Questions and Answers
Which type of royalties is subject to a 20% final tax?
What defines royalties of an active nature?
Who is ineligible to be an informer for cash rewards?
What is the maximum cash reward an informer can receive if their calculated share exceeds 1M?
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Which income type is typically subject to withholding final tax obligations for non-resident taxpayers?
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What is the nature of a bond investor's income from tax-free corporate covenant bonds?
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Which condition must be met for an individual to be recognized as a recipient of a prize or reward?
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What is indicated when income is recognized as having a high risk of non-compliance?
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What is the final tax rate for non-resident aliens not engaged in trade or business in the Philippines?
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What is the final tax rate on interest income from short-term deposits for individuals?
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For pre-termination of long-term deposits, what is the final tax rate if the holding period is between 3 years and less than 4 years?
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Which of the following entities is NOT exempt from final tax on interest income from long-term deposits?
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What is the final tax rate on dividends received by a domestic corporation from another domestic corporation?
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What final tax rate applies to earnings from dividends received by individuals from foreign corporations?
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What is the final tax rate on earnings from dividends received by a domestic corporation after 2000?
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Which scenario does not lead to tax exemption on dividends received?
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Study Notes
Taxation Overview for Mixed Income Earners
- Taxpayers with both compensation and mixed income are subject to specific tax rates.
- Non-resident taxpayers not engaged in business in the Philippines face a general final tax rate of 25% for NRA-NETBs and 30% for NRFC.
Tax Rates on Interest Income
- Interest from short-term deposits is taxed at 20% for individuals and corporations alike.
- Long-term deposits (held for five years or more) are generally exempt, but NRA-NETBs do not qualify for exemption.
- Pre-termination of long-term deposit tax rates for individuals vary based on the holding period:
- Less than 3 years: 20%
- 3 to less than 4 years: 12%
- 4 to less than 5 years: 5%
- 5 years or more: 0%
Dividend Taxation
- Domestic corporate dividends incur a 10% final tax for individual recipients but are exempt for resident foreign corporations.
- Dividends from foreign corporations are subject to regular tax, with historical earnings having varying exemptions based on the year received.
- Inter-corporate dividends and dividends received by certain partnerships have restrictions on taxation.
Royalties Taxation
- Passive royalties are subject to a 20% final tax irrespective of the nature of passive royalties.
- Active royalties, where the taxpayer is actively involved, constitute active income and are subject to regular income tax rates.
Cash Rewards and Taxation
- Tax incentives are available for informers, yet certain individuals, such as BIR officials or relatives of officials, are ineligible for these rewards.
- The reward amount is determined by which is lower: the calculated percentage of recovered funds or a maximum threshold.
Investment Bonds Taxation
- Interest income generated from tax-free corporate covenant bonds is scrutinized, as it involves high-risk non-compliance or tax evasion potential among non-resident investors.
- Non-resident persons are obliged to withhold specific final tax rates on income, depending on the nature of the income (passive or active).
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Description
This quiz covers the computation of taxable income for accounting students, including various scenarios and problems related to tax rates for mixed-income earners. You'll explore taxation concepts applicable to non-resident individuals and general final tax rates. Test your understanding with the provided problems and solutions.
