Module 2
Individual Taxpayers
ILLUSTRATION
Use the following data for Cases A-E
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
Determine the taxable income assuming:
Case A: The taxpayer is a resident citizen:
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱3,500,000
Solution:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines (3,000,000)
Business expenses, Canada (1,000,000)
Business expenses, Singapore (500,000)
Taxable income ₱3,500,000
Determine the taxable income assuming:
Case B: The taxpayer is a non-resident citizen.
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case C: The taxpayer is a resident alien.
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case D: The taxpayer is a non-resident alien engaged in trade or business.
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱2,000,000
Solution:
Gross income, Philippines ₱5,000,000
Business expenses Philippines (3,000,000)
Taxable income ₱2,000,000
Determine the taxable income assuming:
Case E: The taxpayer is a non-resident alien not engaged in trade or business.
An individual taxpayer provided the following information for 2018:
Gross business income, Philippines ₱5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000
❖ Answer: ₱5,000,000
❏ NRA-NETB are taxable on their gross income
Case F: The income and expenses of a Filipino
citizen for 2018 were provided as follows:
January to June Philippines Canada
Gross Income ₱5,000,000 ₱2,000,000
Allowable Deductions 2,000,000 1,000,000
July to December
Gross Income 2,000,000 3,000,000
Allowable Deductions 1,000,000 1,200,000
Assume that the taxpayer is a resident who left the country in July of the
current year to reside permanently in Canada, how much is his taxable
income?
❖ Answer: ₱5,000,000
Solution:
Gross income, Philippines (Jan-Dec) ₱7,000,000
Gross income, Canada (Jan-June) 2,000,000
Allowable deductions, Philippines (Jan-Dec) (3,000,000)
Allowable deductions, Canada (Jan-June) (1,000,000)
Taxable income ₱5,000,000
Case G: Assume the same data in Case F except that the taxpayer is a
non-resident who returned and resided permanently in the country in
July of the current year. His taxable income before personal exemptions
is
❖ Answer: ₱5,800,000
Solution:
Gross income, Philippines (Jan-Dec) ₱7,000,000
Gross income, Canada (Jan-June) 2,000,000
Allowable deductions, Philippines (Jan-Dec) (3,000,000)
Allowable deductions, Canada (Jan-June) (1,200,000)
Taxable income ₱5,800,000
Table 2-1: GRADUATED TAX RATE
Income Tax (TRAIN Law 2018-2022) 2023 ONWARDS
Below 250,000 Exempt Exempt
250,000-400,000 20% excess of 250,000 15% excess of 250,000
400,000-800,000 30,000 + 25% excess of 400,000 22,500 + 20% excess of
400,000
800,000-2,000,000 130,000 + 30% excess of 800,000 102,500 + 25% excess of
800,000
2,000,000-8,000,000 490,000 + 32%excess of 2,000,000 402,500 + 30% excess of
2,000,000
Above 8,000,000 2,410,000 + 35% excess of 2,202,500 + 35% excess of
8,000,000 8,000,000
ILLUSTRATION –
COMPUTATION OF BASIC INCOME TAX
DUE
Purely Compensation Income Earner
1. Determine the income tax due assuming the taxable compensation
income for 2018 is ₱240,000.
❖ Answer: ₱0, tax exempt
2. Determine the income tax due assuming the taxable compensation
income for 2018 is ₱300,000.
❖ Answer: ₱10,000
Solution: tax on first ₱250,000 ₱0
In excess of ₱250,000 10,000
50,000 x 20%
Tax due ₱10,000
3. Determine the income tax due assuming the net taxable
compensation income for 2018 is ₱1,850,000.
❖ Answer: ₱445,000
Solution: tax on first ₱800,000 ₱130,000
In excess of ₱800,000 315,000
1,050,000 x 30%
Tax due ₱445,000
