Republic of the Philippines

BATANGAS STATE UNIVERSITY

The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

Use a separate sheet of paper for your solutions and final answer.

A. Determine the taxable income and income tax due on each situation. (5 points each item, 20 points)

1. Juan is a resident citizen, earning purely business income for 2020 taxable year:
Gross Sales P2,800,000
Cost of Sales 1,200,000
Operating expenses 650,000
Creditable withholding taxes 80,000

Solution:
Gross Sales P 2,800,000
Less: Cost of Sales (1,200,000)
Gross Income 1,600,000
Less: Operating expenses (650,000)
Taxable Income P 950,000

Taxable Income P 950,000

Tax bracket threshold (800,000)
Net 150,000
Multiply by tax rate based on tax bracket 30%
Basic 45,000
Additional as per bracket 130,000
Income tax due 175,000
Less: Creditable withholding taxes (80,000)
Income Tax Payable P 95,000

2. Use the same data in #1 but assume that Juan opted to be taxed using 8% income tax rate.

SOLUTION:
Gross Sales P2,800,000
Less: Allowable Deductions 250,000
Total 2,550,000
Tax rate 8%
Income tax due 204,000
Less: Creditable withholding tax 80,000
Income tax payable 124,000

3. Lorna is a resident citizen, earning compensation and business income for 2020 as follows:
Compensation income P1,400,000
Gross sales 2,800,000
Cost of sales 1,200,000
Operating expenses 650,000
Withholding tax on compensation income 310,000
Other creditable withholding taxes 80,000

SOLUTION:
Compensation Income 1,400,000
Gross Sales 2,800,000
Total 4,200,000
Less: Cost of Sales 1,200,000
Gross Income 3,000,000
Less: Operating expenses 650,000
Taxable Income 2,350,000
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

Taxable Income 2,350,000

Tax bracket threshold 2,000,000
Net 350,000
Multiply by tax rate based on tax b 32%
Basic tax 112,000
Additional as per bracket 490,000
Income Tax 602,000
Less: Withholding tax on compensation 310,000
Less: Creditable withholding taxes 80,000
Income tax due 212,000

4. Can Lorna choose to be taxed at 8% instead of the graduated income tax rate in #3? If yes, how much is her total
income tax payable for the year?

SOLUTION:
Yes, Lorna can be taxed on her business income by 8%

For compensation income

Taxable Income 1,400,000
Tax bracket threshold 800,000
Net 600,000
Multiply by tax rate based on tax bracket 30%
Basic tax 180,000
Additional as per bracket 130,000
Income tax due 310,000

For compensation income

Gross sale 2,800,000
Tax rate 8%
Income tax on business 224,000

Income tax due on compensation 310,000

Income tax due on business 224,000
534,000
Less: Withholding tax 310,000
Other creditable withholding tax 80,000
Total income tax payable 144,000

B. Computation of Basic Income Tax on Passive Income and Capital Gains Tax
CJ, single, had the following data for 2020 taxable year:
Gross business income, Philippines P1,000,000
Gross business income, USA 500,000
Business expenses, Philippines 700,000
Business expenses, USA 430,000
Compensation income, Philippines 600,000
Dividend income from a domestic corporation 50,000
Dividend income from a foreign corporation 40,000
Interest income from peso bank deposit- Philippines 20,000
Interest income from bank deposits abroad 30,000
Interest income from FCDS deposits 40,000
Royalty income from composition 25,000
Raffle draw winnings 10,000
PCSO winnings 200,000
Creditable withholding taxes on business income 125,000
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

1. Determine the following assuming the taxpayer is a resident citizen: (5 points each, 20 points)
a. Taxable net income
Gross business income, PH 1,000,000
Gross business income, USA 500,000
Business expenses, PH (700,000)
Business expenses, USA (430,000)
Compensation income, PH 600,000
Dividend income, Foreign 40,000
Interest income, bank deposit abroad 30,000
Taxable net income 1,040,000

b. Income tax payable

Taxable income 1,040,000
Tax bracket threshold 800,000
Net 240,000
Multiply by tax rate based on tax bracket 30%
Basic tax 72,000
Additional as per bracket 130,000
Income tax 202,000
Less: Creditable withholding taxes 125,000
Income tax payable 77,000

c. Total final taxes on passive income

Dividends income from a domestic corp. 50,000
Tax rate 10%
5,000

Interest income from FCDS Deposits 40,000

Tax rate 15%
6,000

Interest income from peso bank deposit-Philippines 20,000

Tax rate 20%
4,000

Royalty income from composition 25,000

Tax rate 10%
2,500

Raffle draw winnings 10,000

Tax rate 20%
2,000

PSCO Winnings 200,000

Tax rate 20%
40,000

Total final taxes on passive income 59,500

d. Total income tax expense

Income tax due 202,000
Total final taxed on passive income 59,500
Total income tax expense 261,500
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

