Taxable Income Computation Notes for Accounting

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Questions and Answers

Which type of royalties is subject to a 20% final tax?

Passive royalties (correct)

Corporate royalties

Active royalties

Future royalties

What defines royalties of an active nature?

They are limited to dividends from cooperatives.

They are earned from passive participation.

They accrue from an undertaking with active involvement. (correct)

They are not subject to any tax.

Who is ineligible to be an informer for cash rewards?

A distant relative of a public official

A BIR official (correct)

Any relative not involved in government

An employee of a public corporation

What is the maximum cash reward an informer can receive if their calculated share exceeds 1M?

1M, whichever is lower. Signup and view all the answers

Which income type is typically subject to withholding final tax obligations for non-resident taxpayers?

Passive and active income Signup and view all the answers

What is the nature of a bond investor's income from tax-free corporate covenant bonds?

It generates a non-taxable income. Signup and view all the answers

Which condition must be met for an individual to be recognized as a recipient of a prize or reward?

Their selection was purely random with no action taken. Signup and view all the answers

What is indicated when income is recognized as having a high risk of non-compliance?

It indicates potential tax evasion issues. Signup and view all the answers

What is the final tax rate for non-resident aliens not engaged in trade or business in the Philippines?

30% Signup and view all the answers

What is the final tax rate on interest income from short-term deposits for individuals?

20% Signup and view all the answers

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?

12% Signup and view all the answers

Which of the following entities is NOT exempt from final tax on interest income from long-term deposits?

NRA-NETBs Signup and view all the answers

What is the final tax rate on dividends received by a domestic corporation from another domestic corporation?

Exempt Signup and view all the answers

What final tax rate applies to earnings from dividends received by individuals from foreign corporations?

Regular tax Signup and view all the answers

What is the final tax rate on earnings from dividends received by a domestic corporation after 2000?

10% Signup and view all the answers

Which scenario does not lead to tax exemption on dividends received?

Dividends from a domestic corporation received by GPP Signup and view all the answers

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.