Income‌ ‌Taxation‌ Saturday,‌ ‌17‌ ‌October‌ ‌2020‌ ‌

Corporate‌ ‌Income‌ ‌Tax‌1:00pm-4:00pm‌ ‌

Solve‌ ‌the‌ ‌following‌ ‌problems‌ ‌and‌ ‌provide‌ ‌a‌ ‌complete‌ ‌solution.‌

1. CLenovo, Inc., a resident foreign Corporation, has earned the following income during 2018.
Dividend from:
Microsoft, a non-resident corporation 500,000
Intel, a resident foreign corporation 400,000
IBM, a domestic corporation 300,000
Interest from:
Current Account, BDO 600,000
Savings deposit, ABN-AMRO Bank, UK 700,000
US Dollar Deposit (FCDU)-BPI Makati 800,000
Royalty Income from Various Domestic Corp. 100,000

Additional information:

 The ratio of microsoft’s gross income in the Philippines over worldwide income for the
past three years is 40%
 The ratio of intel’s gross income in the Philippines over worldwide income for the past
three years is 60%
 The ratio of IBM’s gross income in the Philippines over worldwide income for the past
three years is 80%
How much is the total income tax expense of Lenovo?
Answer:
3 YEARS AGO 2018
Microsoft, Non Resident 500,000 x 40% = 200,000 x 30% = 150,000
Intel, Resident Foreign 400,000 x 60% = 240,000 x 0% = 0
Ibm, Domestic Corporation 300,000 x 80% = 240,000 x 30% = 90,000
1,200,000 680,000 240,000

Current Account, BDO 600,000 x 20% = 120,000

Saving deposit, ABN-AMRO Bank, UK 700,000 x 20% = 140,000
US Dollar Deposit (FCDU)-BPI Makati 800,000 x 15% = 120,000
Royalty Income from Various Domestic Corp. 100,000 x 20% = 20,000
2,200,000 400,000
240,000 + 400,000 = 640,000

2. In 2018, a domestic corporation declared and paid dividends to its shareholders as follows:
 To Apol, a resident citizen 100,000
 To Alex, a nonresident citizen 100,000
 To George, s resident alien 100,000
 To LJ, a nonresident alien engaged in trade in the Philippines 100,000
 To Francis, a nonresident alien not engaged in trade in the Philippines 100,000
 To chen, a domestic Corporation 100,000
 To a resident foreign corporation 100,000
 To a nonresident foreign corporation (with tax sparing) 100,000
How much final tax shall be withheld by the Corporation?
Answer:
To Apol, a resident citizen 100,000 x 10% = 10,000
To Alex, a nonresident citizen 100,000 x 8% = 8,000
To George, s resident alien 100,000 x 10% = 10,000
To LJ, a nonresident alien engaged in trade in the Philippines 100,000 x 20% = 20,000
To Francis, a nonresident alien not engaged in trade in the Philippines 100,000 x 25% = 25,000
To chen, a domestic Corporation 100,000 x 30% = 30,000
To a resident foreign corporation 100,000 x 10% = 10,000
To a nonresident foreign corporation (with tax sparing) 100,000 x 15% = 15,000
Witheld Final Tax 800,000 128,000

3. Alpha Corporation, a domestic Corporation has the following records of income and expenses
during 2018 taxable year:

Gross income, net of 1% withholding tax 1,435,500

Expenses 790,600
Rent Income, Net of 5% withholding tax 136,800
Dividend from Domestic Corporations 25,000
Royalty, gross of tax 80,000
Interest from bank deposit with PNB, net of tax 12,000

Compute for tax income tax payable of Alpha Corporation.

Answer:
Gross Income 1,421,145
Rent Income 129,960
1,551,105
Expenses (790,680)
760,505
x 30%
Income Tax Payable P 228,151

1. Using the data of Alpha Corporation, compute for the final tax paid.
Answer:
Divided from Domestic Corporation 25,000 x 30% = 7,500
Royalty 80,000 x 20% = 16,000
Interest from bank deposit 12,000 x 20% = 2,400
Final Tax Paid ` 117,000 25,900

1. Corporation has the following data for 2018 taxable year.

Gross Income, Phil 1,000,000
Gross income, USA 500,000
Gross Income, Japan 500,000
Expenses, Phils 300,000
Expenes, USA 200,000
 Expenses, Japan 100,000
Other Income:
Dividend from San Miguel Corporation 70,000
Dividend from Ford Motors, USA 120,000
Gain on Sale of San Miguel Shares directly to buyers 150,000
Royalties, Phils 50,000
Royalties, USA 100,000
Interest receivables in the Philippines 60,000
Rent Income, Land in USA 250,000
Rent Income, Building in the Philippines 100,000
The company also sold a condominium classified as capital asset for P2,000,000. The cost of the
condominium is P1,000,000 while its Zonal Value is P3,000,000.

Required: (All income means Regular, passive and capital Gains)

Answer:
a. Income Tax on All income as domestic Corporation
Domestic Corporation (Philippines)
Gross Income 1000,000
Expenses (300,000)
700,000
x 30%
210,000

Dividend from SM Corp 70,000 x 10% = 7000

Interest Receivables 60,000 x 20% = 12,000
Royalties 50,000 x 20% = 10,000
180,000 29,000
b. Income tax on All income if the corporation is a resident foreign corporation.
Gross Income 500,000
Gross Income 500,000
Expenses (200,000)
Expenses (100,000)
700,000
x 30%
210,000

Dividend from ford motors, USA 120,000 x 20% = 24,000

Royalties 100,000 x 20% = 20,000
220,000 44,000
 c. Income tax on All income if the corporation is a nonresident foreign corporation.
Gross Income 500,000
Gross Income 500,000
Expenses (200,000)
Expenses (100,000)
70,000
x 30%
210,000

Dividend from ford motors, USA 120,000 x 25% = 30,000

Royalties 100,000 x 25% = 25,000
220,000 55,000
3,000,000 x 6% = 180,000
Gain on sale of SM share directly to the buyers 150,000 x 10% = 15,000
Rent Income, Land in USA exempt
Rent Income, Building in PH 100,000 x 6% = 6000
250,000 21,000
Condominium 3000,000 x 6% = 180,000
3250,000 201,000