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Questions and Answers
A resident citizen of the Philippines is defined as a citizen residing outside of the country.
A resident citizen of the Philippines is defined as a citizen residing outside of the country.
False (B)
A non-resident citizen is someone who has the intention to reside abroad for a definite period.
A non-resident citizen is someone who has the intention to reside abroad for a definite period.
True (A)
Overseas Filipino Workers (OFW) are classified as resident citizens for tax purposes.
Overseas Filipino Workers (OFW) are classified as resident citizens for tax purposes.
False (B)
A citizen of the Philippines who leaves for employment abroad is a non-resident citizen for the entire taxable year.
A citizen of the Philippines who leaves for employment abroad is a non-resident citizen for the entire taxable year.
A citizen of the Philippines born before January 17, 1973 can elect Philippine citizenship upon reaching adulthood.
A citizen of the Philippines born before January 17, 1973 can elect Philippine citizenship upon reaching adulthood.
A seaman is always considered a resident citizen for tax purposes.
A seaman is always considered a resident citizen for tax purposes.
A non-resident citizen is treated as a resident citizen for income derived from sources abroad after arriving in the Philippines permanently.
A non-resident citizen is treated as a resident citizen for income derived from sources abroad after arriving in the Philippines permanently.
Citizens of the Philippines born to foreign parents are automatically classified as resident citizens.
Citizens of the Philippines born to foreign parents are automatically classified as resident citizens.
Compensation income includes salaries, wages, and bonuses.
Compensation income includes salaries, wages, and bonuses.
Non Taxable Compensation can reduce the taxable compensation income.
Non Taxable Compensation can reduce the taxable compensation income.
The basic income tax due for a taxable compensation income of P920,000 is P152,500.
The basic income tax due for a taxable compensation income of P920,000 is P152,500.
Business or professional income is subject to income tax and expanded withholding tax.
Business or professional income is subject to income tax and expanded withholding tax.
All types of income are classified as either compensation income or business income.
All types of income are classified as either compensation income or business income.
A professional must be formally certified to be classified under business or professional income.
A professional must be formally certified to be classified under business or professional income.
Taxable pensions and retirement pay are considered compensation income.
Taxable pensions and retirement pay are considered compensation income.
Fringe benefits are always classified as taxable under the compensation income category.
Fringe benefits are always classified as taxable under the compensation income category.
The Basic Income Tax for a non-resident alien not engaged in business in the Philippines is 30%.
The Basic Income Tax for a non-resident alien not engaged in business in the Philippines is 30%.
Non-resident aliens not engaged in business in the Philippines are taxed 25% on their income received from all sources within the country.
Non-resident aliens not engaged in business in the Philippines are taxed 25% on their income received from all sources within the country.
Exempt income is considered taxable for non-resident aliens in the Philippines.
Exempt income is considered taxable for non-resident aliens in the Philippines.
The total allowed deduction for a non-resident alien not engaged in business can include non-deductible business expenses.
The total allowed deduction for a non-resident alien not engaged in business can include non-deductible business expenses.
Interest and dividends received by non-resident aliens in the Philippines are subject to Basic Income Tax.
Interest and dividends received by non-resident aliens in the Philippines are subject to Basic Income Tax.
The Basic Income Tax for a taxable net income of $1,300,000 is calculated using graduated rates.
The Basic Income Tax for a taxable net income of $1,300,000 is calculated using graduated rates.
For non-resident aliens, the final income tax applies single rates to their taxable gross income.
For non-resident aliens, the final income tax applies single rates to their taxable gross income.
The tax rate for the Basic Income Tax applies to both gross income in the Philippines and abroad.
The tax rate for the Basic Income Tax applies to both gross income in the Philippines and abroad.
A non-resident alien not engaged in business is subjected to an optional 8% tax rate on all their income.
A non-resident alien not engaged in business is subjected to an optional 8% tax rate on all their income.
The Basic Income Tax Due is calculated at $140,000 for a gross income of $2,000,000 under the optional 8% tax rate.
The Basic Income Tax Due is calculated at $140,000 for a gross income of $2,000,000 under the optional 8% tax rate.
If a husband and wife jointly own an asset, they will share the gain from its disposal equally.
If a husband and wife jointly own an asset, they will share the gain from its disposal equally.
Only one spouse is responsible for filing the income tax return if they choose to report jointly.
Only one spouse is responsible for filing the income tax return if they choose to report jointly.
The annual gross receipt threshold for availing the 8% income tax rate is 5 million pesos.
The annual gross receipt threshold for availing the 8% income tax rate is 5 million pesos.
Spouses can deduct expenses incurred mutually if it is undeterminable who incurred them.
