INTAX Chapter 8

Chapter 8 - Regular Income Tax: Exclusions From Gross Income 1
CHAPTER 8
REGULAR INCOME TAX:
EXCLUSIONS FROM GROSS INCOME
EXCLUSIONS FROM GROSS INCOME- are income which will not be subject to income tax. (excluded sa
RIT, CGT, and FT) These include but not limited to the ff: (under NIRC)
A. Proceeds of life insurance policy
B. Amount received by the insured as a return of premium
C. Gift, bequest, devise, or descent
D. Compensation for injuries or sickness
E. Retirement benefits, pensions, gratuities, etc.
F. Income exempt under treaty
G. Miscellaneous items (3P2I2C2G13th)
1. PERA investment income and PERA distributions
2. Prizes and awards in recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievements
3. Prizes and awards in athletic or sports competitions
4. Income in the Philippines of foreign government or FGOCC
5. Income of the government and its political subdivisions
6. Contributions to GSIS, SSS, PhilHealth, Pag-Ibig, and Union dues
7. Contributions to Personal Equity Retirement Account (PERA)
8. Gains from sale of bonds, debentures, or certificates of indebtedness with maturity of
more than 5 years.
9. Gains from redemption of shares in mutual fund
10. 13th month pay and other benefits not exceeding P90,000
OTHER EXEMPT INCOME UNDER THE NIRC AND SPECIAL LAWS (BaCoNonBuQuMi)
1. Income of Barangay Micro-Business Enterprises Act (RA 9178)
2. Income of cooperatives (RA 9520)
3. Income of non-stock, non-profit entities
4. Business or professional income od self-employed and or professionals who opted to the 8%
income tax.
5. Income of qualified employee trust funds

6. Minimum wage and certain benefits of minimum wage earners
EXCLUSIONS FROM GROSS INCOME
A. Proceeds of life insurance policy

Ø Yung binayaran sa heirs or beneficiaries upon death of the insured, whether in a single
sum or otherwise EXEMPT siya
Ø If such amounts are held by the insurer under an agreement to pay interest thereon,
yung interest payments included siya sa gross income.
B. Amount received by the insured as a return of premium

Levy T. Pangan, CPA 2020 A-532 Notes in Taxation
“Trust in the Lord with all your heart and lean not with your own understanding. Acknowledge Him in all
your ways and He will direct your paths”
Ø The amount received by the insured as a return of premiums paid by him under life
insurance, endowment, annuity contracts or insurance contracts either during the term
or at the maturity of the term mentioned in the contract or upon surrender of the
contract is a return of capital and excluded from gross income.
Illustration 1: life insurance contracts
Alberto is insured in a P1,000,000 life insurance policy with annual premium payments of
P20,000 for 10 years. If Alberto outlives the policy after the 10 th year, he will be paid a P500,000
maturity value.
Scenario 1
Alberto died on the 8th yearof coverage and his heirs collected the P1,000,000 proceeds.
Answer: The entire 1,000,000 is not taxable.
Scenario 2
Upon the death of alberto, the insurance company negotiated for an extension of the payment
of the proceeds wherein the insurance company shall pay P1,050,000 on the extended payment.
Answer:
Proceeds 1,000,000 Not taxable
Interest 50,000 Taxable item of gross income
Total 1,050,000
Scenario 3
Alberto outlived the policy and collected the maturity value of P500,000
Total proceeds 500,000

Return of premium (20,000 x 10 years) 200,000 Not taxable
Return on capital (item of gross income) 300,000 Taxable item of gross income
Scenario 4
After 6 years of payment, Alberto assigned the policy to Glino who paid him P130,000. Glino
continued the premium payments for two more years after which Alberto died. Glino collected
the P1,000,000 insurance proceeds.
Assignment or sale of the policy by Alberto to Glino

Return of premiums (20,000 x 6 years) 120,000 Not taxable
Return on capital 10,000 Taxable item of gross income
Total 130,000
The receipt of the insurance proceeds by Glino

