Fundamentals of

Accounting, Business
and Management 2
Quarter 2 – Module 4:
Taxable Income and Tax Due
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Fundamentals of
Accounting, Business
and Management 2
Quarter 2 – Module 4:
Taxable Income and Tax Due
Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accounting, Business and Management 2 – Grade

12 Alternative Delivery Mode (ADM) Module on the Taxable Income and Tax Due!

This module was collaboratively designed, developed, and reviewed by educators

both from public and private institutions to assist the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

For the learner:

1
Welcome to the Fundamentals of Accounting, Business and Management 2 – Grade
12 Alternative Delivery Mode (ADM) Module on the Taxable Income and Tax Due!

The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a
learner is capable and empowered to successfully achieve the relevant
competencies and skills at your own pace and time. Your academic success lies in
your own hands!

This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the module.

What I Know This part includes an activity that aims to check

what you already know about the lesson to take. If you get all the
answers correct (100%), you may decide to skip this module.

What’s In This is a brief drill or review to help you link the current
lesson with the previous one.
What’s New In this portion, the new lesson will be introduced to you
in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the lesson.

This aims to help you discover and understand new concepts and
skills.

What’s More This comprises activities for independent practice to

solidify your understanding and skills of the topic. You may check the
answers to the exercises using the Answer Key at the end of the module.

What I Have Learned This includes questions or

blank sentence/paragraph to be filled in to process
what you learned from the lesson.
What I Can Do This section provides an activity which will help you
transfer your new knowledge or skill into real life situations or
concerns.

Assessment This is a task which aims to evaluate your level of

mastery in achieving the learning competency.

Additional Activities In this portion, another activity will be given to

you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

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 Answer Key This contains answers to all activities in the
module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

What I Need to Know

From the last module, we have understood the bank reconciling items. These items
are important in preparing for bank reconciliation statement.

At the end of the lessons, you should be able to:

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1. Explain the procedure in the computation of gross taxable income and tax
due (ABM_FABM12-IIh-j-17)

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 What I Know

Select the letter of the best answer.

1. Which of the following is computed as gross income by a resident alien?
a. Compensation income from Philippines
b. Compensation income from foreign country
c. Business income from foreign country
d. None of the above

2. A classification of individual who is a Filipino citizen and lives or resides in

another country.
a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien

3. How much is the tax equivalent and tax rate of a business with net income of
P250,000.
a. 0%
b. 20% in excess of P250,000
c. P30,000 + 25% in excess of P400,000
d. P130,000 + 30% in excess of P800,000
e. None of the above

4. A non-resident citizen has the following sources of income:

Compensation income – Philippines P30,000 monthly
Business income – China P200,000
Allowable deductions – Philippines P2,000 monthly
Business expenses – China P10,000 How much is
tax due?
a. P17,000
b. P17,100
c. P17,200
d. P17,300

5. In the same sources of income as above, how much is tax due of a

nonresident alien not engage in trade or business?
a. P93,000
b. P152,000
c. P141,000
d. P140,000

Lesson
Taxable Income and Tax
5
 1 Due
The previous module has discussed the key features for the computation of tax
dues. This module aims to discuss a more comprehensive computations as we
differentiate tax dues from each classification of individual. In addition, this
module will show you different BIR Form requirements needed by a single
proprietor business.

What’s In

Identify the terms being described in each item. Select the correct answers from the
box of words below.

Income Bureau of Internal Revenue

Taxable Income Tax schedule

Deductions Gross income

_________________1. On SEC. 31 of the National Internal Revenue Code (NIRC) of

1997, it is defined as “the pertinent items of gross income specified in this Code, less
the deductions, if any, authorized for such types of income by this Code or other
special laws” (National Internal Revenue Code (As Amended by RA 10963) n.d.)
_________________2. It is defined by the NIRC as all wealth, which flows into the
taxpayer other than as a mere return of capital.
_________________3. These are amounts that reduces the gross income to arrive at a
taxable income.
_________________4. It is an attached agency of the Department of Finance. It is
tasked to assess and collect all national internal revenue taxes, fees, and charges,
and to enforce all forfeitures, penalties, and fines connected therewith.
_________________5. It is a rate sheet used by individuals or corporations in
determining their tax dues.

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_________________6. These are gains arising from compensation, business,
investment, or winnings where allowable deductions and exclusions are not yet
deducted.

Let us examine:

Income is defined by the Bureau of Internal Revenue as all wealth which flows into
the taxpayer other than as a mere return of capital. It can be in the form of
compensation, gains arising from business and investments or prizes and
winnings.
1. Who is the regulatory body who handles the collection of government
taxes?
Bureau of Internal Revenue (BIR) is an attached agency of the Department of
Finance. Its task is to assess and collect all national internal revenue taxes,
fees, and charges, and to enforce all forfeitures, penalties, and fines
connected with it.

2. Who can gain income and be taxed?

Individuals and corporations are the major classifications of taxpayers. The

basis for the computation of the tax due is the determination of gross
income. This lesson covers tax due to individuals.

INDIVIDUALS

(Income from compensation, business, investment, or

winnings)

CORPORATIONS Resident Citizen

30% Corporate tax is
imposed on net Non-resident Citizen
income
Resident Alien

Non-resident Alien Engaged in Trade or Business

Non-resident Alien Not Engaged in Trade or Business

3. What part of the income is being taxed?

Taxable income is the basis where tax due is being computed.

