Title | Income Taxation - tabag & garcia |
---|---|
Course | Auditing Theory |
Institution | Mindanao State University |
Pages | 33 |
File Size | 579.1 KB |
File Type | |
Total Downloads | 32 |
Total Views | 467 |
1 | PageSOLUTIONS MANUALINCOME TAXATION2018 EditionBy: TABAG & GARCIACHAPTER 1 – PRINCIPLES OF TAXATIONTRUE OR FALSE-SET A1. FALSE 9. TRUE 17. FALSE 25. FALSE2. TRUE 10. TRUE 18. FALSE 26. TRUE3. TRUE 11. TRUE 19. FALSE 27. FALSE4. TRUE 12. TRUE 20. TRUE 28. TRUE5. TRUE 13. FALSE 21. TRUE 29...
SOLUTIONS MANUAL INCOME TAXATION 2018 Edition By: TABAG & GARCIA
CHAPTER 1 – PRINCIPLES OF TAXATION TRUE OR FALSE-SET A 1. FALSE 2. TRUE 3. TRUE 4. TRUE 5. TRUE 6. FALSE 7. TRUE 8. FALSE MULTIPLE CHOICE 1. A 2. C 3. B** 4. D 5. C
9. 10. 11. 12. 13. 14. 15. 16.
TRUE TRUE TRUE TRUE FALSE FALSE FALSE FALSE
17. 18. 19. 20. 21. 22. 23. 24.
FALSE FALSE FALSE TRUE TRUE TRUE TRUE FALSE
25. 26. 27. 28. 29. 30.
FALSE TRUE FALSE TRUE TRUE FALSE
21. 22. 23. 24. 25.
D D D D B
41. 42. 43. 44. 45.
D A A B C
61. 62. 63. 64. 65.
C C C C A
6.
B
26.
A
46.
C
7.
C
27.
A
47.
B
8.
C
28.
D
48.
A
9.
D
29.
C
49.
C
10.
D***
30.
C
50.
D
11.
A
31.
A
51.
D
12.
D
32.
C
52.
C
13.
D
33.
D
53.
B
14.
C
34.
C
54.
D
15.
C
35.
A
55.
A
16.
D
36.
C
56.
A
17.
A
37.
D
57.
A
18.
A
38.
C
58.
D
19.
C
39.
D
59.
C
20.
B
40.
A
60.
A
**Statement 1 – False; similarity of tax from license fee, not a distinction. ***Statement 1 – False; should be “jurisdiction” instead of “symbiotic relation”. Statement 2 – False; should be “symbiotic relation” instead of “jurisdiction” % % CHAPTER 2 - INDIVIDUAL TAXPAYERS ERRATUM: (1) FWT % of Royalty income
(2) ROYALTIES B. Royalties on books, as well as other literary works and musical compositions (2)
Citizens & Residents
NRA-ETB
NRA-NETB
20% 10%
20% 10%
25% 25%
PAGE 79; Illustration #6 Question#2: ANSWER SHOULD BE P154,000. Include PCSO winnings @ 20%
PROBLEM SOLVING: 2-1 1. RC 2. RC 3. RC
4. 5. 6.
