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    Income Taxation

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    estherlorrainedioneencila00
    The document discusses taxation, describing that taxes are collected by governments to fund expenses and providing examples of different types of national and local taxes. It also examines income taxation in more depth, defining who is required to pay income tax and describing the various types of income including compensation, business, and mixed incomes. Key aspects of computing income tax liability such as determining taxable income and using the income tax table are demonstrated through examples.

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    Income Taxation

    Uploaded by

    estherlorrainedioneencila00
    10 views17 pages
    The document discusses taxation, describing that taxes are collected by governments to fund expenses and providing examples of different types of national and local taxes. It also examines income taxation in more depth, defining who is required to pay income tax and describing the various types of income including compensation, business, and mixed incomes. Key aspects of computing income tax liability such as determining taxable income and using the income tax table are demonstrated through examples.

    Original Description:

    Income taxation Grade 12

    Original Title

    INCOME-TAXATION

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    The document discusses taxation, describing that taxes are collected by governments to fund expenses and providing examples of different types of national and local taxes. It also examines income taxation in more depth, defining who is required to pay income tax and describing the various types of income including compensation, business, and mixed incomes. Key aspects of computing income tax liability such as determining taxable income and using the income tax table are demonstrated through examples.

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    Download as pptx, pdf, or txt
    10 views17 pages

    Income Taxation

    Uploaded by

    estherlorrainedioneencila00
    The document discusses taxation, describing that taxes are collected by governments to fund expenses and providing examples of different types of national and local taxes. It also examines income taxation in more depth, defining who is required to pay income tax and describing the various types of income including compensation, business, and mixed incomes. Key aspects of computing income tax liability such as determining taxable income and using the income tax table are demonstrated through examples.

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    of 17

    TAXATION

     Taxation- is the process by which the government collects revenue


    (taxes) in order to pay for its expenses. This is also an inherent
    power of the government to demand contributions for public
    purpose/s.
     There are two classification of taxes
    1. National Taxes
    a. Income Tax- tax on the net income or the entire income realized in
    one taxable year.
    b. Value Added Tax- tax which is a percentage of the selling price
    levied on the sale, barter, exchange or lease of goods.
    TAXATION

    a. Percentage Tax- tax measured in percentage of gross


    selling price of goods sold, bartered, exchanged in the sale
    of services.
    b. Estate Tax- tax on the property that are left to the estate.
    c. *Donor’s Tax- tax when a person makes a donation.
    TAXATION

    2. Local Taxes
    a. Mayor’s Permit
    b. Sanitary Permit
    c. Real Estate Tax

    Note: The taxes that are given are just SOME examples of
    National and Local Taxes.
    INCOME TAXATION
     Our discussion is limited to Income Taxation.
     Who are REQUIRED to pay Income Tax?
    1. Resident Citizen- Filipino that is living in the Philippines.
    - Income earn within and without the Philippines will be
    taxed.
    2. Non-resident citizen- Filipino that is not living in the Phil.
    - Income earn within the Philippines only will be taxed.
    INCOME TAXATION

    3. Resident Alien- Foreigner that is living in the Philippines.


    - Income earn within the Philippines only will be taxed.
    4. Non-resident Alien- Foreigner that is not living in the
    Philippines.
    - Income earn within the Philippines only will be taxed.
    INCOME TAXATION
     Compensation Income- income that is earn by an employee.
     Employed individuals that earn compensation income pay their
    income taxes monthly. Employers withhold the income tax of
    their employees from their monthly gross income and remit these
    sums to the BIR.
     Business Income- income that is earn by a business.
     Mixed Income- income that is earn as a compensation and
    income from a business or a practice of profession.
    Note: Income tax is computed at the end of the year but the employer withhold taxes because employees
    might not have sufficient cash to pay for their income tax dues if aggregated to a one time annual payment.
    COMPENSATION INCOME
    Gross Compensation (salary and other taxable ₱ xx
    bonuses)

    Less: Statutory payments (ex. SSS or GSIS, (xx)


    PhilHealth and Pag-ibig Fund)

    13th month pay and other bonuses that are (xx)


    exempted from income tax

    Net taxable compensation income ₱ xx


    Note:
    Statutory payments- are also known as mandatory contributions.
    COMPENSATION INCOME

     Example
    Miss Cona generated annual compensation income of
    P615,000. Statutory payments are as follows: SSS –
    P6,975.60, Philhealth - P5,250, Pag-ibig Contribution – P
    1,200. Tax exempt 13th month pay and other bonuses P
    60,000. How much is the Taxable Income and Tax Due?
    COMPENSATION INCOME
    Income Tax Table ( TRAIN Law )
    Example Compensation Income
     So for requirement number 2, we’re going to compute for the INCOME TAX DUE.
     The tax table will be given on your exam and it’s important to know how to use the table.
     First, you just need to check on what specific bracket the TAXABLE INCOME fall.
     In our example, our Taxable Income is 541,574.40 so it is on the bracket between 400,000-
    800,000.
     Second step, you need to know the tax rate you will use. In our example it is stated there
    that for the FIRST 400,000, the tax applicable is 22,500 then 20% for the excess over
    400,000. So 541,574.40-400,000, the excess is 141,574.40. You just need to multiply the
    excess to the 20%.

    Solution:
    22,500 + ( 20% x 541,574.40-400,000 ) = 50,814.88 INCOME TAX DUE
    Example No.2

     Misyu Lods, a non-resident citizen earned an income of


    ₱2,150,750 outside the Philippines. How much is the
    income tax due of Misyu Lods?

     ANSWER: P0/zero. Non-resident citizen, so only the


    income earn within the Philippines is taxable. The given
    income is earned outside the Philippines.
    Business Income
     Example:
    Bet Keeta owns a trading business. Sales for the year amounted to ₱2,150,000.
    Expenses are given in the table below:

    Beginning inventory 125,000 Purchases


    315,000
    Rental 110,000 Ending
    inventory 152,000
    Representation 25,500 Depreciation
    42,000
    Utility Expense 85,000 Freight-in
    Required: Compute for the (1) TAXABLE INCOME and (2) INCOME TAX DUE
    36,000
     Solution:
    Sales ₱2,150,000
    Cost of Goods Sold (COGS) (324,000)
    Gross Profit ₱1,826,000
    Rental (110,000)
    Representation (25,500)
    Utility Expense (85,000)
    Transportation-out (45,000)
    Depreciation (42,000)
    Bad debt expense (8,500)
    Net Income/Taxable Income ₱1,510,000 (1)
    COGS= Beg. Inventory + Purchases + Freight-in – End. Inventory
    COGS= 125,000 + 315,000 + 36,000 – 152,0000
    COGS= 324,000
    Business Income
     2. INCOME TAX DUE- again, we need to use the tax table.
    Business Income

     2. INCOME TAX DUE- again, we need to use the tax table.


     Our TAXABLE INCOME is 1,510,000. So this is on the bracket
    between 800,000-2,000,000.
     So same process, you just need to check the tax rate applicable.

     SOLUTION:
     102,500 + ( 25% x1,510,000-800,000 ) = 280,000 Income Tax
    Due (2)

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