Return of capital ((130,000 + (20,000 x 2 years)) 170,000 Not taxable
Return on capital 830,000 Taxable item of gross income

Total 1,000,000
There is loss of life in this scenario but it does not pertain to the purchaser of the life insurance
policy. Hence, the excess must be taxable to the heirs.
Illustration2: life insurance of company officers

Alberto is insured by his employer corporation for P1,000,000 with the employer-corporation as
the beneficiary. Alberto subsequently died, and the corporation collected the P1,000,000 life
insurance proceeds.
Answer: the entire proceeds is not taxable.
Property insurance contracts – proceeds of this in excess of the tax basis of the property lost or
destroyed is a taxable return on capital.
Illustration: Property insurance

Aztec company secured a fire insurance covering the entire P2,000,000 fair value of its office
building. The building was completely destroyed by fire when the depreciated cost (tax basis) of
the building was P1,800,000. Aztec recovered the P2,000,000 insurance proceeds.
Total proceeds 2,000,000

Less: Basis of property destroyed (return of 1,800,000 Not taxable
capital)
Return on capital (item of gross income) 200,000 Taxable
C. Gift, bequest, devise, or descent

Ø The value of property acquired by gift, bequest, devise, or descent: provided, however,
that income from such property as well as gift, bequest, devise, or descent of income
from any property, in cases of transfers of dividend interest, shall be included in gross
income.
Illustration
Mark received a restaurant business as a gift on April 1, 2020. On that date, the restaurant had total
properties amounting to P400,000 including P50,000 cash income earned since January 1, 2020. The
restaurant posted an additional P150,000 cash income from April1 to December 31, 2020.
Transfer of business properties (gratuity) 400,000 Subject to transfer tax

Donated income 50,000 Included in gross income in the
ITR of the donor
Income after donation 150,000 Included in gross income in the
ITR of the done, Mark.
Gift Exchange
Tinitignan dito yung intention or motive ng transferor para malaman kung yung transfer ba ay gift or
exchange
Ø Characterized by pure liberality or Ø Always involves a consideration.

disinterested generosity and are
given without any consideration.
Employment Gratuities
Gratuities given under employer-employee relationship are Subject to income tax

treated in exchange for services rendered by employees
Transfer of properties by the employer to managerial or subject to fringe benefit tax.
supervisory employees
Christmas or major anniversary gifts de minimis benefit subject to
income tax
D. Compensation for injuries or sickness

Ø Amounts received through accident or health insurance or under Workmen’s
Compensation Acts as compensation for personal injuries or sickness, plus the amounts
of any damages received, whether by suit or agreement, on account of such injuries or
sickness.
Illustration 1
Andrew was hit by a jeepney. He paid P100,000 for hospitalizationexpenses. He sued the jeepney driver
and was awarded by the court a total indemnity of P340,000 divided as follows: P200,000 indemnity for
his pain, anguish and sufferings, P40,000 for his lost salaries, and P100, as reimbursement for his
hospital bills.
Indemnity for his pain 200,000 Non-taxable (return of capital)

Reimbursement for hospitalization expense 100,000 Non-taxable (return of capital)
Reimbursement for lost salary 40,000 Taxable (recovery of lost profit)
Illustration 2
Mr. Pogi’s brand new car which he bought for P1,200,000 was totally wrecked in a car collision. Mr. Pogi
escaped unharmed. He was paid P1,300,000 for the accident.
Total indemnity 1,300,000

Less: Tax basis of the car 1,200,000
Excess indemnity 100,000 Taxable item of gross income
E. Retirement benefits, pensions, gratuities, etc.