NRA-NETB NRC RA
2-2 1 2 3 4 5 6 7 8 9
TAX TYPE FWTx FWTx BTx FWTx Exempt BTx BTx BTx BTx
Tax RATE 20% 7.5%/ 15%TL Tax Table 20% Tax Table Tax Table Tax Table Tax Table
19 20 21 22 23 24 25 26 27
TAX TYPE Exempt FWT FWTx BTx Exempt FWTx FWTx FWTx FWTx
Tax RATE 20% 25% Tax Table 25% 20% 20% 10%
10 11 12 13 14 15
BT FWTx FWTx FWTx BTx BTx
T
T bl 20% 10% 20%* Tax Table* Tax Table
28 29 30 31 32 33
BT BTX FWTx FWTx CGT Exempt
T T bl Tax Table 20% 25% 5%&10%/15% Sub.to OPT***
1"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
FWTx 20% BTx Tax Table 16 34 FWTx 20% BTx Tax Table**** 17 35 BTx Tax Table 18 *Prizes received from Philippine sources exceeding P10,000 are subject to 20% final tax rate. On the other hand, Other WINNINGS (regardless of amount) are subject to 20% final tax rate. **PCSO/Lotto winnings under TRAIN Law: Amount RC, NRC, RA, NRAET NRANET ≤ P10,000 exempt exempt 25% > P10,000 20% FWT 20% FWT 25% FWT ***Stock Transaction Tax on sale of shares of DC listed in the Local Stock Exchange: Prior to TRAIN Law = ½ of 1% of GSP TRAIN Law = 6/10 of 1% of GSP ****CGT on Real Properties Must be pertaining to a real property classified as capital asset located in the Philippines. However, if it is sold to the Government, the tax may either be CGT or Basic Tax at the option of the individual taxpayer. 2-3 1. a. b. c. d.
2.
3.
4.
Exempt Exempt Income Tax Due = P130,000 P746,000 computed as follows: Tax Due: 1st P2,000,000 Excess over P2M = (P800,000 x 32%) Total
Income Tax Payable = P95,000 computed as follows: Gross sales Cost of sales Operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P150,000 x 30%) Tax Due Less: CWT Income Tax Payable Income Tax Payable = P124,000 computed as follows: Gross sales Less Balance subject to 8% tax x Tax Due Less: CWT Income Tax Payable Income Tax Payable = P215,000 computed as follows: Gross sales Rental income (P380,000/95%) Cost of sales Operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P550,000 x 30%) Tax Due Less: CWT Income Tax Payable
P490,000 256,000 P746,000
P2,800,000 (1,200,000) (650,000) P950,000 P130,000 45,000 P175,000 (80,000) P95,000
P2,800,000 (250,000) P2,550,000 8% P204,000 (80,000) P124,000
P2,800,000 400,000 (1,200,000) (650,000) P1,350,000 P130,000 165,000 P295,000 (80,000) P215,000
5.
The 8% optional tax is not applicable because the total of the gross sales and other operating income exceeded the revised vat threshold of P3,000,000.
6.
Income Tax Payable = P222,500 computed as follows: Gross receipts Cost of direct services Other operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P575,000 x 30%) Tax Due Less: CWT Income Tax Payable
7.
P4,000,000 (1,800,000) (825,000) P1,375,000 P130,000 172,500 P302,500 (80,000) P222,500
The 8% optional tax is not applicable because the gross receipts exceeded the revised vat threshold of P3,000,000.
2"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
8.
9.
Income Tax Payable = P212,000 computed as follows: Compensation income Gross sales Cost of sales Operating expenses Taxable net income Tax Due: 1st P2,000,000 Excess over P2M = (P350,000 x 32%) Tax Due Less: CWT On compensation income On business income Income Tax Payable
P1,400,000 2,800,000 (1,200,000) (650,000) P2,350,000 P490,000 112,000 P602,000 (310,000) (80,000) P212,000
The 8% optional tax is applicable because gross sales did not exceed the revised vat threshold of P3,000,000. The income tax payable shall be computed as follows: Gross sales 2,800,000 x 8% 8% Tax on sales P224,000 ADD: Tax due on compensation income 1st P800,000 P130,000 Excess over P800,000 = (P600,000 x 30%) 180,000 310,000 Tax Due P,000 P534,000 Less: CWT On compensation income (310,000) On business income (80,000) Income Tax Payable P144,000 & &
For mixed income earners, P250,000 is not deducted for purposes of computing the 8% tax The 8% tax is not applicable to compensation income.
2-4 1.
