INDIVIDUAL TAXPAYERS

(FOR DISCUSSION PURPOSES ONLY)

Prepared by: Atty. Yasmeen L. Junaid, CPA
Given data:
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines P5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000

Determine the taxable income assuming:

Case A: The taxpayer is a resident citizen
Gross business income, Philippines P5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines (3,000,000)
Business expenses, Canada (1,000,000)
Business expenses, Singapore (500,000)
Taxable income P3,500,000
Case B: The taxpayer is a nonresident citizen
Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000

Case C: The taxpayer is a resident alien

Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000
Case D: The taxpayer is a NRA-ETB
Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000

Case E: The taxpayer is a NRA-NETB

Taxable income P5,000,000
Case F:
The income and expenses of a Filipino citizen for 2018
were provided as follows:

January to June: Philippines Canada

Gross income P5,000,000 P2,000,000
Allowable deductions 2,000,000 1,000,000

July to December:
Gross income P2,000,000 P3,000,000
Allowable deductions 1,000,000 1,200,000
Assume the taxpayer is a resident who left the country in July of the current
year to reside permanently in Canada, how much is his taxable income?

Gross income, Philippines (Jan-Dec.) P7,000,000

Gross income, Canada (Jan.-June) 2,000,000
Allowable deductions, Philippines (Jan.-Dec.) (3,000,000)
Allowable deductions, Canada (Jan.-June) (1,000,000)
Taxable income P5,000,000

Assume the taxpayer is a nonresident citizen who who returned and reside
permanently in the country in July of the current year. How much is his
taxable income before personal exemption?

Gross income, Philippines (Jan-Dec.) P7,000,000

Gross income, Canada (July-Dec.) 3,000,000
Allowable deductions, Philippines (Jan.-Dec.) (3,000,000)
Allowable deductions, Canada (July-Dec.) (1,200,000)
Taxable income P5,800,000
SELF-EMPLOYED AND/OR PROFESSIONALS (SEP)
CASE A: PURELY SEP whose gross sales/receipts and other non-operating income does not exceed the
VAT threshold of P3,000,000.

Using the data below, determine the income tax due for 2018:
Gross sales 2,800,000
Cost of sales (1,500,000)
Operating expenses (750,000)
Net income 550,000

SOLUTION:
Tax on
First P400,000 income P30,000
In excess of P400,000 income (P150,000 x 25%) 37,500
Income Tax Due P67,500

If opted to avail the 8% tax, the income tax due is:

P204,000 = (P2,800,000 – P250,000) x 8%
CASE B: PURELY SEP whose gross sales/receipts and other non-operating income does EXCEEDS the
VAT threshold of P3,000,000.

Using the data below, determine the income tax due for 2018:
Gross sales 5,000,000
Cost of sales (2,250,000)
Operating expenses (1,250,000)
Net income 1,500,000

SOLUTION:
Tax on
First P800,000 income P130,000
In excess of P800,000 income (P700,000 x 30%) 210,000
Income Tax Due P340,000
CASE C: PURELY SEP + GR or GS < P3M + the SEP is vat registered

Using the data below, determine the income tax due for 2018:
Gross sales 2,800,000
Cost of sales (1,500,000)
Operating expenses (750,000)
Net income 550,000

SOLUTION:
Income Tax:
First P400,000 income P30,000
In excess of P400,000 income (P150,000 x 25%) 37,500 P67,500
Business Tax:
12% vat = P2,800,000 x 12% 336,000
Total Tax Due P403,500
CASE D: PURELY SEP + GR or GS < P3M + the SEP is subject to other type of OPT

Juan is a taxi operator. The following data were provided for taxable year 2018:
Gross sales 2,800,000
Cost of sales (1,500,000)
Operating expenses (750,000)
Net income 550,000

Determine the total tax due of Juan assuming he opted to use the 8% tax.

SOLUTION:
Income Tax:
First P400,000 income P30,000
In excess of P400,000 income (P150,000 x 25%) 37,500 P67,500
Business Tax: (Sec. 117, NIRC)
3% CCT = P2,800,000 x 3% 84,000
Total Tax Due P151,500

NOTE: SEP cannot avail 8% tax because – liable for Percentage Taxes other than Sec. 116 under NIRC
CASE E: PURELY SEP using 8% tax rate but whose gross sales/receipts and other non-operating income
EXCEEDS the VAT threshold of P3,000,000 during the year.

Juan signified his intention to be taxed at 8% income tax rate on gross sales in his 1st quarter
income tax return. However, his gross sales during the taxable year exceeded the VAT threshold of
P3M as provided in his “quarterly” records as follows:

Q1 Q2 Q3 Q4/Annual
(8% tax) (8% tax) (8% tax) (8% tax)
Sales P500,000 P500,000 P2,000,000 P3,500,000
Cost of Sales (300,000) (300,000) (1,200,000) (1,200,000)
Gross Income 200,000 200,000 800,000 2,300,000
Operating Expenses (120,000) (120,000) (480,000) (720,000)
Net taxable income P80,000 P80,000 P320,000 P1,580,000

Question: How much is Juan’s annual income tax payable?

SOLUTION:

Sales (total for the year) P6,500,000

Cost of sales (total for the year) (3,000,000)
Gross income (total for the year) 3,500,000
Operating expenses (total for the year) (1,440,000)
Net taxable income for the year P2,060,000

Income Tax Due using graduated rate P509, 200

Less: Quarterly tax payments (Q1-Q3) based
On 8% tax rate [(P3M-250K)x8%] (220,000)
Annual Income Tax Payable P289,200

Tax on
First P2,000,000 income P490,000
In excess of P2,000,000 income (P60,000 x 32%) 19,200
Income Tax Due P509,000
SEP WITH MIXED INCOME
CASE A: Mixed Income Earner whose gross sales/receipts and other non-operating income does not exceed
the VAT threshold of P3M

Assume the following data for the year:

Compensation income P900,000
Gross sales 2,800,000
Cost of sales (1,500,000)
Operating expenses (750,000)
Total taxable net income P1,450,000

1. Determine the correct income tax due.

SOLUTION:

Tax on
First P800,000 income P130,000
In excess of P800,000 income (P650,000 x 30%) 195,000
Income Tax Due P325,000
SEP WITH MIXED INCOME
CASE A: Mixed Income Earner whose gross sales/receipts and other non-operating income does not exceed
the VAT threshold of P3M

Assume the following data for the year:

Compensation income P900,000
Gross sales 2,800,000
Cost of sales (1,500,000)
Operating expenses (750,000)
Total taxable net income P1,450,000

2. Assume the SEP opted to avail 8% tax under the TRAIN Law, determine the correct income tax due.

SOLUTION:
On his compensation income
Tax on
First P800,000 income P130,000
In excess of P900,000 income (P100,000 x 30%) 30,000
On his business income P160,000
P2,800,000-250 x 8% 204,000
Income Tax Due P364,000