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MARY JOY P. JUNIO, CPA
Notre Dame of Midsayap College
Midsayap, Cotabato
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Separation pay
Separation pay is taxable ifvoluntarily availed of.
Examples of involuntary separation:
a. Death
b. Sickness
c. Disability
d. Reorganization/merger ofcompany
e. Company at the brink of
bankruptcy
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This is stated allowance paidregularly to a person on hisretirement or to his
dependents on his death, inconsideration of pastservices, meritorious work,
age, loss, or injury
Pension
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Rules:1. If paid or availed of as salary
of an employee who is onvacation or on sick leave,taxable.
2. Monetized value of 10 days orless, not taxable3. Terminal leave, not taxable
Vacation and
sick leave
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Not taxable if the
total amountreceived is P30,000or less. Any amount
exceeding P30,000 istaxable.
Thirteenth month pay
and other benefits
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Premium paymentreceived for workingbeyond regular hours of
work which is includedin the computation ofgross salary of employee
Overtime Pay
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Profit Sharing
It is the proportionateshare in the profits ofthe businessreceived by
the employee inaddition to his wages.
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Amount received as anaward for special services
of employee, orsuggestions to employerresulting in the preventionof theft and robbery
Awards for Special Services
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Beneficial paymentsSuch as where an
employer pays the
income tax owed by anemployee areadditionalcompensation income
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Shares of stock received ascompensation
Employee stock optionCancellation of debtInsurance premiums as
compensationIncome tax paid as
compensation
Other forms of compensation
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Business Defined
Business means anycommercial activity engaged in asa means of livelihood or profit ofan individual or group ofindividuals.
Profession DefinedProfession is primarily any
endeavour or work requiringspecialized training in the field of
learning, art or science engaged inas a means of livelihood or profitof an individual or group ofindividuals.
GI from Business and Profession
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1.Manufacturing
2.Merchandising or
Trading3.Servicing
4.Farming
5.Long-term contract
Gross Income from Business
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Means inclusion of allincome not expresslyexempted within the class of
taxable income under thelaws irrespective of thevoluntary or involuntaryaction of the taxpayer inproducing the gains, andwhether derived from legal orillegal sources.
Income from whatever source
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a. Gambling
b.Kidnappingc. Extortiond.Smuggling
e. Embezzlement
Income from illegal sources:
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Embezzled fundsAre income without
consent (express orimplied) with anobligation to repay.