2. Determine the following assuming that taxpayer is resident alien: (5 points each, 20 points)
a. Taxable net income
Gross business, PH 1,000,000
Business expense, PH (700,000)
Compensation income, PH 600,000
Taxable income 900,000

b. Income tax payable

Taxable Income P 910,000
Tax bracket threshold (800,000)
Net 100,000
Multiply by Tax Rate based on tax bracket 30%
Basic tax 30,000
additional as per bracket 130,000
Income Tax Due 160,000
Creditable withholding taxes on business income (125,000)
Income Tax Payable 35,000

c. Total final taxes on passive income

Dividends income from a domestic corp. 50,000
Tax rate 10%
5,000

Interest income from FCDS Deposits 40,000

Tax rate 15%
6,000

Interest income from peso bank deposit-Philippines 20,000

Tax rate 20%
4,000

Royalty income from composition 25,000

Tax rate 10%
2,500

Raffle draw winnings 10,000

Tax rate 20%
2,000

PSCO Winnings 200,000

Tax rate 20%
40,000

Total final taxes on passive income 59,500

d. Total income tax expense

Income tax due 160,000

Total final taxed on passive income 59,500
Total income tax expense 219,500

C. Capital Gains Tax

1. A resident citizen taxpayer sold a vacant lot (held as investment) in the Philippines. Other data regarding the
sale are as follows:
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

Selling price P5,500,000
Fair market value 6,000,000
Zonal value 5,850,000
Expenses on the sale 275,000

SOLUTION:
Fair Market Value P 6,000,000
Capital Gains Tax Rate 6%
Capital Gain Tax P 360,000

2. The taxpayer is a resident alien:

Selling price on a direct sale to buyer of shares of stock of a domestic corp. P310,000
Expenses on sale 10,000
Cost of shares sold 200,000
Required: Compute the capital gains tax. (5 points)

SOLUTION:
Selling Price P 310,000
Expenses on sale (10,000)
Cost of shares sold (200,000)
Capital Gain 100,000
Multiply by Capital Gains Tax Rate 15%
Capital Gains Tax P 15,000

D. Quarterly Income Tax Return

The following cumulative balances during the year on income and expenses were provided by Juan Dela Cruz, a
resident citizen:
1st Q 2nd Q 3rd Q 4th Q
Gross Profit from Sales P300,000 P650,000 P910,000 P1,200,000
Business expenses 120,000 262,000 405,890 426,000
Dividends-domestic corp. 20,000 20,000 30,000 30,000
Interest income from,
BPI 4,000 8,000 12,000 16,000
UCPB 8,000 12,000 16,000 18,000
Metro Bank 5,000 10,000 15,000 30,000
Capital gain on sale of Land: 150,000 150,000 150,000150,000
Selling price: P600,000; Cost: P450,000

REQUIRED: Using the above information, compute the following: (5 points each, 30 points)
1. Income tax payable, first quarter

Gross Profit from Sales P 300,000

Business Expenses (120,000)
Taxable Income P 180,000
Income Tax Payable 0
*Taxable Income do not exceed P250,000

2. Income tax payable, second quarter

Gross Profit from Sales P 650,000

Business Expenses (262,000)
Taxable Income P 388,000

Taxable Income P 388,000

Tax bracket threshold (250,000)
Net 138,000
Multiply by Tax Rate based on tax bracket 20%
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

Income Tax Due P 27,600
Income Tax Payable P 27,600

3. Income tax payable, third quarter

Gross Profit from Sales P 910,000

Business Expenses (405,890)
Taxable Income P 504,110

Taxable Income P 504,110

Tax bracket threshold (400,000)
Net 104,110
Multiply by Tax Rate based on tax bracket 25%
basic 26,027.5
additional as per bracket 30,000.0
Income Tax Due P 56,027.5
Income Tax Due (3rd Quarter) P 56, 027.5
Income Tax Paid (1st Quarter) 0
Income Tax Paid (2nd Quarter) (27,600)
Income Tax Payable P 28,427.5

4. Income tax payable, fourth quarter

Gross Profit from Sales P 1,200,000

Business Expenses (426,000)
Taxable Income P 774,000

Taxable Income P 774,000

Tax bracket threshold (400,000)
Net 374,000
Multiply by Tax Rate based on tax bracket 25%
basic 93,500
additional as per bracket 30,000
Income Tax Due P 123,500
Income Tax Due (4th Quarter) P 123,500
Income Tax Paid (1st Quarter) 0
Income Tax Paid (2nd Quarter) (27,600)
Income Tax Paid (3rd Quarter) (28,427.5)
Income Tax Payable P 67,472.5

5. Total final taxes (for the year) on passive income

Dividend income from a domestic corporation 30,000 x 10% P 3,000

Interest Income from:
BPI 16,000 x 20% 3,200
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

UCPB 18,000 x 20% 3,600
Metro Bank 30,000 x 20% 6,000
Final Taxes on Passive Income P 15,800

6. Total capital gain tax

Gross Selling Price P 600,000
Capital Gains Tax Rate 6%
Capital Gain Tax P 36,000

Leading Innovations, Transforming Lives, Building the Nation