Taxpayer is a resident citizen 1.1 Taxable income = P1,050,000 1.2 Income tax payable = P80,000 1.3 Final tax on passive income = P57,500 1.4 Total income tax expense = P262,500 Gross business income, Philippines
P1,000,000
Gross business income, USA Business expenses, Philippines Business expenses, USA Compensation income, Philippines Dividend income-foreign corp. Interest income-bank deposit abroad Raffle draw winnings Basic personal exemption Taxable income
500,000 (700,000) (430,000) 600,000 40,000 30,000 10,000 P1,050,000
Tax Due [(P130,000)+(250,000 x 30%)] Creditable withholding tax on bus. income Income Tax Payable
P205,000 (125,000) P80,000
Dividend income – DC (50k x 10%) Interest income bank deposit-Phls.@20% Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings (P200,000 x 20%) Final Tax on Passive Income
P5,000 4,000 6,000 2,500 40,000 P57,500
Basic income tax due Final taxes on passive income Total income tax expense 2.
P205,000 57,500 P262,500
The question is tax expense; ignore the income tax payable of P80,000.
Taxpayer is a nonresident citizen 2.1 Taxable income = P910,000 2.2 Income tax payable = P38,000 2.3 Final tax on passive income = P51,500 2.4 Total income tax expense = P214,500 Gross business income, Philippines Business expenses, Philippines Compensation income, Philippines Dividend income-foreign corp. Raffle draw winnings Basic personal exemption Taxable income
P1,000,000 (700,000) 600,000 *** 10,000 P910,000
***Assume situs is without the Phls.
Tax Due [(P130 000)+(110k x 30%)] Creditable withholding tax on bus Income Income Tax Payable
P163 000 (125 000) P38,000
Assume the tax withheld pertain to Income derived in the Phls.
3"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Dividend income – DC (50k x 10%) Interest income bank deposit-Phls.@20%
P5,000 4,000
Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings (P200,000 x 20%) Final Tax on Passive Income
exempt 2,500 40,000 P51,500
Basic income tax due Final taxes on passive income Total income tax expense
P163,000 51,500 P214,500
3.
Taxpayer is a resident alien 3.1 Taxable income = P910,000 (same answer with #2.1; nonresident citizen) 3.2 Income tax payable = P38,000 (same answer with #2.2; nonresident citizen) 3.3 Final tax on passive income = P57,500 (same answer with #1.3; resident citizen) 3.4 Total income tax expense = P220,500 computed as follows: Basic income tax due P163,000 Final taxes on passive income 57,500 Total income tax expense P220,500
4.
Taxpayer is a nonresident alien engaged in trade or business 4.1 Taxable income = P910,000 (same answer with #2.1; nonresident citizen) 4.2 Income tax payable = P38,000 (same answer with #2.2; nonresident citizen) 4.3 Final tax on passive income = P16,500 4.3 Total income tax expense = P179,500 Dividend income – DC (50k x 20%) Interest income bank deposit-Phls.@20% Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings Final Tax on Passive Income &
Use 20% rate for DI from DC instead of 10%
**Unfortunately, unlike RCs, NRCs and RAs, the PCSO exemption of NRAET under TRAIN Law was retained.
Basic income tax due Final taxes on passive income Total income tax expense 5.
P10,000 4,000 exempt 2,500 Exempt** P16,500
Taxpayer is a nonresident alien not-engaged in trade or business Compensation income, Philippines Dividend income - DC Dividend income from foreign corp. Interest income bank deposit, Phls. Interest income on FCDS deposit Royalty income from composition Raffle draw winnings PCSO winnings Total GROSS Income x Income Tax Due/expense
P163,000 16,500 P179,500
P600,000 50,000 20,000 Exempt 25,000 10,000 200,000 P905,000 25% P226,250
Assume situs is “without or abroad”
2-5 1.
Taxpayer is a resident citizen a. Taxable net income = P1,076,100 b. Income tax payable = P212,830 c. Final tax on passive income = P68,030 d. Capital gains tax = P120,600 Solution: From Phils.
