TAX CASES BASED ON CREATE LAW - FTG ORIG

THE FOLLOWING DATA WERE TAKEN FROM BOOKS OF GUTZY CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2022:

SALES (VAT INCLUSIVE) 19,040,000

COST OF SALES IS 60%
Gain on sale of land under investmet property 2,000,000
Dividend income 150,000
Gross income from Indonesia 2,000,000
Administrative expenses 2,500,000
Selling Expenses 1,500,000
Withholding tax received (BIR FORM 2307) 350,000
ALL EXPENSES ARE ALLOWABLE DEDUCTIONS
Total shareholders' equity 100,000,000
Debt/Equity ratio .25 to 1
Land used in business 20,000,000

COMPUTE THE TAX DUE AND THE INCOME TAX PAYABLE/(EXCESS CARRY OVER)
FROM THE FOLLOWING INDEPENDENT CASES:

1 The GUTZY CORP. is a domestic corporation.

2 The GUTZY CORP. is a resident foreign corporation.
3 The GUTZY CORP. is a non-resident foreign corporation.
4 The GUTZY CORP. is a domestic corporation and the D/E ratio is .10 to 1.
5 The GUTZY CORP. is a resident foreign corporation and the D/E ratio is .10 to 1.
6 The GUTZY CORP. is a domestic corporation and registered as of Jan. 5, 2015
7 The GUTZY CORP. is a resident foreign corporation and registered as of Jan. 5, 2015
8 The GUTZY CORP. is a domestic corporation and registered as of Jan. 5, 2015
and filed the ITR by availing the 40%OSD
9 The GUTZY CORP. is a resident foreign corporation and registered as of Jan. 5, 2015
and the total operating expenses is P6,650,000 all are allowable deductions.
SOLUTION:

CASE 1 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) Local operation 6,800,000
GROSS INCOME from Indonesia 2,000,000
LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 4,800,000
Tax Rate 25%
Tax Due 1,200,000
less-Withholding tax (2307) 350,000
Income tax payable 850,000

Note: Gain on sale of land under investmet property is subject to capital gains tax.
Dividend income is subject to final tax (passive income)

Tax rate of 20% is not applicable although the taxable income is less than 5M
because the total assets is more than 100M computed as follows:

Total shareholders' equity 100,000,000

Multiply by the Debt/equity R 0.25
Total liabililties 25,000,000
Total assets 125,000,000
Less-Land used in business 20,000,000
Over from the 100M threshold 105,000,000
CASE 2
SALES (EXCLUDING VAT) 17,000,000
COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) 6,800,000
LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 2,800,000
Tax Rate 25%
Tax Due 700,000
less-Withholding tax (2307) 350,000
Income tax payable 350,000
 Note: Only income from the Philippines is taxable for the resident
foreign corporation

CASE 3 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) 6,800,000
Tax Rate 25%
Tax Due 1,700,000
less-Withholding tax (2307) 350,000
Income tax payable 1,350,000

CASE 4 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) Local operation 6,800,000
GROSS INCOME from Indonesia 2,000,000
LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 4,800,000
Tax Rate 0.2
Tax Due 960,000
less-Withholding tax (2307) 350,000
Income tax payable 610,000

Note:
Tax rate of 20% is applicable because the taxable income is less than 5M
and the total assets is less than 100M computed as follows:

Total shareholders' equity 100,000,000

Multiply by the Debt/equity R 0.10
Total liabililties 10,000,000
Total assets 110,000,000
Less-Land used in business 20,000,000
Less than from the 100M threshold 90,000,000

CASE 5 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) 6,800,000
 LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 2,800,000
Tax Rate 25%
Tax Due 700,000
less-Withholding tax (2307) 350,000
Income tax payable 350,000

Note: Only income from the Philippines is taxable for the resident
foreign corporation and not qualified for the 20% rate
becasue this is being given only to the domestic corporation.

case 6 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) Local operation 6,800,000
GROSS INCOME from Indonesia 2,000,000
LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 4,800,000
Tax Rate 25%
Tax Due 1,200,000
less-Withholding tax (2307) 350,000
Income tax payable 850,000

NOTE: TAX DUE TO BE APPLIED IS THE REGULAR TAX RATE OR THE RCIT
BECAUSE HIGHER THAT THE MCIT

CASE 7 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) 6,800,000
LESS-OPERATING EXPENSES
Administrative expenses 2,500,000
Selling Expenses 1,500,000
TOTAL Expenses 4,000,000
Taxable Income 2,800,000
Tax Rate 25%
 Tax Due 700,000
less-Withholding tax (2307) 350,000
Income tax payable 350,000

Note: Only income from the Philippines is taxable for the resident
foreign corporation

TAX DUE TO BE APPLIED IS THE REGULAR TAX RATE OR THE RCIT

BECAUSE HIGHER THAT THE MCIT

CASE 8 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) Local operation 6,800,000
GROSS INCOME from Indonesia 2,000,000
TOTAL GROSS INCOME 8,800,000
LESS- 40% OSD (8,800,000 x 40%) 3,520,000

Taxable Income 5,280,000

Tax Rate 25%
Tax Due 1,320,000
less-Withholding tax (2307) 350,000
Income tax payable 970,000

CASE 9 SALES (EXCLUDING VAT) 17,000,000

COST OF SALES (60% OF SALES) 10,200,000
GROSS PROFIT (GROSS INCOME) 6,800,000
LESS-TOTAL OPERATING EXPENSES 6,650,000

Taxable Income 150,000

Tax Rate 25%
Tax Due 37,500
less-Withholding tax (2307)
Excess Income tax carry over

Note: Only income from the Philippines is taxable for the resident
foreign corporation

The tax due to be applied is the MCIT because higher than the RCIT
pital gains tax.
MCIT

8,800,000 TOTALGROSS INCOME

1%
88,000

MCIT

6,800,000 TOTALGROSS INCOME

1%
 68,000

MCIT

8,800,000 TOTAL GROSS INCOME

1%
88,000

6,800,000 TOTALGROSS INCOME

1%
68,000
350,000
- 282,000