INCOTAX ASSIGNMENT:

1. What is the definition of Self-Employed under RA 10963 or TRAIN Law?

- An independent contractor or single owner who reports self-employment
income is considered to be self-employed. Instead of working for an employer,
self-employed individuals work for themselves in a number of crafts,
professions, and occupations. They are paid solely for the task they actually
perform; but, since they are not employees, they are not entitled to benefits or
compensation. Under the TRAIN law, self-employed individuals and
professionals have the option to be subject to 8% income tax based on gross
sales/receipts and other non-operating income for the year do not exceed the
three million pesos (P3,000,000) value-added tax (VAT) threshold and are not
subject to other types of percentage tax.

2. What is the definition of a Professional?

- a professional is a person whose competency can typically be evaluated against
a set of established criteria who has been formally certified by a professional
body as belonging to a certain profession by virtue of having passed the
necessary examination or course of study and/or practice. In addition, it
describes someone who practices a sport or an art form professionally, rather
than just as a leisure. It includes but is not limited to doctors, lawyers, engineers,
architects, CPAs, professional entertainers, artists, professional athletes,
directors, producers, insurance agents, insurance adjusters, management and
technical consultants, bookkeeping agents and other recipients of professional,
promotional and talent fees.

3. What are the two types of taxes that are applicable to the income derived from
the conduct of trade or business such as Self-Employed and Professionals?

4. What are the requisites to avail 8% preferential tax rate?

 Your gross sales/receipts and non-taxable income should not exceed the
VAT threshold of three million pesos.
 You need to be a self-employed taxpayer, either a single proprietor, a
mixed-income earner, or a professional.
  You need to be registered and subject to percentage tax or be a non-VAT
filer.
 You need to express your intention of availing the 8% income tax rate
option.
5. When do you consider an individual taxpayer as Purely Self-Employed?
- A taxpayer is said to be Purely Self-Employed if they have started their own
firm as a sole owner and are not receiving income from a job.

6. What are the conditions that an 8% preferential tax is not applicable?

 A business owned by a corporation.
 Income Earner through Compensation
 VAT registered taxpayer (depends on the amount of gross sales or receipts)
 Exempted from VAT but exceeds the three-million-peso VAT threshold
 Taxpayers subject to other types of Income Taxes
 Partner of a General Professional Partnership (GPP)

7. What are the rules/guidelines under RR 8-2018, if at any time during the
taxable year, a taxpayer's gross sales and/or gross receipts exceeded the VAT
threshold of P3,000,000?
- If a taxpayer's gross annual sales and/or receipts exceed Three Million Pesos
(3,000,000.00) at any time during the current taxable year when the option was
made, they will automatically be subject to graduated income tax rates, liable for
VAT prospectively, and required to attach an audited FS when filing their annual
income tax return. In the month that follows the month in which they crossed the
VAT threshold, they must amend their registration right away to reflect the
change in their tax status from non-VAT to VAT taxpayer. Up until the taxpayer
becomes subject to VAT, a percentage tax will be applied.

8. When do you consider an individual taxpayer as a mixed income earner?

- Mixed income earners are simply those who receive income from
several sources. This includes your employee salary, business
earnings, or gross receipts from being a freelancer.