1. Retirement benefit under R.A 7641 and those received by officials and employees of
private firms in accordance with a reasonable private benefit plan maintained by the
employer.
Requisites of exemption: (Pneumonics: 1-10-50-RPBP)

a) This is the first time availment of retirement benefit exemption.
b) The retiring official or employee has been in the services of the same employer for
at least ten (10) years. (cumulative years of employment… not continuous years of
employment)
c) The retiring employee is at least fifty (50) years of age at the time of retirement.
d) The employer maintains a reasonable private benefit plan
Reasonable private benefit plan

Ø A pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for
the benefit of some or all of his officials or employees, wherein contributions are made
by such employer for the officials or employees, or both, for the purpose of distributing
to such officials and employees the earnings and principal of the fund thus accumulated,
and wherein it is provided in said plan that at no time shall any part of the corpus or
income of the fund be used for, or be diverted to, any purpose other than for the
exclusive benefit of the said officials and employees.
Ø To be exempt, it must be “trusteed” plan where the fund is held under the management
of a trustee free from both employer and employee control.
Illustration 1
Angel was employed in 1990 when she was 25 years old. In 2010, she availed of the early
retirement program of her emplopyer.
first time availment of retirement ü

benefit exemption.
10 year cumulative employment ü 2010-1990
50 years old at the time of x 25+(2010-1990)
retirement
employer maintains a reasonable ü
private benefit plan
Note: the retirement benefit is taxable. (inclusion in gross income as compensation income)
Illustration 2
Assume that Angel joined another employer and worked therein for 7 more years after which
she retired from her employment.
first time availment of retirement ü

benefit exemption.
10 year cumulative employment x 7 years under the employ of her
second employer
50 years old at the time of ü 45+7
retirement
employer maintains a reasonable ü
private benefit plan
Note: the second retirement benefit is taxable as compensation income.
Illustration 2
Assume instead that Angel was 30 years old when she joined her first employer and worked
therein for 20 years after which she retired at 50. She immediately joined another employer
and retired after 10 years of service when she was 60 years old.
First retirement benefit from 1st employer Exempt (4 requisites are met)
Second retirement benefit from 2nd employer Taxable (retirement benefit exemption can be
availed of only once in a lifetime)
2. Separation or Termination
Requisite of exemption:
a) The separation or termination must be due to job-threatening sickeness, deaths,
or other physical disability
b) The same must be due to any cause beyond the control of the employee or
official such as : (CEDRReS)
a. Closure of rmployer’s business
b. Employee lay-off
c. Downsizing of employer’s business
d. Redundancy
e. Retrenchment
f. Sickness or death of the employee
Beyond the control of the employee

ü Involuntariness on the part of the employee
ü Separation must not be of his own making
ü Abandonment of office such as the registration and subsequent appointment to
another office is considered as a voluntary separation and does not fall within
the purview of this phrase.
To avail of the tax exemption, the employee of his heirs shall:

ü Request for a ruling or Certificate of exemption (CTE) from the BIR
ü The request for a CTE and other required documents shall be filed at the RDO
where the employer is registered.
Taxable Termination or Separation Benefits:

ü Backwages or illegal deductions repaid by the employer upon termination

ü Terminal leave pay or the commutation of accumulated unused leave credits
Illustration 1
Yvonne is an employee of Goldfish Company which closed its business during the year. Yvonne’s
last paycheck shows the following details:
Unpaid salary in the last two months P 30,000 Subject to income tax
Current month salary 15,000 Subject to income tax
Separation pay 100,000 Not Taxable
Total pay P 145, 000
Illustration 2
Henson’s employer was downsizing its business operations. Henson was identified among
others to be laid off. To avoid implications of inefficiencies on his part, Henson filed a
resignation letter to the company and received a separation pay of P120,000.
Separation pay Taxable Since the underlying reason of the severance of the employment
(i.e. resignation) is within the control of the employee.
Separation pay Exempt If Henson got terminated without resigning
Illustration 3
Mr. Swabe was diagnosed to have a sexually transmitted disease (STD). Due to this, his
employer decided to terminate his services but granted him P1,000,000 separation pay.
Ø The P1,000,000 separation pay is taxable as STD does not normally render the employee
incapable of working.
3.Social Security Benefits, Retirement Gratuities, and Other similar benefits from foreign
government agencies and other institutions, private or public, received by resident or
non-resident citizens or aliens who come to settle permanently in the Philippines.
Illustration
John was an OFW employed by Microsoft Corporation in the USA. John retired and returned to
permanently settle in the Philippines. He is paid a S2,000 monthly pension from Microsoft’s
pension fund and another S800 monthly benefit from the US social security benefit.
ü BOTH the pension and the social security benefits are EXEMPT.
-these benefits were earned abroad when the taxpayer was a non-resident.
-under situs rule, the foreign income of non-residents is not taxable in the Philippines
-this holds true even if the taxpayer subsequently receives the income as a resident of
the Philippines.
4. United States Veterans Administration (USVA) – administered benefits under the laws
of the United States received by any person residing in the Philippines.
Illustration
Mr. Jackson is a retired US serviceman from the Iraqui war. He married a beautiful
Filipina and settled in the Philippines. He is receiving a S1,000 monthly benefit from the
USVA.
Ø The USVA benefit is excluded in gross income. The same rule applies to USVA benefits
for beneficiaries of Filipino veterans who fought under the American flag in World War
II.
5. Social Security Systms (SSS) benefits under RA 8282
6. GSIS benefits under RA 8291 including retirement gratuity received by government

officials and employees.
F. Income exempt under treaty

Ø Income items that are excluded by international agreement to which the Philippine
government is a signatory are excluded from income tax.
G. Miscellaneous items (3P2I2C2G13th)
1. PERA investment income and PERA distributions

- Exclusions in gross income (EXEMPT) of the contributor or his heirs or beneficiaries
- The PERA account assets will be distributed back to the contributor either in lump
sum, life pension or in instalment upon reaching the age of 55 or to his heirs or
beneficiaries upon his or her death.
2. Prizes and awards in recognition of religious, charitable, scientific, educational, artistic,

literary, or civic achievements
Requisites for exemption:

a. The recipient was selected without any action on his part to enter the contest or
proceeding
b. The recipient is not required to render substantial future services as a condition to
receiving the prize or award.
Ø Exempt from income tax (unilateral transfer kasi yung nature)

Ø Exempt from transfer tax.
Ø Kapag d nameet yung requisite , taxable siya as income
Examples of exempt prizes:

a. Nobel Prize award
b. Gawad ng Sining Award
c. CNN Hero of the Year
d. Most Outstanding Citizen
3. Prizes and awards in athletic or sports competitions

Ø In local or international competitions to tournaments
Ø Whether held in the Philippines or abroad
Ø Sanctioned by their national sports associations
4. Income in the Philippines of foreign government or FGOCC / Income derived on

investments in the Philippines in loans, stocks, bonds, or other domestic securities, or
from interest on deposits in banks in the Philippines by:
a. Foreign governments
b. Financial institutions owned, controlled, or enjoying refinancing from foreign
government
c. International or regional financial institutions established by foreign governments
Ø These are exempt under the exemption doctrine of international comity.
5. Income of the government and its political subdivisions from:

a. Any public utility
b. Exercise of essential government function
Government agencies and instrumentalities

Ø EXEMPT because of their public nature
Ø TAXABLE when they engage in income-producing activities which are proprietary or
commercial in nature.
Ø GOCCs are generally taxable as regular corporations
6. Contributions to GSIS, SSS, PhilHealth, Pag-Ibig ( Home Development Mutual Fund or

HDMF), and Union dues
Ø Pertains to the employee share in the premium contributions (EXEMPT)
Ø Voluntary contributions in excess of the mandatory monthly contribution are TAXABLE.
Ø Employer’s share is not exclusion from gross income but an item of deduction against
gross income.
Illustration
An employee has a gross compensation income of 400,000 in 2016. His employer deducted
5,000 SSS, 4,000 PhilHealth, 3,000 HDMF, 2,000 union dues and 80,000 creditable
withholding tax (CWT).
Gross compensation income 400,000

