Part I.

Computation of Income Tax

Simple Corporation is engaged in the business of manufacturing ready-to-wear clothes. Below is the
data of its operation during the current year.

Sales (domestic) P3,000,000

Sales (abroad) 7,000,000
Cost of goods sold 5,000,000
Yield from deposit substitute 400,000
Expenses on domestic sales 1,000,000
Expenses on sales abroad 2,000,000

Compute the income tax payable if the taxpayer is:

a. Domestic corporation

Sales (domestic) P3,000,000

Sales (abroad) 7,000,000
Total 10,000,000
Less: COGS 5,000,000
Expences on domestic sales 1,000,000
Expences on Sales abroad 2,000,000 8,000,000
Taxable Income 2,000,000
Rate of Tax 30%
Income tax due 600,000

Yield from deposit substitute 400,000

Rate of tax 20%
Final withholding tax 80,000

b. Resident foreign corporation

Sales(Domestic) 3,000,000
Less:
Expences on domestic sales 1,000,000
COGS(5,000,000/2) 2,500,000 3,500,00
Total -500,000 LOSS
NO income tax due

Yield from deposit substitute 400,000

Rate of tax 20%
Final withholding tax 80,000

c. Nonresident foreign corporation

Sales domestic 3,000,000

Yield from deposit sales 400,000
Total Gross Income 3,400,000
Rate of tax 30%
Final w/holding tax 1,020,000

Part II. Minimum Corporate Income Tax (MCIT)

The records of Panday Corporation are as follows:

Quarte Normal MCIT Taxes Excess Excess

r Income Tax Withheld MCIT Withholding
(NIT) Taxes Prior tax prior
Year year
1st 100,000 80,000 20,000 30,000 10,000
2nd 120,000 250,000 30,000
3rd 250,000 100,000 40,000
4th 200,000 100,000 35,000
Total 670,000 530,000 125,000
Compute the income tax payable for the:

a. first quarter

b. second quarter

c. third quarter

d. whole year

e. whole year, assuming that during the fourth quarter, the NIT and MCIT are P50,000 and
P120,000, respectively

Answer:

First Quarter Normal Income Tax MCIT Higher Amount

1st quarter 100,000 80,000 NIT-100,000

Second Quarter
1st quarter 100,000 80,000
2nd quarter 120,000 250,000
Total 220,000 330,000 MCIT-330,000

Third Quarter:
1st quarter 100,000 80,000
2nd quarter 120,000 250,000
3rd quarter 250,000 100,000
Total 470,000 430,000 NIT-470,000

Fourth Quarter
1st quarter 100,000 80,000
2nd quarter 120,000 250,000
3rd quarter 250,000 100,000
4th quarter 200,000 100,000
Total 670,000 530,000 NIT-670,000

1st quarter 2nd quarter 3rd quarter 4th quarter E. 4th quarter

Income tax 100,000 330,000 470,000 670,000 550,000

due (higher)
note 2
Less:

Taxes (10,000) (10,000) (10,000) (10,000) (10,000)

withheld-prior
year
Taxes withheld (20,000) (20,000) (20,000) (20,000) (20,000)
- 1st Qtr
Taxes withheld (30,000) (30,000) (30,000) (30,000)
- 2nd Qtr
Taxes (40,000) (40,000) (40,000)
withheld- 3rd
Qtr
Taxes (35,000) (35,000)
withheld- 4th
Qtr
Taxes paid, 1st (40,000) (40,000) (40,000) (40,000)
Qtr
Taxes paid, 2nd (230,000) (230,000) (230,000)
Qtr
Taxes paid, 3rd (70,000) (70,000)
Qtr
Excess MCIT, (30,000) -------------- (30,000) (30,000) -------------
prior year
Net income tax P40,000 P230,000 P70,000 P165,000 P75,000
due

e. whole year, assuming that during the fourth quarter, the NIT and MCIT are P50,000 and P120,000, respectively
NIT MCIT
100,000 80,000 whole year ,net income tax due= 75,000
120,000 250,000
250,000 100,000
50,000 120,000
520,000 550,000 MCIT-550,000

Part III. Improperly Accumulated Earnings Tax (IAET)

ABC Corporation, a domestic corporation operating in the Philippines, is being audited to ascertain
whether the company is subject to improperly accumulated income tax (IAET).

Gross receipts P4,500,000

Cost of sales 1,200,000

Deductions 680,000

Yield from deposit substitute 75,000

Interest income on dollar deposit with PNB 42,000

Cash dividends paid to its stockholders 375,000

Amount received for construction of building 1,000,000

ANSWER

a. What is the company’s taxable income?

Gross Receipts 4,500,000
Less: Cost of sales 1,200,000
Deductions 680,000 1,880,000
Taxable Income P2,620,000
Tax Rate 30%
Income Tax Payable P786,000

b. What is the company’s IAET?

Taxable Income P2,620,000
Add: Yield from deposit substitute 75,000
Interest income on dollar deposit 42,000 117,000
Total 2,737,000
Less:
Final withholding tax on deposit substitute 15,000
(75,000*20%)
Final withholding tax on dollar deposit 6,300
(42,000*15%)
Cash dividends paid 375,000
Amount received for construction of building 1,000,000 1,396,300
Improperly accumulated taxable Income P1,340,700
Tax Rate 10%
IAET P134,070

Module Number 3 Additional to Tax

Computation of Total Income Tax Due

Virgilio filed and paid his income tax return for the taxable year 2019 on May 15, 2020. The income tax due
per return is P15,000.

ANSWER

1. Compute the total amount due including penalties and interest as of May 15, 2020.

Income tax due per return P15,000

Add: 25% surcharge P 3,750
Total amount Due P18,750
Less: Amount paid P15,000
Amount still due P3,750

2. Assume that the return was filed and the first installment of P7,500 was paid only in October 30, 2020.
Compute the total amount due on the second installment.

Income Tax 15,000

Less: Amount of Tax paid 7,500
Deficiency tax 7,500
Add: Deficiency interest
(7500*12%*167/365) 411.78
Total Amount Due(second installment) P7,911.78
3. Compute the total amount due including interest and penalties if the late filing of the return and the late
payment of tax was due to willful neglect of the taxpayer.

Income Tax 15,000

Add: Surcharges
Late Filing and Payment(15,000*50%) 7,500
Interest(15,000*12%*167/365) 823.56 8,323.56
Total Amount Due, October 30,2020 P23,323.56