ANSWER KEY: QUIZ ON GRADUATED INCOME TAX

1. Assuming Willdeym signified in his first quarter return his intention to avail of the 8%
preferential tax rate, how much is his income tax due for the year 2019?

Gross income from business of poultry (net of Cost of Sale: 200,000)..... P1,800,000
Gross income from business of piggery (net of Cost of Sale: 100,000)..... 800,000
Dividend from resident corporation............................................................ 50,000
Sale of real property not used in trade or business
located in Kazakhstan (SP 400k – Cost 350k) ......................................... 50,000
Won winnings from Barangay Volleyball League ................................. 10,000
Less:
Business expenses from poultry business................................... 720,000
Business expenses from piggery business................................... 900,000
OPT on the Sale of Shares of GLOBE, Inc. listed in the PSE
SP(1M) x 6/10 of 1%................................................................... 6,000 (1,626,000)
Taxable Income P1,084,000
Income Tax Due:
Basic Amount: P130,000
(1,084,000-800k)x30% 85,200
P215,200
-8% preferential tax cannot be availed of because the total gross sales and other non-operating
income have exceeded the 3M VAT threshold. Accordingly, the business is also subject to 12% VAT

2. Assuming Willdeym is also employed in Meralco earning a total compensation income per
annum of P1,500,000, how much is his total income tax due?

Gross income from business of poultry (net of Cost of Sale: 200,000)..... P1,800,000
Gross income from business of piggery (net of Cost of Sale: 100,000)..... 800,000
Dividend from resident corporation............................................................ 50,000
Sale of real property not used in trade or business
located in Kazakhstan (SP 400k – Cost 350k) ......................................... 50,000
Won winnings from Barangay Volleyball League ................................. 10,000
Less:
Business expenses from poultry business................................... 720,000
Business expenses from piggery business................................... 900,000
OPT on the Sale of Shares of GLOBE, Inc. listed in the PSE
SP(1M) x 6/10 of 1%................................................................... 6,000 (1,626,000)
Total Income P1,084,000

Plus: Compensation Income 1,500,000

Taxable Income 2,584,000

Income Tax Due:

Basic Amount: P490,000
(2,584,000-2M)x32% 186,880
P676,880

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 3. Assuming Wildeym, a mixed income earner where he also earned a total compensation income of
P1,500,000, net of exclusions, signified in his first quarter return his intention to avail of the
OSD, how much is his income tax due?

Gross Sales from business of poultry (Cost of Sale: 200,000)............ P2,000,000

Gross Sales from business of piggery (Cost of Sale: 100,000)............ 900,000
Dividend from resident corporation............................................................ 50,000
Sale of real property not used in trade or business
located in Kazakhstan (SP 400k – Cost 350k) ......................................... 50,000
Won winnings from Barangay Volleyball League ................................. 10,000
Gross sales and ONOI 3,010,000
Less:
OSD: 40% of Gross Sales/Receipts only x P2,900,000 (1,160,000)
Total Income P1,850,000

Plus: Compensation Income 1,500,000

Taxable Income 3,350,000
Income Tax Due:
Basic Amount: P490,000
(3,350,000-2M)x32% 432,000
P922,000

4. Using all the facts above, however, Wildeym, who earned purely from his businesses of poultry
and piggery a total gross sales of P1,600,000 and P1,300,000, respectively, and incurred cost of
sales for each of P200,000 and P 300,000 for 2019, respectively, signified in his first quarter
return his intention to avail of the 8% preferential tax rate, how much is his total income tax due?

Gross Sales from business of poultry (Cost of Sale: 200,000)............ P1,600,000

Gross Sales from business of piggery (Cost of Sale: 300,000)............ 1,300,000
Dividend from resident corporation............................................................ 50,000
Sale of real property not used in trade or business
located in Kazakhstan (SP 400k – Cost 350k) ......................................... 50,000
Won winnings from Barangay Volleyball League ................................. 10,000
Gross sales and ONOI 3,010,000
Less: Amount allowed as deduction (250,000)
Taxable Income 2,760,000
X 8%
Income Tax Due P 220,800

5. Using all the facts above, however, instead of the poultry and piggery businesses, Wildeym has
the business of cockpits and cabarets where these earned a total gross sales of P1,600,000 and
P1000,000, respectively, can he avail the 8% preferential tax rate?

No, Willdeym has no option to avail of the 8% income tax rate on his income
from business of cockpits and cabarets since his business income is subject to Other
Percentage Tax under Section 125 of the Tax Code, as amended. Willdeym will be subject

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 to the graduated rates plus the prescribed business tax, which, in this case, is the OPT of
18% on the gross receipts as prescribed under Sec. 125 of the Tax Code, as amended.

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