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Questions and Answers

What is the main distinction between gross income and taxable income for corporations?

  • Taxable income is derived after deductions are applied. (correct)
  • Taxable income includes all forms of income without any deductions.
  • Gross income is calculated after taxes.
  • Gross income includes only operating revenues.

Which of the following statements correctly describes the tax treatment of PAGCOR and its contractees?

  • Contractees and licensees of PAGCOR are liable for corporate income tax.
  • The 5% franchise tax payment benefits both PAGCOR and its contractees. (correct)
  • PAGCOR must pay a 10% corporate income tax based on their gross income.
  • PAGCOR is exempt from all forms of taxation.

In the calculation of taxable income for corporations, which of the following deductions are typically allowed?

  • Only the Optional Standard Deduction.
  • Non-operating income and personal expenses.
  • Itemized deductions and the Optional Standard Deduction. (correct)
  • Penalties and fines incurred during business operations.

What defines the nature of e-Sabong as discussed in the content?

<p>It refers to online wagering on live cockfighting matches through licensed platforms. (B)</p> Signup and view all the answers

Which calculation represents the total gross income for a corporation prior to deducting any expenses?

<p>Gross income from operations plus non-operating income. (B)</p> Signup and view all the answers

Which tax obligations applies specifically to PAGCOR regarding its employees?

<p>PAGCOR must withhold taxes on employee compensation. (C)</p> Signup and view all the answers

What is the criteria for gross income as defined for domestic and resident foreign corporations?

<p>Gross income is the entire revenue before any deductions. (B)</p> Signup and view all the answers

What is the effect of the Bloomberry ruling on e-Sabong?

<p>E-Sabong operators are subject to the same tax rules as PAGCOR. (C)</p> Signup and view all the answers

What is the gaming tax rate levied on Offshore Gaming Licensees (OGLs)?

<p>5% of the Gross Gaming Revenue (GGR) or 5% of agreed predetermined minimum monthly revenue (A)</p> Signup and view all the answers

Which of the following accurately describes how taxable income is calculated for corporations?

<p>Gross income minus deductions authorized for such types of income (C)</p> Signup and view all the answers

How is gross income defined for alien employees working in the Philippines under POGO entities?

<p>All earnings including bonuses and in-kind allowances (A)</p> Signup and view all the answers

What is the minimum final withholding tax an alien employee must pay per taxable month in the Philippines?

<p>P12,500 (D)</p> Signup and view all the answers

Which type of tax is charged on income from non-gaming operations for Philippine-based OGLs?

<p>25% income tax on taxable income (C)</p> Signup and view all the answers

In determining net income for taxation, which of the following statements is true?

<p>Net income is the remainder after authorized deductions are subtracted from gross income. (D)</p> Signup and view all the answers

What is the tax treatment for income derived from E-Sabong operations?

<p>Subject to the same gaming tax as other gaming operations (A)</p> Signup and view all the answers

What obligation do employers have regarding the final withholding tax for foreign employees in the Philippines?

<p>Employers are responsible for withholding and remitting the tax monthly. (C)</p> Signup and view all the answers

What distinguishes a domestic corporation from a foreign corporation regarding income taxation?

<p>Domestic corporations are taxed on income from both national and international sources. (A)</p> Signup and view all the answers

Which entity is considered a corporation for tax purposes?

<p>A partnership other than a general professional partnership. (C)</p> Signup and view all the answers

What is the tax treatment of income generated by PAGCOR?

<p>PAGCOR pays corporate income tax on all income. (C)</p> Signup and view all the answers

Which of the following correctly describes taxable income?

<p>Taxable income is gross income minus allowable deductions. (D)</p> Signup and view all the answers

How is net income calculated in the context of corporate taxation?

<p>Net income is gross income minus all operational costs and allowable deductions. (A)</p> Signup and view all the answers

What is the final tax rate on passive income for corporate taxpayers?

<p>Passive income has a specific final withholding tax rate depending on the source. (C)</p> Signup and view all the answers

What defines a micro, small, or medium enterprise (MSME) for tax purposes?

<p>A categorized entity based strictly on its revenue and number of employees. (B)</p> Signup and view all the answers

What is the main factor in determining the taxability of E-Sabong in the Philippines?

