422.

a.
b.
c.
d.
423.

Who may claim additional exemption for dependents?

Answer.
Married individual whether his qualified dependents
legitimate, illegitimate or legally adopted.
Head of the family
Legally separated spouses.
Single individual with qualified dependent child or children.

are

Amount of additional exemption;

Answer.
Now Php 25,000 per child, maximum of four (4) children
a. In case of married individuals, the additional exemption may be
claimed only by one of the spouses;
b. As a rule, the husband is the proper claimant.
Exceptions:
1.
If husbands waives his right in favor of the wife;
2. If the husband is unemployed
3. If the husband is abroad
c. In the case of legally separated spouses, the additional exemption
may be claimed ONLY by the spouse who has custody of the
child/children.
424.

a)
b)
c)
d)

When may a NRAEBT exemptions be allowed to claim

exemptions?
Answer.
He must be engaged in trade or business or in the exercise of
profession in the Philippines;
There is recognition of the Principle of Reciprocity in his country;
There is income tax law in his country, and
He must file a true and accurate return of total income from all
sources within the Philippines.
Limitations:
a) The exemptions allowed should not be more than
the amount of exemptions granted to citizens or
resident of the Philippines.
b) His exemptions is applicable only to personal
exemption; c) No additional exemption is allowed.

425.
a)
b)
c)

Rules on change of status of an individual taxpayer:

Answer.
If during the taxable year the taxpayer marries or should have
additional dependent(s), he may claim the personal or additional
exemption, as the case may be, in full for such
If a taxpayer dies during the taxable year, his estate may still claim
the personal and additional exemptions for himself and his
dependent(s) as if he died at the close of the year;
If during the taxable year, the spouse dies, or any of the dependent
dies, or marries, or becomes 21 or gainfully employed the
taxpayer may still claim the same
exemptions as if the change occurred at the close of
such year.

426.

On Premium payments on Health and/or Hospitalization

Insurance:
Answer.
This is an amount of premium on health and/or
hospitalization paid by an individual taxpayer (married or
head of the family), for himself and members of his family
during the taxable year.
Requisites:
a) The amount claimed is not more than Php 2,400 per
family or Php 200 per month during the taxable year.
b) The total gross income of the family is not more than
Php 250,000 for the taxable year;
c) In case of a married individual, only the spouse
claiming additional exemption shall be entitled to this
deduction.
Who can claim/avail of this deduction?

a)
b)
c)
427.
a)
b)

Answer.
Individual earning purely compensation income during the taxable
year;
Individual taxpayer earning business or professional income
whether availing of itemized or optional standard deduction during
the year.
Individual earning both compensation and business or profession
income during the taxable year.
Non-deductible expenses from Gross Income:
Answer.
Personal, living and family expenses
Utility services in ones home or residence
c) Insurance paid on a dwelling owned and occupies
by a taxpayer is a personal expense;
d) Amount spent for the restoration Of property or
making good the exhaustion thereof where an
allowance is or has been made; (deemed a capital
expense)
e) Any amount paid out for new building or for
permanent improvements or betterment made to
increase the value of any property or estate.
f) Amount spent to prolong life of property; (capital
expense)
g) Premiums paid on any life insurance policy covering
the life of any employee or officer, or of any person
financially interested in any trade or business
carried on by the taxpayer, individual or corporate,
when the taxpayer is directly or indirectly a
beneficiary under such policy whether or not
additional beneficiaries were named;
h) Losses from sales or exchanges of property between
related parties (includes brother/sister whether full
or half blood, spouse, ancestors and lineal
descendants,

i) Salary or allowances paid by a father-employer to

his minor children for services rendered in their
family business is non-deductible in the tax return
of the former;
j) Alimony and/or allowance paid under a separation
agreement are non-deductible from gross income.
k) A taxpayer could not deduct his loss from the sale of
securities to a corporation wholly owned by him
from his personal gross income.
428.

