taxes on worldwide income. 4) Capital gains from stock sales are taxable for resident Filipino citizens. 5) Prize money for a professional Filipino boxer is taxable income, and taxes paid to other countries can be claimed as a foreign tax credit or deduction. 6) Cash dividends

Uploaded by

Danny Labordo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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1.

A non-resident alien who stays in the Philippines for less than 180 days during the calendar
year shall be entitled to personal exemption not to exceed the amount allowed to citizens of
the Philippines by the country of which he is subject or citizen. 

2. Premium payment for health insurance of an individual who is an employee in an amount of


P2,500per year may be deducted from gross income if his gross salary per year is not more
than P250,000.

3. Federico, a Filipino citizen, migrated to the United States some six years ago and got a
permanent resident status or green card. He should pay his Philippine income taxes on:

4. A resident Filipino citizen (not a dealer in securities) sold shares of stocks of a domestic
corporation that are listed and traded in the Philippine Stock Exchange.

5. Mr. A, a citizen and resident of the Philippines, is a professional boxer. In a professional


boxing match held in 2013, he won prize money in United States (US) dollars equivalent to
P300,000,000.
1. Is the prize money paid to and received by Mr. A in the US taxable in the
Philippines? Why?
2. May Mr. A's prize money qualify as an exclusion from his gross income? Why?
3. The US already imposed and withheld income taxes from Mr. A's prize money. How
may Mr. A use or apply the income taxes he paid on his prize money to the US when
he computes his income tax liability in the Philippines for 2013?
ANS:
1. Yes, under the NIRC, the income within and without of a resident citizen is taxable
income. Since Mr. A is a resident Filipino citizen, his income from the boxing match is
taxable in the Philippines.
2. Mr. A’s prize money does not qualify as an exclusion from gross income. Under the
law, all prizes and awards granted to athletes in local and international sports
competitions whether held in the Philippines or abroad sanctioned by their national
sports associations are excluded from gross income. The exclusion find application
only to amateur athletes where the prize was given in an event sanctioned by the
appropriate national sports association affiliated with the Philippine Olympic
Committee and not to professional athletes like Mr. A.
3. The income taxes withheld and paid to the US may be claimed by Mr. A, either as a
deduction from his gross income or as a tax credit from the income tax due, when he
computes hi Philippine income tax liability for 2013.

6. BBB, Inc., a domestic corporation, enjoyed a particularly profitable year in 2014.In June
2015, its Board of Directors approved the distribution of cash dividends to its stockholders.
BBB, Inc. has individual and corporate stockholders. What is the tax treatment of the cash
dividends received from BBB, Inc. by the following stockholders:
1. A resident citizen
2. Non-resident alien engaged in trade or business
3. Non-resident alien not engaged in trade or business

ANS:
1. A final withholding tax for 10% shall be imposed upon the cash dividends received by
a resident citizen from BBB, Inc.
2. A final withholding tax of 20% shall be imposed upon the cash dividends received by
a non-resident alien engaged in trade or business from BBB, Inc.
3. A final withholding tax of 25% of the income received from all sources within the
Philippines including the cash dividends received from BBB, Inc.

7. X was hired by Y to watch over Y’s fishponds with a salary of P10,000. To enable him to
perform his duties well, he was also provided a small hut, which he could use as his
residence in the fishponds. Is the fair market value of the use of the small hut by X a “fringe
benefit” that is subject to the 32% tax imposed by Sec. 33 of the NIRC?
ANS:
No, X is neither a managerial nor a supervisory employee. Only managerial or supervisory
employees are entitled to a fringe benefit subject to the 32% tax imposed by Sec. 33 of the
NIRC. The small hut is provided for the convenience of the employer and not X, therefore
does not constitute as a fringe benefit.

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