Problem Solving:

1. Mr. Sandro had the following data for taxable year 2018: (Exchange rate $1 - P40) Solution:
Philippines Abroad A). Compute the taxable income of Mr. Sandro (Resident Citizen)
Salaries P165,000 $2,000
Business Income 450,000 6,000 Salaries, Philippines
Business Expenses 120,000 1,500 Salaries, Abroad ($2,000@P40)
Interest Income: Business Income, Philippines
Personal receivable 10,000 Less: Business Expenses, Philippines
FCDU $2,500 Business Income, Abroad ($6,000@P40)
On bank deposits (20% long term) 25,000 600 Less: Business Expenses, Abroad ($1,500@P40)
Royalty Income (20% from books) 22,000 500 Interest Income from personal receivable
Prize won in contest 10,000 Interest Income on bank deposits, Abroad ($600@P40)
Dividend income: Royalty income, Abroad ($500@P40)
From domestic corp. 7,000 Prizes won in contest
From resident foreign corp. 3,000 50 Dividend Income from Resident Foreign Corp. (3,000+{$50@
From non-resident foreign corp 5,000 75 Dividend Income from Non-resident foreign corp (5,000+{$7
Winnings from Phil. Charity Sweepstakes 80,000 Net Taxable Income
Mr. Sandro is married with the following children as dependents:
- Haze, born March 15, 1993 B). The total final taxes on his passive income
- Diane, born April 5, 1994 Interest income from FCDU ($2,500@P40@15%)
- Christine, born May 6, 1995 Interest Income from bank deposits (P25,000@80%@20%)
- Batman, born February 27, 1996 Royalty Income from books (P22,000@20%@10%)
Royalty Income, other (P22,000@80%@20%)
During the year, he sold a condominium unit in Manila (residential) for P2,000,000 although its FMV is Dividend Income from Domestic Corp (P7,000@10%)
P3,000,000 but with zonal value of P4,000,000. Winnings from sweepstakes (10,000 - Exempt, P70,000@20%
Total final taxes on his passive income
Finally, his shares of stocks in a domestic corporation bought for P10,000, were sold outside the local stock C). The total capital gains tax for the year
exchange for P30,000. Sale of a condominium (P4,000,000@6%)
Shares of stocks (Gain of P20,000@15%)
Required: Compute for the following: Capital gains tax
a). The taxable of Mr. Sandro
b). The total final taxes on his passive income
c). The total capital gains tax for the year
d). If he is a non-resident citizen his total final tax on passive income
e). If he is a non-resident alien not engaged in trade or business, his total combined taxes on all income from Philippines, excluding business income.

Summary of Application Situs of Income D). If he is a non-resident citizen his total final tax on passive income
Classification of Taxpayers and Situs of Income Within Outside Interest Income from bank deposits (P25,000@80%@20%)
Royalty income from books (P22,000@20%@10%)
Citizens Royalty income, others (P22,000@80%@20%)
Resident Citizen Taxable Taxable Dividend income from Domestic Corporation(P7,000@10%)
Nonresident Citizen Taxable Nontaxable Winnings from Sweepstakes (P10,000 - Exempt, P70,000@ 2
Aliens:
Resident Alien Taxable Nontaxable E). If he is a non-resident alien not enggaged in trade or business, his to
Non Resident Alien Engaged in Trade/Business in the Philippines Taxable Nontaxable Salaries, Philippines
Non Resident Alien Not Engaged in Trade/Business in the Philippines Taxable Nontaxable Interest Income from Personal receivable
Interest Income from FCDU
Passive Income Interest income from bank deposits
Dividends Taxpayer Rate Royalties
a). Dividends actually or constructively received from: Prizes
i. Domestic Corporation Dividend Income from domestic corporation
ii. Joint Stock Company Dividend Income from resident foreign corp
iii. Insurance or mutual fund company, and Dividend Income from Non-resident corp
iv. Regional operating headquarters of a multinational company. RC, NRC, RA - 10% PCSO winnings
Taxable Income
b). Share in the distributable net income after tax of a partnership(except of GPP) Tax Rate
Tax Due/Income Tax
Add: Capital gains tax
Total combined taxes

c). Share in the net incme after tax of:

1. Association
2. Joint Account The total capital gains tax for the year
3. Taxable Joint venture or consortium NRA - ETB - 20% Sale of a condominium (P4,000,000@6%)
Shares of stocks (Gain of P20,000@15%)
 Capital gains tax
Interest from a depository bank under the expanded foreign currency deposit system RC & RA 15%
NRC, NRA - ETB 0%

Problem Solving 2:
Patricia, married, supporting his 3 minor children had the following data for taxable year 2018:

Philippines Abroad
Business Income P1,000,000 $20,000
Professional Income 400,000 10,000
Salaries 200,000
Business and professional expenses 250,000 8,000
Income tax paid 4,000

Note: $1 = P50

Required: Compute the following

a). If he is a resident citizen, his income tax payable is?
b). If he is a resident alien, his income tax payable is?
c). If he is a non-resident citizen, his income tax due after tax credit, if any is?
d). If he is a non-resident alien engaged in trade or business in the Philippines but without the benefit of Reciprocity Law, the income tax due after tax credit, if any is?
e). If he is a non-resident alien not engaged in trade of business, disregarding professional & business data, the total income tax that should be withheld from his income?

Problem Solving 3:
Mr and Mrs Ver, both CPA's and residents of the Philippines, with 6 minor children, had the following data for taxable year 2018:

Salaries, wife P150,000

Bonus (13th month pay), wife 42,000
Professional Fees, (net of 10% withholding tax) 450,000
Expenses - Practice of profession 120,000
Rental Income (net of 5% withholding tax) 190,000
Rental expenses 80,000
Other income, husband 80,000

Note: 20% of the other income is non-taxable while 15% of the professional expenses is non-deductible.

Required:
1). Compute the taxable income of Mr. Ver?
2). Compute the taxable income of Mrs. Ver?
ndro (Resident Citizen)

165,000
80,000 245,000
450,000
120,000 330,000
240,000
d ($1,500@P40) 60,000 180,000
10,000
its, Abroad ($600@P40) 24,000
20,000
10,000
Foreign Corp. (3,000+{$50@P40) 5,000
dent foreign corp (5,000+{$75@P40) 8,000
832,000

,500@P40@15%) 15,000
osits (P25,000@80%@20%) 4,000
2,000@20%@10%) 440
@80%@20%) 3,520
c Corp (P7,000@10%) 700
0,000 - Exempt, P70,000@20%) 14,000
37,660
Notes on Capital Gains Tax on Shares
240,000 The rules below are applicable to all individual taxpayers:
3,000 Requisites:
243,000 1. The shares of stock sold, bartered, exchanged or disposed must be a capital asset;
2. It must be issued by a domestic corporation and
3. The transaction must not be through the stock exchange.
 Formula:
Selling price PXXX RATE:
Cost (XXX) Prior to 2018
final tax on passive income Selling Expense (XXX) 1. First 100,000 of the gain = 5%
osits (P25,000@80%@20%) 4,000 Net Gain PXXX 2. In excess of P100,000 = 10%
2,000@20%@10%) 440 Rate XX%
0@80%@20%) 3,520 CGT PXXX Beginning Jan 1, 2018
c Corporation(P7,000@10%) 700 15% of Capital Gain
10,000 - Exempt, P70,000@ 20%) 14,000
22,660
ed in trade or business, his total combined taxes on all income from Philippines , excluding business income.
P 165,000
10,000 Note: Taxation of NRA-NETB
- All income received by a NRA-NETB is subject to 25% FWT, except the following:
25,000 1. Interest from a depository bank under the expanded foreign currency deposit system - exempt
22,000 2. Sale of real property and shares subject to capital gains tax
10,000
c corporation 7,000
foreign corp 3,000
5,000
80,000
327,000
25%
81,750
243,000
324,750

240,000
3,000
243,000