Special Income Taxation

Long-term deposits or investment certificates with a maturity of not less than 5 years, the form of which shall be prescribed by the BSP and issued by banks only are exempt from final tax.

• TRUE

• FALSE

As a general rule, interest income of short-term deposits with banks are subject to

• 20% Final Tax

• Exempt

• Regular Income Tax

• Depends on maturity

Which of the following statement is incorrect.

• The 19-lender rule does not apply to government securities like Treasury Bills, Treasury Bonds and Treasury Notes.

• To be considered as deposit substitute, the 19-lender rule shall apply where public means maximum of 20 corporate lenders at any one time.

• The final tax from interest income in zero coupon instrument or securities shall be withhold upon origination.

• The final tax from interest income in interest-bearing instrument or securities shall be withhold upon payment of interest.

Which of the following pre-termination final tax is incorrect

• Less than 3 years - 20%

• 3 years to less than 4 years - 15%

• 4 years to less than 5 years - 5%

• 5 years or more - Exempt

In order to claim for final tax exemption on long-term investment, it is also mandatory that (choose the incorrect one)

• The investment of individual investor in the common or individual trust fund or investment management account must be held/managed by the bank for at least 5 years.

• The underlying investments of the individual trust account or investment management account must qualify as deposit substitute issued by a bank.

• The investment of individual investor in the common or individual trust fund or investment management account must be held/managed by the bank for less than 5 years.

• The individual trust account or investment management account must be hold on to such underlying investment for at least 5 years.

For joint account of resident and non-resident on forex deposit, 50% of the interest shall be exempt and 50% shall be subject to 15% final tax.

• TRUE

• FALSE

The following are Interest income subject to regular tax, except

• Investment in corporate bonds

• Domestic sources, whether bank or non-bank

• Lending activities, whether or not in the course of business

• Penalty for legal delay or default

Which of the following is considered as return of capital, hence, not taxable.

• Liquidating dividend

• Scrip dividend

• Cash dividend

• Property dividend

Royalties on books sold on e-copies or compact disks are subject to

• 10% Final Tax

• Regular Income Tax

• Exempt

• 20% Final Tax

Which of the following is incorrect

• Individuals are subject to 20% final tax if they received prize exceeding P10,0000

• Prizes received by corporations are subject to RIT.

• PCSO winnings are exempt from final tax.

• Tax informer's reward is subject to 10% final tax.