San Beda College of Law

MEMORY AID IN TAXATION LAW

2004 CENTRALIZED BAR OPERATIONS

ANNEX M

ILLUSTRATIVE PROBLEM - COMPUTATION OF TAXABLE INCOME FROM DIFFERENT SOURCES IN INDIVIDUALS

Problem:
A certain individual has the following
Income for the taxable year:
Salary - Philippines
Business Income - Philippines
Interest on Bank Deposits - Phil
Business Income - USA
Business Income - Europe

P 100,000
150,000
50,000
$
3,000
$
4,000

Conversion Rate:
P 53 = 1 US $
P 62 = 1 Euro $
Additional Information:
Allowable Deductions if needed
Philippines
USA
Europe

P
$
$

60,000
1,000
1,500

Compute the taxable income and income

tax due for the taxpayer if he is:

a) Resident citizen, married with two dependent
children
b) Non-resident citizen, married with three
dependent children
c) Resident Alien, single
d) Non-resident alien engaged in business,
married
e) Non-resident citizen not engaged in
business who supports a brother, on the
assumption that all income he received
from the Philippines are nonbusiness income

Solution:
a) RESIDENT CITIZEN
(Sources: within and without the Philippines)
Gross Income
Salary
P 100,000
Business income - Phil.
150,000
Business income - USA
159,000
Business Income - Europe
248,000
Total
P 657,000
Less: Expenses
Philippines
P 60,000
USA
53,000
Europe
93,000
206,000
Net Income
P 451,000
Less:
Basic personal exemption P 32,000
Additional exemption
16,000
48,000
Taxable Income
P 403,000
Income Tax Payable:
On P 250,000
P 50,000
153,000 @ 30%
45,900
P 403,000
P 95,900

127

b) NON-RESIDENT CITIZEN
(Sources: within the Philippines only)
Gross Income
Salary
P
Business income - Phil.
Total
P
Less: Expenses - Phil.
Net Income
P
Less:
Basic personal exemption P 32,000
Additional exemption
24,000
Taxable income
P
Income Tax Payable:
On P 70,000
P 8,500
64,000 @ 20%
12,800
P 403,000
P 21,300
c) RESIDENT ALIEN
(Sources: within the Philippines only)
Gross Income
Salary
P
Business income - Phil.
Total
P
Less: Expenses - Phil.
Net Income
P
Less: Basic personal exemption
Taxable income
P
Income Tax Payable:
On P 140,000
P
30,000 @ 25%
P 170,000
P

d) NON-RESIDENT ALIEN ENGAGED

IN BUSINESS IN THE PHILIPPINES

100,000 (Sources: within the Philippines only)
150,000 Gross Income
Salary
P 100,000
250,000
Business income - Phil.
150,000
60,000
Total
P 250,000
190,000
Less: Expenses - Phil.
60,000
Net Income
P 190,000
32,000
56,000 Less: Basic personal exemption
P 158,000
134,000 Taxable income
Income Tax Payable:
On P140,000
P 22,500
18,000 @ 20%
4,500
P 158,000
P 27,000
d) NON-RESIDENT ALIEN NOT

ENGAGED IN BUSINESS IN THE PHIL.

100,000 (Sources: within the Philippines only)
150,000 Gross income
Salary
P 100,000
250,000
Business income - Phil.
150,000
60,000
Interest on Bank Deposits - Phil.
50,000
190,000
Total
P 300,000
20,000
25%
170,000 Multiply: Rate of Tax
Income Tax Payable
P 75,000
22,500
7,500
30,000