Spouses can deduct expenses incurred mutually if it is undeterminable who incurred them.
Corporations are eligible to avail the 8% income tax option.
Corporations are eligible to avail the 8% income tax option.
Purely compensation income earners can opt for the 8% income tax rate.
Purely compensation income earners can opt for the 8% income tax rate.
Partners of General Professional Partnerships can claim the 8% flat rate on their share in the partnership's net income.
Partners of General Professional Partnerships can claim the 8% flat rate on their share in the partnership's net income.
VAT registered taxpayers can avail the 8% income tax rate regardless of their gross sales amount.
VAT registered taxpayers can avail the 8% income tax rate regardless of their gross sales amount.
Self-employed individuals are not required to pay any business tax.
Self-employed individuals are not required to pay any business tax.
A non-resident alien engaged in business in the Philippines is subject to graduated tax rates.
A non-resident alien engaged in business in the Philippines is subject to graduated tax rates.
Individuals registered under the Barangay Micro Business Enterprises (BMBEs) are eligible for double tax exemptions under different laws.
Individuals registered under the Barangay Micro Business Enterprises (BMBEs) are eligible for double tax exemptions under different laws.
Compensation income taxpayers can opt for the 8% preferential income tax rate regardless of their income level.
Compensation income taxpayers can opt for the 8% preferential income tax rate regardless of their income level.
A taxpayer must signify their intention to avail the 8% preferential income tax rate before the end of the taxable year.
A taxpayer must signify their intention to avail the 8% preferential income tax rate before the end of the taxable year.
The taxable net income for an individual with a gross income of $5,050,000 and allowed deductions of $2,000,000 is $3,050,000.
The taxable net income for an individual with a gross income of $5,050,000 and allowed deductions of $2,000,000 is $3,050,000.
Income received from foreign sources is always taxable in the Philippines.
Income received from foreign sources is always taxable in the Philippines.
The basic income tax due for a total taxable net income of $1,550,000 amounts to P290,000.
The basic income tax due for a total taxable net income of $1,550,000 amounts to P290,000.
Self-employed individuals with a taxable net income of $3,050,000 pay a basic income tax due of P717,500.
Self-employed individuals with a taxable net income of $3,050,000 pay a basic income tax due of P717,500.
Mixed income earners are exclusively taxed based on their compensation income.
Mixed income earners are exclusively taxed based on their compensation income.
The VAT annual income threshold determines the eligibility of a business to be registered under VAT.
The VAT annual income threshold determines the eligibility of a business to be registered under VAT.
Mixed Income Earners are subject to a fixed tax rate of 25% regardless of their income levels.
Mixed Income Earners are subject to a fixed tax rate of 25% regardless of their income levels.
Irish nationals are automatically exempt from paying income tax in the Philippines.
Irish nationals are automatically exempt from paying income tax in the Philippines.
The allowed deductions can be different for various income groups of self-employed individuals.
The allowed deductions can be different for various income groups of self-employed individuals.
Individuals with gross income of $2,500,000 and below are only subjected to regular percentage tax.
Individuals with gross income of $2,500,000 and below are only subjected to regular percentage tax.
A mixed income earner is defined as someone who earns both compensation income and income from business or profession.
A mixed income earner is defined as someone who earns both compensation income and income from business or profession.
Flashcards
Resident Citizen
Resident Citizen
A Philippine citizen living in the Philippines.
Non-resident Citizen
Non-resident Citizen
A Philippine citizen living abroad with the intent of permanent residency there.
Non-resident Citizen (183 days)
Non-resident Citizen (183 days)
A Philippine citizen who spends at least 183 days outside the Philippines during a tax year.
Resident Alien
Resident Alien
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Taxable Year Income (Non-Resident Citizen)
Taxable Year Income (Non-Resident Citizen)
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Overseas Contract Worker (OCW)
Overseas Contract Worker (OCW)
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Overseas Filipino Worker (OFW)
Overseas Filipino Worker (OFW)
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Arrival Date & Tax Status
Arrival Date & Tax Status
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NRANEBP
NRANEBP
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Basic Income Tax (BIT)
Basic Income Tax (BIT)
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Final Income Tax (FIT)
Final Income Tax (FIT)
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Taxable Gross Income
Taxable Gross Income
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Exempt Income
Exempt Income
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Capital Gains
Capital Gains
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25% Tax Rate
25% Tax Rate
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Allowed Deduction
Allowed Deduction
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Taxable net income
Taxable net income
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Graduated Tax Rates
Graduated Tax Rates
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Compensation Income
Compensation Income
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Taxable Compensation Income
Taxable Compensation Income
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Business or Professional Income
Business or Professional Income
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Professional Income (Business/Professional Income)
Professional Income (Business/Professional Income)
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Mixed Income
Mixed Income
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Gross Compensation Income
Gross Compensation Income
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Non-Taxable Compensation
Non-Taxable Compensation
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What are Barangay Micro Business Enterprises (BMBEs)?