Less: Exclude compensation
income or contributions
Contributions to SSS 5,000
Contributions to PhilHealth 4,000
Contributions to HDMF 3,000
Union dues 2,000 14,000
Gross taxable compensation 386,000
income
Note: The CWT is not an exclusion in gross income but a tax credit which is deductible
against the income tax due of the taxpayer.
7. Contributions to Personal Equity Retirement Account (PERA)
PERA - is a contributor’s voluntary retirement account established from qualified

contributions of the contributor and or his employer for the sole purpose of being invested
in qualified PERA investment products.
Ø Exclusions in gross income
Ø Additional exclusion and is separate with the exclusion for contributions to SSS or GSIS.
Ø PERA contributors are allowed to claim 5% of their PERA contributions as tax credit
against any internal revenue taxes.
Maximum contribution to a PERA account

Each OFW Up to 200,000 per year
Non-OFW 100,000 per year
Husband and Wife Can contribute up to the maximum allowable
contribution each.
8. Gains from sale of bonds, debentures, or certificates of indebtedness with maturity of

more than 5 years.
Ø this exemption is grounded upon the same assumption that long-term indebtedness is
diverted to the financing of long-term projects which is viewed as beneficial to the
development of the country.
Ø The term “gain” does not include “interest”
Illustration
On September 1, 2020, an individual taxpayer sold a 6-year term bond investment for
P1,000,000. These bonds bear 8% interest payable every December 31 and were
previously acquired at P1,000,000 face value on January 1, 2020.
Selling price 1,100,000

Less: Cost of bonds sold 1,000,000
Interest accrued (1M x 8% x 9/12 mos.) 60,000 Taxable (RIT)
Gain on sale 40,000 exempt bec. The bonds
have a maturity period of
more than 5 years.
9. Gains from redemption of shares in mutual fund
Mutual Fund Company – an open-end and close-end investment company
Mutual Fund
- pool the money invested by different investors and invest the money to earn
investment income which shall add up to the net assets of the fund.
- Participation shares from the fund must be purchased by the participating investor
at their Net Asset Value (NAV).
- Upon redemption of his participation shares, the investor gains or losses by his
proportionate share in the increase or decrease in the NAV of the fund
Illustration
A taxpayer bought 10,000 shares from Golden Dragon Mutual Fund at 120 NAV per share.
The taxpayer redeemed his shares when the NAV per share was 180.
Ø The 600,000 gain computed as (180-120) x 10,000 on redemption is excluded from

gross income; hence exempt from taxation.
Ø The exemption is intended to mitigate double taxation because most of the items of
income of mutual funds are subject to final tax at source.
10. 13th month pay and other benefits not exceeding P90,000
Ø This will be discussed in Chapter 10.
OTHER EXEMPT INCOME UNDER THE NIRC AND SPECIAL LAWS (BaCoNonBuQuMi)
1. Income of Barangay Micro-Business Enterprises Act (RA 9178)
BMBE
Ø Is a business entity or enterprise engaged in the production , processing or
manufacturing of products or commodities, including agro-processing, trading and
services, whose total assets including those arising from loans but exclusive of the land
on which the particular business entity’s office, plant, and equipment are situated, do
not exceed P3,000,000.
Ø The term “service” excludes those rendered by licensed professionals and partnership
and and corporations engaged in consultancy, advisory and similar services which are
essentially carried out through licensed professionals.
Ø BMBE shall include any individual owning such business entity or enterprise,
partnership, cooperative, corporation, association, or other entity incorporated and/
organized and existing under Philippine laws and registered with the Office of the
treasurer of a city or municipality.
Ø Income of BMBE from their operations is exempt.
Ø File an Annual Information Return in lieu of the income tax return.
Ø Their non-operating, passive, and capital gains are subject to the appropriate type of
income tax.
How to qualify to be a BMBE?

