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PSBA
Atty. Llamado

INCOME TAX OF INDIVIDUALS

1. Who among the following taxpayers shall be taxable only income within and without the Philippines?

a. Resident citizens
b. Non-resident citizens and OFWs/OCWs
c. Resident aliens and non-resident aliens
d. All except resident citizens
e. All except resident citizens and OFWs/OCWs

2. Which of the following is correct? A non-resident citizen means a citizen of the Philippines
a. Who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad
with a definite intention to reside therein.
b. Who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis.
c. Who works and derives income from abroad and whose employment thereat requires him to be
physically present abroad most of the time (≥ 183 days) during the taxable year.
d. All of the above.

3. A non-resident alien is considered a “engaged in business in the Philippines” if he stays inside the
Philippines during the taxable year
a. For 183 days or more
b. For less than 183 days
c. For more than 180 days
d. For less than 180 days

4. Bobby Fishing, an American student, went to the Philippines in 2024 as part of a 5-month student
exchange program. During his stay from January 1, 2024 to May 31, 2024, he worked as a teaching
assistant to a professor in a university. He also fell in love with a Filipina named Leica whom he
promised marriage after he graduated from college. For tax purposes, Bobby in 2024 is classified as a

a) Resident alien
b) Non-resident alien engaged in trade or business.
c) Non-resident alien not engaged in trade or business
d) None of the above.

5. Before leaving the Philippines, does Bobby (in number 4 above) need to file an income tax return with
the BIR?

a) No.
b) Yes.
c) It depends whether the employer withheld taxes from his compensation.
d) None of the above.
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6. Kan Wi Pa, a Taiwanese citizen permanently residing in the Philippines, received several income
payments during the taxable year. Which among the following is not subject to Philippine income
taxation?

a. Royalties received for writing a computer program used in computer facilities in Europe.
b. Interest income from his Dollar deposit in BDO Manila.
c. Dividends received from a German corporation which derived 100% of its annual gross income
from Philippine sources for the past 3 years.
d. Gains derived from the sale of his condominium unit located in Tanay, Rizal.

7. J. Fernando sold his residential house in Marikina on February 14, 2025 for ₱18.0 Million. The
property was originally purchased 10 years ago for ₱20.4 Million. At the time of the sale, the
residential house had the following valuations:

BIR Zonal value ₱17.0 Million

City Assessor’s value ₱18.0 Million
Appraiser’s value ₱21.0 Million
Bank mortgage value ₱20.5 Million

What is the capital gains tax (“CGT”) on the sale?

a) 6% of ₱17.0 M
b) 6% of ₱18.0 M
c) 6% of ₱21.0 M
d) 6% of ₱20.4 M

8. If J. Fernando in the preceding number, within 6 months after the sale, purchases another principal
residence for ₱20,000,000, what will be the capital gains tax on the sale?

a) ₱1.020 M. c) ₱1.020 M.
b) ₱1.080 M. d) ₱0

9. Suppose J. Fernando in number 8, within the 18-month reglementary period instead purchases a new
principal residence at a cost of ₱9,000,000. What will be the capital gains tax on the sale?

a) ₱540,000
b) ₱380,000
c) ₱550,000
d) ₱475,500

10. Amelia Corporation declared and distributed to its stockholders shares of Amelia Corporation. One of
its stockholders, Will Villarama, received 100 shares as dividends. At the date of dividend declaration,
the fair market value of Amelia Corporation shares was ₱120 per share. By the time Will received the
dividend, the fair market value per share was ₱180. Which of the following is correct? The dividend is
a. A stock dividend, hence exempt from tax
b. A property dividend, hence part of taxable income of W in his ITR.
c. A property dividend, hence subject to final tax based on its fair market value of P120 per share at
the time of declaration.
d. A property dividend, hence subject to final tax based on its fair market value of P180 per share

11. Using the same information in number 10, but what was paid as dividends were shares of Ameliorita
Corporation, which of the following would be correct? The dividend is
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a. A stock dividend, hence exempt from tax.

b. A property dividend, hence part of taxable income of W in his ITR.
c. A property dividend, hence subject to final tax based on its fair market value of P120 per share at
the time of declaration.
d. A property dividend, hence subject to final tax based on its fair market value of P180 per share.

12. Raymond Flores, Filipino, resident of Quezon City, vacationed in Los Angeles where he stayed with
his sister. For fun, he participated in The Voice, America where he won the grand prize of $500,000.
He deposited this amount in a Los Angeles branch of Bank of America (BOA). He was then offered
a job as a singer in a hotel for which he was paid ₱5,000 monthly.

Which among the following shall be included in Raymond’s Philippine ITR?

a) Only his income from the hotel. The rest shall be subject to final tax.
b) Only the grand prize from The Voice. The rest shall be subject to final tax.
c) Only the interest income from the BOA. The rest shall be subject to final tax.
d) All of the incomes shall be declared in Raymond’s Philippine ITR.
e) None of them because all are exempt from income tax.

