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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.