From Abroad
Income from employment P180,000 P280,000 Business income 850,000 960,000 Deductible business expenses (610,000) (730,000) Interest income on personal loans** 6,000 3,000 Dividend income from foreign corp. 6,800 2,000 Prizes from singing contest 5,600 Interest income on bank deposits 4,200 Interest income on money market placements 1,600 Royalty income 50,000 Winnings/ prizes from lotteries, raffles 16,900 Lotto winnings --50,000 Basic Personal exemption Additional exemption Taxable income TAX DUE: First P800,000 Excess = P276,100 @ 30% **All incomes regardless of source are taxable. However, personal expenses are not allowed as deduction from
Total P460,000 1,810,000 (1,340,000) 9,000 8,800 5,600 4,200 1,600 50,000 16,900 50,000 P1,076,100 P130,000 82,830 P212,830
4"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Final Tax on Passive income: Interest income on bank deposits Interest income on money market placements Royalty income Lotto winnings Winnings/ prizes from lotteries, raffle draws Total @
10,800 7,500 90,000 150,000 45,000 P303,300 20%
Dividend income from domestic corp. Royalty income from sale of books Total @ TOTAL FINAL TAX ON PASSIVE INCOME Capital Gains Tax: Sale of lot (P1,060,000 x 6%) Sale of house and lot (P950,000 x 6%) Total 2.
5,700 68,000 P73,700 10%
P60,660 7,370 P68,030
P63,600 57,000 P120,600
Taxpayer is a non-resident citizen a. Taxable income = P438,400 b. Income tax payable = P39,600 c. Final tax on passive income = P68,030 d. Capital gains tax = P120,600 Solution: Income from employment Business income Deductible business expenses Interest income on personal loans Dividend income from foreign corp. Prizes from singing contest Basic Personal exemption Additional exemption Taxable income TAX DUE: First P400,000 Excess = P38,400 x 25%
From Phils. P180,000 850,000 (610,000) 6,000 6,800 5,600 P438,400 P30,000 9,600 P39,600
Final Tax on Passive income: § As long as there is no interest income from foreign currency bank deposit under FCDS/FCDU, the final tax on passive income of a nonresident citizen is the same with that of a resident citizen. Capital Gains Tax: § All individual taxpayers are subject to the same types of CGTs 3.
Taxpayer is a nonresident alien engaged in trade a. Taxable income = P438,400 (same with a non-resident citizen taxpayer) b. Income tax payable = P39,600 (same with a non-resident citizen taxpayer) c. Final tax on passive income = P38,600; The exemption on PCSO/Lotto winnings was retained on NRAETB d. Capital gains tax = P120,600 (all individual taxpayers are subject to the same types of CGTs) Final Tax on Passive income: Interest income on bank deposits Interest income on money market placements Royalty income Dividend income from domestic corp Winnings/ prizes from lotteries, raffle draws Total @ Dividend income from domestic corp.@ 20% Royalty income from sale of books @ TOTAL FINAL TAX ON PASSIVE INCOME
10,800 7,500 90,000 5,700 45,000 P159,000 20% 68,000 10%
rate is 20%
P31,800 6,800 P38,600
5"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
2-6 a. b. c.
Taxable income of the husband = P1,165,000 Taxable income of the wife = P890,000 Consolidated tax due of the husband and the wife = P396,500 Husband
INCOME: Compensation income Income-Profession [P800,000/2)] Income from trading business LESS: Expenses-practice of profession [ P320,000/2)] Expenses – trading business Basic Personal exemption Additional exemption TAXABLE INCOME
Wife
P 850,000 400,000 250,000
P650,000 400,000 -
(160,000) (100,000) (75,000) P1,165,000
(160,000) P890,000
P130,000 109,500
P130,000 27,000
Tax due: First P800,000 In excess of P500,000 @ 30%
Total P239,500 P157,000 Consolidated Tax Due P396,500 Note: Personal expenses are not deductible. The Personal exemptions and Premium payments for health insurance are no longer deductible beginning Jan. 1, 2018 under TRAIN Law. 2-7 a.
