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Joint Accounts On Forex Deposits

This document discusses the tax treatment of various types of dividends and stock distributions. It notes that 50% of interest income from a joint account with a resident and non-resident taxpayer is exempt from the 15% final tax. Dividends are generally taxable income, except for stock dividends which represent a transfer of surplus to capital. Stock dividends can become taxable if subsequently redeemed or if they substantially alter ownership of the corporation. A distribution of another corporation's stocks is a taxable property dividend, not a stock dividend.

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80 views2 pages

Joint Accounts On Forex Deposits

This document discusses the tax treatment of various types of dividends and stock distributions. It notes that 50% of interest income from a joint account with a resident and non-resident taxpayer is exempt from the 15% final tax. Dividends are generally taxable income, except for stock dividends which represent a transfer of surplus to capital. Stock dividends can become taxable if subsequently redeemed or if they substantially alter ownership of the corporation. A distribution of another corporation's stocks is a taxable property dividend, not a stock dividend.

Uploaded by

dailydoseoflaw
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Joint accounts on forex deposits

If the bank account is jointly in the name of a non-statement and a resident taxpayer, 50% of the
interest shall be exempt while the other 50% shall be subject to the 15% final tax.

Interest income subject to regular tax


Interest income from the following sources is subject to regular income tax, not to final tax:
1. Lending activities, whether or not in the course of business.
2. Investments in bonds
3. Promissory notes
4. Foreign sources, whether bank or non-bank
5. Penalty for legal delay or default

DIVIDENDS means any distribution made by a corporation to its shareholders out of its earnings or
profits and payable to its shareholders, whether in money or in other property

Types of dividends:
1. Cash dividends-paid in cash
2. Property dividends-paid in non-cash properties including stocks or securities of another corporation.
3. Scrip dividends- those paid in notes or evidence of indebtedness of the corporation
4. Stock dividends- paid in the stocks of the corporation
5. Liquidating dividends- distribution of corporate net asset.

As a rule, dividends are income subject to tax. However, the following are not income for taxation
purposes:
1. Stock dividends- representing transfer of surplus to capital account shall not be subject to tax. Stcok
dividends are in the form of increase in corporate value (i.e. capital gain) which should be property
taxable when realized through disposal or sale of the stocks investment

The distribution of stocks of another corporation as dividends is taxable property dividend and not a
stock dividend.

2. Liquidating dividends- under NIRC, the receipt of liquidating dividends is not viewed as income but as
exchanged of properties. When the liquidating dividends exceed the cost of the investment, the excess
is a taxable capital gain, subject to regular income tax. Any loss is deductible to the extent of capital
gain.

Taxability of Stock Dividends


Normally, stock dividends are exempt from income tax. Exceptionally, stock dividends are subject to tax
at fair value of the stocks received under the following conditions;
a. Subsequent cancellation and redemption- If a corporation cancels or redeems stock dividend at such
time and in such manner as to make the distribution and cancellation or redemption, in whole or in part,
equivalent to the distribution of a taxable dividend, the amount so distributed shall be taxable to the
extent it represents a distribution of earnings or profit.

For instance, a corporation declared stock dividends and immediately called the stock dividends for
redemption and cancellation. This act is equivalent to declaration of cash dividends.

b. If it leads to substantial alteration in ownership in the corporation


Substantial alteration in ownership in a corporation may occur when stock dividends are given in lieu of
cash dividend or when the corporation declared an optional stock or cash dividend.

Stock dividend vs. Stock split


Stock dividend is a capitalization of earnings while stock split results in reduction in the ar value of stock
and an increase in the number of shares of shareholders. Assuming a 2-for-1 split, a shareholder holding
one P50-par value stock will be given P25-par value stocks. While stock dividend may be taxable under
certain conditions, stock split will never be subject to income tax.

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