Capital expenditures defined:

Answer.
Expenditures or money spent in the acquisitio n '
betterment or permanent improvement of an asset,
benefitS more than one accounting period or that result
in obtaining benefits of a permanent nature such as on
lands, buildings and machineries and is not deductible
from gross income in the year it was paid.
Examples:

i)

a) Cost of defending or perfecting title to property as it

constitutes a part of the cost of the property and is not
a deductible expense. (Atlas Consolidated Mining Co.
vs. CIR, 102 SCRA 246)
b) Amount spent to establish or improve corporate
reputation or image.
c) Architect's fees as they constitute a part of the cost of
the building constructed;
d) Commissions paid in selling securities as they form
part of the cost of the securities purchased;
e) Compensation or fees paid for services in carrying on
campaign to sell corporation's capital stock, expenses
relating to recapitalization and reorganization of the
corporation; the cost of obtaining stock subscription;
promotion expenses and expenses or fees for listing
capital stock in the stock exchanges, paid only once
and the benefit acquired thereby continuing
indefinitely but such stock listing fee is an ordinary and
necessary business expense if it is a recurring costs or
paid annually for the maintenance (annually) of the
listing. (CIR vs. Atlas Consolidated Mining & Devt
Corporation & CTA, January 22, 1981)
f) In the case of a corporation, expenses for organization,
such as corporation fees, attorney's fees and
accountant's charges, which are ordinarily capital
expenditures;
g) Amount spent for reorganization or re-capitalization of
the business entity.
h) Expenses of the administration of an estate's (legal
cost, attorney's fees, appraisal's fees, executor's
commission and accountant's fees are chargeable
against the "corpus, of the estate and are not allowable
deductions.
Commissions paid in acquiring property as they represent part of
the cost of the property acquired;

j)
k)
l)
m)
n)

o)
p)
q)

Amounts paid in connection for maps, abstracts, legal opinions, on

titles, recording fees and surveys of property;
Amount paid in connection with geological explorations
development and subdividing of real estate;
Oil drilling and exploration expenses are capital expenditures.
Expenses for clearing off and grading lots acquired as they
represent part of the cost of land;
The cost of farm machinery, equipment and farm building and
amounts spent in the development of farms, orchards and ranches
prior to the time when productive state is reached. (Gancayco vs.
Collector, 1 SCRA 980)
Amount spent to establish or improve corporate reputation or
image.
Amounts spent for topographical survey made for the purpose of
establishing property boundaries and lines on land are capital
expenses.
Margin fees on the remittances for foreign exchange abroad are
not deductible because the expense must be incurred for realizing
profits or minimizing losses in the Philippines. (Esso Standard
Eastern vs. CIR, July 7, 1989)
429.

(a) Are special aliens entitled to personal and

additional exemption?
(b) How about a Filipino occupying a managerial
position in a MNC
Answer.
(a) Special aliens are taxed at gross. Thus, they can not
enjoy personal and additional exemptions.
(b) If such Filipino opted to avail of the preferential rate of
15% income tax he may not avail of the personal and
additional exemptions, however, if he opted to subject his
income to the normal income tax, he may avail of the
personal and additional exemptions provided by law.
430.

Summary of differences among income taxpayers:

(Secs. 24 - 29 and 33)
Answer.

RC

NRC

RA

NRAE

NRA
NETB

Within
Net
income

Within
Net
income

Within
Net income

Within
Gross
income

5%-32%

5%-32%

5%-32%

25% FWT

Available

Available

Available

Available*

Not Available

Available

Available

Available

N/A

N/A

Available

Available

Available

Available

N/A

Source of
income

Within and
W/out

Tax Base

Net income

Tax Rates
Personal
Exemptions
Additional
Exemption
s
Allowable
Deduction
s

5%-32%

Fringe
Benefit

32% of
GUMV

32% of
GUMV

32% of
GUMV

32% of
GUMV

25% of
GUMV

Subject to the Principle of Reciprocity

DC

RC

NRC

Within
Net
income

Within
Net income

30%

30%

Not
Available

Not
Available

Not Available

N/A

N/A

N/A

Available
N/A

Available
N/A

N/A
N/A

Source of
income

Within and
W/out

Tax Base

Net income

Tax Rates
Personal
Exemptions
Additional
Exemption
s
Allowable
Deduction
s
Fringe
Benefit

30%

Under RA 9337, beginning January 2009, it shall be 30%.

Subject to the recognition of the Principle of Reciprocit