Ø An enterprise must not be a branch or subsidiary of a large scale enterprise and its
policies
Ø modus operandi must not be determined by a large scale enterprise such as in the case
of franchises.
How to avail the benefits and privileges of a BMBE?

Ø Applicant must secure a certificate of authority to operate as a BMBE from the Office of
the Treasurer of the city or municipality that has jurisdiction.
Illustration 1
William has a bakery with total assets of 4,000,000 inclusive of a lot with a book value of
1,200,000.
Gross income from sales of bread 300,000

Interest on promissory notes of retail store 12,000
clients
Royalties on sale of recipe books 36,000
Dividend income from domestic stocks 10,000
Note:
Ø William qualified to be a BMBE because he has a total asset of 2,800,000 excluding the
lot.
Ø If he obtained a certificate of authority to operate as a BMBE, the following items of
operating income are exempt from income tax:
Gross income from sales of bread 300,000

Interest on promissory notes of retail store clients 12,000
Total exempt income 312,000
If the bakery is not registered as a BMBE, the 312,000 will be subject to RIT.
Either way, the royalty income and dividend income are not subject to RIT, subject kasi sila sa FT.
Illustration 2
Chris Santana has an accounting and auditing firm with total assets of 2,500,000. He derived a total
operating income of 1,000,000 in 2014.
Ø The entire 1M is taxable since Mr. Chris Santana is a professional service provider not
qualified to be a BMBE.
Revocation of BMBE Tax Exemptions

1) Death of the registered individual owner; violation or non-compliance with the provisions of RA
9178
2) Making false or omitting required declarations or statements
3) Merger or consolidation with an entity which is not eligible to be a BMBE
4) Retirement from business, or cessation/suspension of operations for one year
5) Sale or transfer of the BMBE if a sole proprietorship without prejudice to the transferee applying
for registration
6) Submission of fake or falsified documents
7) Transfer of place business
8) Value of assets exceeds 3,000,000
9) Voluntary surrender of the certificate of authority
2. Income of cooperatives (RA 9520)
Activity Type of Tax

Cooperatives transacting business purely with Exempt from all taxes and fees
members
Cooperatives transacting business with non- exempt din provided yung accumulated reserve
members and undivided savings do not exceed 10M.
Otherwise, the amount of surplus allocated for
interest on capitals is subject to regular tax.
Income from non-related sources fully taxable to regular tax
3. Income of non-stock, non-profit entities
Non-stock entities NOT organized for profit EXEMPT

Their income from unrelated sources TAXABLE
4. Business or professional income of self-employed and or professionals who opted to the 8%

income tax.
Ø Excluded in gross income subject to RIT.
Ø The 8% income tax is in lieu of the 3% percentage tax and the progressive income tax.
5. Income of qualified employee trust funds

Ø An employees’ trust fund which forms part of a pension, stock bonus or profit sharing plan of
an employer for the benefit of some or all his employees is EXEMPT from any income tax under
the NIRC.
Conditions for exemptions of employee trust funds

1 Contributions are made to the trust by such employer, or employees, or both for the purpose
of distributing to such employees the earnings and principal of the fund accumulated by the
trust in accordance with such plan.
2 The asset of the fund shall not be diverted for other purposes other than the exclusive benefit
of the employee.
6. Minimum wage and certain benefits of minimum wage earners
Minimum wage earner

ü Is an individual recipient of a minimum wage fixed by the Regional Tripartite Productivity Wage
and Productivity Board of the Department of Labor and Employment.
ü EXEMPT from income tax on the minimum wage including holiday pay, overtime pay, night
shift differential pay and hazard pay.
Qualification of Exemption of EXEMPT Entities

ü Tax exemption is highly disfavored by law and is not automatic.
ü Once exemption is established, it only operates prospectively.
Taxpayers Documents to be filed at BIR to be entitled with EXEMPTION

BMBE Certificate of Authority
Cooperatives Certificate of Tax Exemption/Ruling (CTE)
Income subject to Final Tax or Capital Gains Tax

u Items of income subject to FT or CGT are not subject to RIT
u EXEMPT items in FT or CGT are also EXEMPT in RIT
EXCLUSIONS DEDUCTIONS
Not included in the amount of reportable Initially included in the amount of gross
gross income in the ITR income but is separately presented as
deduction against gross income in the ITR.

