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Illustration 5

This document provides financial information for a resident citizen taxpayer including income from business operations and investments in the Philippines and Canada. It asks to determine the taxpayer's taxable income and final taxes on passive income. Taxable income is calculated as P2,105,000, which excludes some foreign interest and dividend income taxed separately. Final taxes on passive income total P154,000 and are calculated by applying tax rates to specific interest, dividend, lottery, and prize amounts from domestic sources.

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Bea Nicole Baltazar
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321 views2 pages

Illustration 5

This document provides financial information for a resident citizen taxpayer including income from business operations and investments in the Philippines and Canada. It asks to determine the taxpayer's taxable income and final taxes on passive income. Taxable income is calculated as P2,105,000, which excludes some foreign interest and dividend income taxed separately. Final taxes on passive income total P154,000 and are calculated by applying tax rates to specific interest, dividend, lottery, and prize amounts from domestic sources.

Uploaded by

Bea Nicole Baltazar
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 PDF, TXT or read online on Scribd
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ILLUSTRATION 5

A resident citizen taxpayer provided the following information:

Gross business income, Philippines P2,000,000


Gross business income, Canada 3,000,000
Business expenses, Philippines 1,400,000
Business expenses, Canada 2,050,000
Interest income- BDO Philippines 100,000
Interest income- BDO Canada 50,000
Dividend income from domestic corporation 125,000
Dividend income- resident foreign corporation 75,000
Dividend income- nonresident foreign corporation 102,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Philippine lotto winnings 10,000
Philippine Charity Sweepstakes winnings 500,000
Singapore sweepstakes winnings 200,000
Other winnings- Philippines 50,000
Prizes- Robinsons Manila 8,000
Prizes- SM Manila 20,000
Prizes- SM Shanghai China 30,000

Determine the following:


1. Taxable income
2. The amount of final taxes for passive income
Solution
1. Taxable income
 Answer: P2,105,000
Gross business income, Philippines P2,000,000
Gross business income, Canada 3,000,000
Business expenses, Philippines (1,400,000)
Business expenses, Canada (2,050,000)
Interest income- BDO Canada 50,000
Dividend income- resident foreign corporation 75,000
Dividend income- nonresident foreign corporation 102,000
Interest income received from a depository
bank under FCDS, Philippines 50,000
Singapore sweepstakes winnings 200,000
Prizes- Robinsons Manila 8,000
Prizes- SM Shanghai China 30,000
Taxable Income P2,015,000

 Taxable income means ordinary income subject to graduated tax rates


 Interest incomes on bank deposits from sources outside the Philippines
and dividend income from foreign corporations are subject to basic tax
 PCSO/Philipine lotto winnings:
Under TRAIN Law: exempt if not exceeding P10,000; subject to 25% FWT
if the amount exceeds P10,000
 Prizes not exceeding P10,000 are subject to basic tax. On the other hand,
prizes more then P10,000 from sources within the Philippines are subject
to final tax
 Prizes derived from sources outside the Philippines are subject to basic
tax

2. The amount of final tax on passive income:


 Answer: P154,000

Interest income- BDO Philippines (20%) P100,000


Dividend income from domestic foreign corporation (10%) 12,500
Interest income received from FCDU deposit (15%) 7,500
PCSO Winnings (P500,000 x 20%) 100,000
Other winnings- Philippines (P50,000 x 20%) 10,000
Prizes- SM Manila (P20,000 x 20%) 4,000
Total final tax on passive income P154,000

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