What are Barangay Micro Business Enterprises (BMBEs)?
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Why can't taxpayers claim double tax exemptions?
Why can't taxpayers claim double tax exemptions?
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Self-Employed Individual Tax
Self-Employed Individual Tax
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What is the "Regular Percentage Tax"?
What is the "Regular Percentage Tax"?
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Income From Business (Mixed Income)
Income From Business (Mixed Income)
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Compensation Income (Mixed Income)
Compensation Income (Mixed Income)
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Calculate 'Taxable Net Income'
Calculate 'Taxable Net Income'
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Basic Income Tax Due
Basic Income Tax Due
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Spousal Income Tax
Spousal Income Tax
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8% Income Tax Rate
8% Income Tax Rate
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Self-Employed Individuals
Self-Employed Individuals
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Percentage Tax
Percentage Tax
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3 Million Peso Threshold
3 Million Peso Threshold
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VAT Registration
VAT Registration
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Joint Filing
Joint Filing
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Ineligible for 8% Tax
Ineligible for 8% Tax
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Self-Employed Tax
Self-Employed Tax
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Non-Resident Alien's Tax
Non-Resident Alien's Tax
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8% Preferential Tax
8% Preferential Tax
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Income Tax Classifications
Income Tax Classifications
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Mixed Income Earner's Tax
Mixed Income Earner's Tax
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8% Tax Eligibility
8% Tax Eligibility
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8% Tax Ineligibility
8% Tax Ineligibility
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VAT Annual Income Threshold
VAT Annual Income Threshold
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Study Notes
Individual Income Tax Classification
- Resident Citizen (RC): A citizen of the Philippines residing in the Philippines. Citizenship is determined by the 1987 Constitution.
- Non-resident Citizen (NRC): A citizen of the Philippines residing abroad with a definite intention to reside abroad or if they are abroad for employment or immigration for the whole taxable year.
- Resident Alien (RA): An alien living in the Philippines with no specific intention as to their stay.
- Non-resident Alien (NRA): An alien in the Philippines for a definite purpose, which can be achieved quickly or if their stay is for less than 180 days. Includes NRA engaged in trade or business (NRAETB) and NRA not engaged in trade or business (NRANETB).
Classification of Income Taxability
- Basic Income Tax (BIT): Income subject to graduated tax rates.
- Final Income Tax (FIT): Income subject to a flat tax rate.
- Exempted Income: Income not subject to tax.
Taxable Income Computation for Different Categories
- Resident Citizen (RC):
- Taxable Net Income (Gross Income less Deductions) is calculated globally.
- Resident Alien (RA), Non-resident Citizen (NRC) and Non-resident Alien Engaged in Business in the Philippines:
- Taxable Net Income (Gross Income less Deductions) is calculated in the Philippines.
- Non-resident Alien Not Engaged in Business in the Philippines (NRANEBP):
- Taxable Gross Income is calculated from Philippine sources.
Summarized Tax Rates per TRAIN Law
- Resident Citizen (RC): 0% - 35%, with rates varying based on the taxable amount.
- Resident Alien (RA), Non-resident Citizen (NRC) and Non-resident Alien Engaged in Business in the Philippines: 0%-35% or 8%, the rate depends on the taxable net income.
- Non-resident Alien Not Engaged in Business in the Philippines (NRANEBP): 25% flat rate. This is for income from sources within the Philippines.
Specific Tax Applications and Rules
- Some income is exempt or taxed differently. Examples include that of citizens with overseas employment or income from foreign sources. Overseas Filipino Workers (OFW) and Overseas Contract Workers (OCW) are covered in this area. Seamen are considered OCWs. Duration of presence abroad is a crucial factor in determining whether an individual is considered a resident or non-resident citizen.
- There are income sources subject to 8% or 25% final income tax.
- Income tax regulations apply differently to people based on their place of residence.
- Specific rules for business income are noted, including those earning income under 3,000,000 pesos. Individual income earned from self-employment or profession is categorized and has separate taxation, with nuances around exemptions and rates.
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Description
Test your knowledge on the classification of individuals under Philippine income tax law. This quiz covers categories like resident citizens, non-resident citizens, and taxability of various income types. Assess your understanding of the concepts related to income tax in the Philippines.