INTAX Chapter 8

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INTAX Chapter 8

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Chapter 8 - Regular Income Tax: Exclusions From Gross Income 1

5. Income of qualified employee trust funds

EXCLUSIONS FROM GROSS INCOME

A. Proceeds of life insurance policy

B. Amount received by the insured as a return of premium

Illustration 1: life insurance contracts

Answer: The entire 1,000,000 is not taxable.

Total proceeds 500,000

Assignment or sale of the policy by Alberto to Glino

The receipt of the insurance proceeds by Glino

Return on capital 830,000 Taxable item of gross income

Illustration2: life insurance of company officers

Answer: the entire proceeds is not taxable.

Illustration: Property insurance

Total proceeds 2,000,000

C. Gift, bequest, devise, or descent

Transfer of business properties (gratuity) 400,000 Subject to transfer tax

Ø Characterized by pure liberality or Ø Always involves a consideration.

Gratuities given under employer-employee relationship are Subject to income tax

D. Compensation for injuries or sickness

Indemnity for his pain 200,000 Non-taxable (return of capital)

Total indemnity 1,300,000

E. Retirement benefits, pensions, gratuities, etc.

Requisites of exemption: (Pneumonics: 1-10-50-RPBP)

Reasonable private benefit plan

first time availment of retirement ü

first time availment of retirement ü

Note: the second retirement benefit is taxable as compensation income.

Beyond the control of the employee

To avail of the tax exemption, the employee of his heirs shall:

Taxable Termination or Separation Benefits:

ü Backwages or illegal deductions repaid by the employer upon termination

5. Social Security Systms (SSS) benefits under RA 8282

6. GSIS benefits under RA 8291 including retirement gratuity received by government

F. Income exempt under treaty

G. Miscellaneous items (3P2I2C2G13th)

1. PERA investment income and PERA distributions

2. Prizes and awards in recognition of religious, charitable, scientific, educational, artistic,

Requisites for exemption:

Ø Exempt from income tax (unilateral transfer kasi yung nature)

Levy T. Pangan, CPA 2020 A-532 Notes in Taxation

Ø Kapag d nameet yung requisite , taxable siya as income

Examples of exempt prizes:

3. Prizes and awards in athletic or sports competitions

4. Income in the Philippines of foreign government or FGOCC / Income derived on

Ø These are exempt under the exemption doctrine of international comity.

5. Income of the government and its political subdivisions from:

Government agencies and instrumentalities

6. Contributions to GSIS, SSS, PhilHealth, Pag-Ibig ( Home Development Mutual Fund or

Levy T. Pangan, CPA 2020 A-532 Notes in Taxation

Gross compensation income 400,000

7. Contributions to Personal Equity Retirement Account (PERA)

PERA - is a contributor’s voluntary retirement account established from qualified

Maximum contribution to a PERA account

8. Gains from sale of bonds, debentures, or certificates of indebtedness with maturity of

Levy T. Pangan, CPA 2020 A-532 Notes in Taxation

Selling price 1,100,000

9. Gains from redemption of shares in mutual fund

Mutual Fund Company – an open-end and close-end investment company

Ø The 600,000 gain computed as (180-120) x 10,000 on redemption is excluded from

How to qualify to be a BMBE?

How to avail the benefits and privileges of a BMBE?

Gross income from sales of bread 300,000