13. Which of the following does not belong to the group?

a) 1/10 of 1% stock transaction tax on the selling price of shares traded in the stock exchange
b) 10% final tax on dividends received by citizens and resident aliens from domestic corporations
c) 25% final tax on income received by non-resident aliens not engaged in trade or business in the
Philippines
d) 6% capital gains tax on the sale of real property classified as capital assets

14-19) Alex Dinamita, VAT-registered businessman, had the following data for the taxable year 2025:
Gross sales, Phils. ₱2,300,000
Cost of sales, Phils. 1,250,000

Gross sales, Europe 11,750,000

Cost of sales, Europe 8,100,000

Operating expenses, Phils. 40,000

Operating expenses, Europe 65,000

Non-operating income, Phils. 50,000

He is also a part-time author. He has written a book about how to make girls fall in love entitled
“Love Tactics”. This book was published in the Philippines, and was a smashing success in 2025,
for which the publisher paid him royalties totalling ₱500,000, net of the FT.

He puts all his savings in a BPI Savings Peso account which earned a total interest income of
₱125,000 gross of the FT.

In 2025, he vacationed in New York in the U.S. In New York, he won a cash prize in a supermarket
raffle equivalent to ₱70,000.

14. (a) If the taxpayer is a resident citizen, his tax due (in the ITR) is:
a. ₱1,229,000
b. ₱1,132,000
c. ₱1,217,000
d. None of the above
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Solution: Resident Citizen

Gross sales, Europe

Gross sales, Phils.
Less: Cost of Sales, Europe
Cost of sales, Phils.
Total Gross Income from operations
Less: Deductions
Operating expenses, Phils.
Operating expenses, Europe
Net income from operations
Add: Non-operating income
Share in GPP net income
Net taxable income
Tax due (table)

Tax on =
Tax on x =

(b) If the taxpayer is a resident citizen, not VAT-registered, can he avail of the 8% income tax rate on
gross sales plus non-operating income?

Answer:

15. If the taxpayer is a non-resident citizen, his tax due (in his ITR) is:
a. ₱165,700 c. ₱155,000
b. ₱167,500 d. None of the above,

Solution: Non-resident citizen

Gross sales, Phils.

Less: Cost of sales, Phils.
Gross income from operations
Less: Itemized deductions:
Operating expenses, Phils.
Net income from operations
Add: Non-operating income
Share in GPP net income
Net taxable income

Tax on =
Tax on x 25% =
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16. If the taxpayer is a resident alien, his tax due (in the ITR) is:
a. P167,500
b. P175,400
c. P159,700
d. None of the above.

17. If the taxpayer is a non-resident alien engaged in business in the Philippines, and his country allows
reciprocity of ₱30,000 as personal exemption for individuals, his tax due (in his ITR) is:
a. P141,250
b. P167,500
c. P183,000
d. None of the above.

If the taxpayer is a NRC, RA, or NRAETB, and not VAT-registered, can he avail of the 8% income tax
rate option?

Answer

Gross sales
Plus: Non-operating income
Total
Less: ₱250,000 deduction
Net taxable amount
Taxable rate 8%
Income tax

18. If Alex is a RC, NRC, RA, or NRAETB, compute his total final withholding taxes.

a. ₱165,700
b. ₱80,556 Interest Income (BPI)
c. ₱155,000 125,000 x 20%
d. None of the above. Royalties (book)
(500,000/90%) x 10%
Total final taxes
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19. If Alex was a NRANETB, compute his total final withholding taxes.

a. P453,450
Gross income, Philippines
b. P472,917
c. P452,723 Non-operating income, Phils.
d. None of the above. Interest income, gross of FT
Royalties, gross of FT
(500,000/75%)
TOTAL
X 25%
Total Final Taxes

20-22)

Leica, resident citizen, single, 22 years of age, is an employee of CPAR Inc. from which she received the
following employment income:

Less SSS premiums Less Loan Paid

Gross pay Less CWT Net Pay
and union dues
₱2,950,000 ₱270,000 ₱25,000 ₱34,000 ₱2,621,000

The aforementioned amounts are exclusive of her 13th Month Pay and other benefits of ₱245,840.
20) Compute Leica’s net taxable compensation income.
A. ₱3,195,840
B. ₱3,080,840
C. ₱2,950,000
D. None of the above.

21) Compute Leica’s tax due on her compensation income.

A. ₱456,752
B. ₱726,752
C. ₱270,000
D. None of the above.

22) Compute Leica’s tax payable.

A. ₱726,752
B. ₱456,752
C. ₱345,234
D. None of the above.
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Solution: 20-22)
Annual
Gross compensation income
Less: Exempt compensation:
SSS premiums, Pag-ibig, and union dues
13th month pay and other benefits
Taxable Compensation income

Tax on =
Tax on x =

Less: Tax Credits: CWT

Tax Payable

Graduated Tax Rates: Effective January 1, 2023 onwards:

On citizens, resident aliens, non-resident aliens engaged in business in the Philippines

On compensation, business and other income

Range of Taxable Income (TI) Tax Due = a + [b x (TI - c)]

Over Not Over Basic Amount Additional Rate Of Excess Over
(a) (b) (c)
- 250,000 - -
250,000 400,000 - 15% 250,000
400,000 800,000 22,500 20% 400,000
800,000 2,000,000 102,500 25% 800,000
2,000,000 8,000,000 402,500 30% 2,000,000
8,000,000 - 2,202,500 35% 8,000,000

The End