Total capital gains taxes Sale of shares of domestic corp. directly to a buyer (P150,000 x 15%*) Capital gain on sale of land in the Philippines classified as capital asset (P5M x 6%) Total capital gains tax & *CGT on shares of DC under TRAIN Law & Sale of shares in the local stock exchange is subject to transaction tax of 6/10 of 1% of GSP under TRAIN Law
P22,500 300,000 P322,500
b. Dividend income from domestic corp. P40,000 x 10% Interest income on Philippine bank deposit (3,200 + 2,400 + 8,000)/80% x 20% Interest income on Phl. bank deposit under FCDU (4,000 + 4,000 + 2,000) x 15% Interest income on government bonds = P10,000 x 20% Royalty – literary = P10,000 x 10% Royalty other than literary = P12,000 x 20% Total Final tax on passive income of Daniel and Kat
P4,000 3,400 1,500 2,000 1,000 2,400 P14,300
c. Business income Rental income net of tax (P200,000/95%)/2 Dividend income from nonresident corp. (P10,000/2) Interest income on notes receivable [P6,000 + (P2,000/2)] Interest income on bank deposit abroad [P5,000 + (P5,000/2)] Capital gain on sale of land abroad (P500,000/2) Gain on sale of shares – New York Stock Exchange P30,000/2 Expenses [P350,000 +(75,000/2)] Personal exemption Taxable net income of Daniel
P600,000 100,000 5,000 7,000 7,500 250,000 15,000 (387,500) P597,000
Gross income from practice of profession (P360,000/90%) Rental income net of tax (P190,000/95%)/2 Dividend income from resident corp. Dividend income from nonresident corp. (P10,000/2) Interest income on notes receivable [P4,000 + (P2,000/2)] Interest income on bank deposit abroad [P5,000 + (P5,000/2)] Capital gain on sale of land abroad (P500,000/2) Gain on sale of shares – New York Stock Exchange P30,000/2 Expenses [P200,000 +(75,000/2)] Personal exemption Taxable net income of Kat
P400,000 100,000 20,000 5,000 5,000 7,500 250,000 15,000 (237,500) P565,000
d.
2-8 1. 2. 3. 4. 5. 6.
Income tax payable, first quarter = PIncome tax payable, second quarter = P17,600 Income tax payable, third quarter = P38,427.5 Income tax payable, fourth quarter = P67,297.5 Final tax on passive income = P15,800 Capital gains tax = P600,000 x 6% = P36,000
6"|"P a g e % % % % % % % % Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Gross Profit from Sales Business e-xpenses Personal exemption Taxable income
1st Q P300,000 (120,000)
2nd Q P600,000 (262,000)
3rd Q P910,000 (405,890)
P180,000
P338,000
P304,110
Q4/Year P1,200,000 (426,700) P773,300
-
P17,600
P56,027
P123,325
P-
-
(17,600)
P17,600
P38,427.5
(17,600) (38,427.5) P67,297.5
Tax Due (Tax Table) Less: Tax Paid Q1 Q2 Q3 Income Tax Payable Note: The amounts shown above are cumulative. (Amounts are cumulative) Dividend received from domestic corp. Interest income from BPI UCPB Metro Bank Total final tax on passive income
Amount 30,000
% 10
Tax P3,000
16,000 18,000 30,000
20 20 20
3,200 3,600 6,000 P15,800
! 2-9 CASE A: 2017 Taxable Year a. The Taxpayer is a Special Alien Employee (SAE). Income Tax Due = P850,000 x 15% = P127,500 b.
c. d.
The Taxpayer is a Special Filipino Employee (SFE), however, the income tax due is based on the old graduated tax table. The 15% preferential rate is not applicable because the compensation income is lower than P975,000. TNI = 750,000 + 100,000 – basic personal exemption of P50,000 = P800,000 Basic Tax Due (old rate) = 125,000 + (300,000 x 32%) = P221,000 The Taxpayer is a Special Filipino Employee (SFE) employed by an OBU. Income Tax Due = P850,000 x 15% = P127,500 The Taxpayer is a Special Filipino Employee (SFE) employed by an PC/SC. Income Tax Due = P850,000 x 15% = P127,500