<p>E-Sabong income is taxed as part of normal corporate income if registered. (C)</p> Signup and view all the answers

Flashcards

Gross Income (Corporations)

Total income from business operations before any deductions (standard or itemized).

Alien employee's withholding tax

25% of gross income, with a minimum of PHP 12,500 per month, withheld by the employer.

POGO entity gaming tax

5% of the Gross Gaming Revenue (GGR) or 5% of a predetermined minimum monthly revenue, whichever is higher.

Taxable Income (Corporations)

Gross income minus allowable deductions (optional standard or itemized).

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Taxable income (corporations)

Gross income reduced by allowable deductions, used to compute tax due.

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PAGCOR's Contractees Tax Exemption

Contractors and licensees of PAGCOR (the Philippine Amusement and Gaming Corporation) are exempt from corporate income tax if they pay PAGCOR's 5% franchise tax.

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PAGCOR as Withholding Agent

PAGCOR collects taxes on behalf of the government for employee compensation and payments to individuals/corporations.

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Gross Gaming Revenue (GGR)

Total revenue from gaming operations.

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Net Income

Gross income minus authorized deductions, used to determine tax liability.

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e-Sabong Tax Treatment

The tax treatment of electronic cockfighting (e-Sabong) follows the same exemption as casinos (PAGCOR's contractors and licensees).

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Final withholding tax

A fixed portion of income withheld by an employer before payment to an employee.

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Cost of Sales/Services

Direct costs associated with producing goods or services in a business.

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Standard Deduction (OSD)

A fixed amount deducted from gross income to reduce tax liability.

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Non-gaming operation income tax

25% of taxable income for Philippine and foreign OGLs (sources: within/without the Philippines).

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Taxpayer Identification Number (TIN)

Unique identifier for tax purposes assigned to Alien employees at POGOs.

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Itemized Deduction

A more detailed set of allowable individual deductions.

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Domestic Corporation

A corporation formed and registered within the Philippines.

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Foreign Corporation

A corporation formed and registered outside the Philippines.

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Resident Foreign Corporation

A foreign corporation engaged in trade or business within the Philippines.

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Non-Resident Foreign Corporation

A foreign corporation not engaged in trade or business within the Philippines.

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Income from Philippine Sources

Income earned within the Philippines, regardless of the taxpayer's residency status.

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Income from Sources Outside the Philippines

Income earned outside the Philippines, generally only relevant to domestic corporations.

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General Professional Partnership (GPP)

A partnership of professionals (e.g., lawyers, doctors) taxed individually on their income.

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Proprietary Educational Institutions

Educational institutions with private ownership, subject to corporate income tax.

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Study Notes

Income Tax for Corporations

  • General Professional Partnerships: Partnerships formed for a specific profession, where no part of the income is from trade or business.
  • Government-Owned or Controlled Corporations (GOCCs): Corporations owned or controlled by the government.
  • Foreign-Sourced Dividends: Dividends received from non-resident foreign corporations.

Sources of Income

  • Domestic Corporations: Taxable on income from sources inside and outside the Philippines.
  • Foreign Corporations: Taxable only on income from Philippine sources, regardless of whether they reside in the Philippines.
  • Partnerships (except General Professional Partnerships): Considered corporations for tax purposes.

Tax Rates

  • Domestic Corporations:

    • Normal Rate: 25% (effective July 1, 2020).
    • Minimum Corporate Income Tax (MCIT): 1%.
    • Improperly Accumulated Earnings: 10%.

  • Foreign Corporations:

    • 25% (effective July 1, 2020) on income from within the Philippines. Varying rates apply in some cases, such as special allowances for dividends or interests received in the Philippines.

  • Special Corporations (GOCCs): Specific tax rates depend on the details of their particular operations, as defined by the law.

Additional Details

  • Just-In-Time Inventory Agreement (JIT): Does not automatically make a company subject to Philippine income tax, requires a presence/permanent establishment (PE) in the Philippines.
  • The text discusses various sources of income, identifying when income is considered from within or outside the Philippines.
  • Tax treatment for different types of corporations is detailed including those engaged in specific sectors like international transport, and construction projects.

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