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Tax 301 Module 2 Part 2-1

The document provides examples to illustrate how to calculate taxable income for different types of individual taxpayers in the Philippines in 2018. It addresses scenarios for residents and non-residents, citizens and aliens, and those engaged in or not engaged in trade or business. The examples show how to determine gross income, allowable deductions, and taxable income for each case. Tax rates and calculations are also provided for compensation income earners.

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Christine Merry Abion
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50 views23 pages

Tax 301 Module 2 Part 2-1

The document provides examples to illustrate how to calculate taxable income for different types of individual taxpayers in the Philippines in 2018. It addresses scenarios for residents and non-residents, citizens and aliens, and those engaged in or not engaged in trade or business. The examples show how to determine gross income, allowable deductions, and taxable income for each case. Tax rates and calculations are also provided for compensation income earners.

Uploaded by

Christine Merry Abion
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Module 2

Individual Taxpayers
ILLUSTRATION
Use the following data for Cases A-E
An individual taxpayer provided the following information for 2018:

Gross business income, Philippines ₱5,000,000


Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
Determine the taxable income assuming:
Case A: The taxpayer is a resident citizen:

An individual taxpayer provided the following information for 2018:


Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱3,500,000
Solution:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines (3,000,000)
Business expenses, Canada (1,000,000)
Business expenses, Singapore (500,000)

Taxable income ₱3,500,000


Determine the taxable income assuming:
Case B: The taxpayer is a non-resident citizen.

An individual taxpayer provided the following information for 2018:


Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case C: The taxpayer is a resident alien.

An individual taxpayer provided the following information for 2018:


Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case D: The taxpayer is a non-resident alien engaged in trade or business.

An individual taxpayer provided the following information for 2018:


Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case E: The taxpayer is a non-resident alien not engaged in trade or business.

An individual taxpayer provided the following information for 2018:


Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱5,000,000
❏ NRA-NETB are taxable on their gross income
Case F: The income and expenses of a Filipino
citizen for 2018 were provided as follows:
January to June  Philippines  Canada
Gross Income  ₱5,000,000  ₱2,000,000
Allowable Deductions  2,000,000  1,000,000

July to December

Gross Income  2,000,000  3,000,000


Allowable Deductions  1,000,000  1,200,000
Assume that the taxpayer is a resident who left the country in July of the
current year to reside permanently in Canada, how much is his taxable
income?
❖ Answer: ₱5,000,000
Solution:
Gross income, Philippines (Jan-Dec) ₱7,000,000
Gross income, Canada (Jan-June) 2,000,000
Allowable deductions, Philippines (Jan-Dec) (3,000,000)
Allowable deductions, Canada (Jan-June) (1,000,000)
Taxable income ₱5,000,000
Case G: Assume the same data in Case F except that the taxpayer is a
non-resident who returned and resided permanently in the country in
July of the current year. His taxable income before personal exemptions
is
❖ Answer: ₱5,800,000
Solution:
Gross income, Philippines (Jan-Dec) ₱7,000,000
Gross income, Canada (Jan-June) 2,000,000
Allowable deductions, Philippines (Jan-Dec) (3,000,000)
Allowable deductions, Canada (Jan-June) (1,200,000)
Taxable income ₱5,800,000
Table 2-1: GRADUATED TAX RATE
Income  Tax (TRAIN Law 2018-2022)  2023 ONWARDS
Below 250,000  Exempt  Exempt
250,000-400,000  20% excess of 250,000  15% excess of 250,000
400,000-800,000  30,000 + 25% excess of 400,000  22,500 + 20% excess of 
400,000
800,000-2,000,000  130,000 + 30% excess of 800,000  102,500 + 25% excess of 
800,000
2,000,000-8,000,000  490,000 + 32%excess of 2,000,000  402,500 + 30% excess of 
2,000,000

Above 8,000,000  2,410,000 + 35% excess of  2,202,500 + 35% excess of


8,000,000 8,000,000
ILLUSTRATION –
COMPUTATION OF BASIC INCOME TAX
DUE
Purely Compensation Income Earner
1. Determine the income tax due assuming the taxable compensation
income for 2018 is ₱240,000.
❖ Answer: ₱0, tax exempt
2. Determine the income tax due assuming the taxable compensation
income for 2018 is ₱300,000.
❖ Answer: ₱10,000
Solution: tax on first ₱250,000 ₱0
In excess of ₱250,000 10,000
50,000 x 20%
Tax due ₱10,000
3. Determine the income tax due assuming the net taxable
compensation income for 2018 is ₱1,850,000.
❖ Answer: ₱445,000
Solution: tax on first ₱800,000 ₱130,000
In excess of ₱800,000 315,000
1,050,000 x 30%
Tax due ₱445,000

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