Compensation Income
Add: Business Income
Total Gross Income
Less: Allowable Deductions

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 Taxable Income

4. How does each individual being taxed?

For individuals, each is different in the recognition of gross income.

Refer to the table below.

Summary of Tax base and Tax rate

Classification of Individuals Taxable Income

Income earned within and outside the
RESIDENT CITIZEN (RC)
PH

NON-RESIDENT CITIZEN (NRC) Income generated within the PH.

RESIDENT ALIEN (RA) Income generated within the PH.

NON-RESIDENT ALIEN ENGAGED IN

Income generated within the PH.
TRADE/BUSINESS (NRA-ETB)
NON-RESIDENT ALIEN NOT
Gross income generated within the PH is
ENGAGED IN TRADE/BUSINESS
taxed 25% Final Tax
(NRA-NETB)

5. What do we use as a basis for computation of taxes?

The new tax schedule as amended by RA 10963 or the Tax Reform for
Acceleration and Inclusion (TRAIN Law). This is effective January 1, 2018 to
December 31, 2022.
The tax rate depends on the taxable income of an individual. Tax due is the
amount paid by a taxpayer from its taxable amount, rated using the tax
table. Tax due also called income tax payable.

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 What’s New

Computation of Taxable Income and Tax Due

Note: The amounts below are assumed and the illustrations are for computation
and discussion purposes only.

A taxpayer has the following income and expenses during the year:
a. Compensation income – Philippines P100,000
b. Compensation income – Singapore 200,000
c. Business income – Philippines 300,000
d. Business income – Japan 400,000
e. Allowable deductions – Philippines 10,000
f. Business expenses – Philippines 50,000
g. Business expenses – Japan 40,000

Required: Compute for the taxable income and tax due for the following individuals:

1. Resident citizen
2. Non-resident citizen
3. Resident alien
4. Non-resident alien engaged in trade or business
5. Non-resident alien not engaged in trade or business

1. Resident citizen considers all income from worldwide sources and its
corresponding allowable deductions and expenses.

RESIDENT CITIZEN
Compensation income PH ₱
100,000
Compensation income SG
200,000
Business income PH
300,000
Business income JPN
400,000
Total Gross Income ₱
1,000,000.00
Less:
Allowable deductions PH

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 10,000
Business expenses PH
50,000
Business expenses JPN
40,000
Taxable Income ₱
900,000.00
Tax
130,000
Tax Rate 30% in excess of P800,000
30,000
Income Tax Payable ₱
160,000

2. Non-resident citizen considers income from sources within the Philippines

and its corresponding allowable deductions and expenses.

NON-RESIDENT CITIZEN
Compensation income PH ₱ 100,000
Business income PH 300,000
Total Gross Income ₱
400,000.00
Less:
Allowable deductions PH
10,000
Business expenses PH
50,000
Taxable Income ₱
340,000.00
Tax -
Tax Rate 30% in excess of P250,000
18,000
Income Tax Payable ₱
18,000

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3. Resident alien considers income from sources within the Philippines and its
corresponding allowable deductions and expenses.

RESIDENT ALIEN
Compensation income PH ₱ 100,000
Business income PH
Total Gross Income 300,000
₱
400,000.00
Less:
Allowable deductions PH
10,000
Business expenses PH
50,000
Taxable Income ₱
340,000.00
Tax -
Tax Rate 30% in excess of P250,000
18,000
Income Tax Payable ₱
18,000

4. Non-resident alien engaged in trade or business considers income from

sources within the Philippines and its corresponding allowable deductions
and expenses.

NON-RESIDENT ALIEN ETB

Compensation income PH ₱
100,000
Business income PH
Total Gross Income 300,000
₱
400,000.00
Less:
Allowable deductions PH
10,000

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 Business expenses PH
50,000
Taxable Income ₱
340,000.00
Tax -
Tax Rate 30% in excess of P250,000
18,000
Income Tax Payable ₱
18,000

5. Non-resident alien not engaged in trade or business considers income from

sources within the Philippines and imposed of 25% Final tax at gross
income.

NON-RESIDENT ALIEN NETB

Compensation income PH ₱
100,000
Business income PH
Total Gross Income 300,000
₱
400,000.00
Final Tax of 25% on Gross Income
Income Tax Payable 100,000
₱
100,000

What is It

Steps in Computing Income Tax Due for Individuals

Using the taxable income as reference, look at the “over” column in

Step 1: the tax table. The taxable income must be greater than the over column
but less than the “but not over” column.
Refer to the tax rate corresponding to the row of the taxable income.
Step 2: Compute for the excess:
Excess = (Taxable income – “Over” column) x tax rate (%)
Step 3: Add the tax equivalent (if present)

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Example: Taxable income for a resident citizen: P500,000

Using the taxable income as reference, look at the “over” column in

the tax table. The taxable income must be greater than the over Step 1:
column but less than the “but not over” column.

Row: over- 400,000 / not over 800,000

Add the tax equivalent (if present) Step

3:
P30,000 + 25,000 = P55,000 (Tax Due)
Let us practice:
A taxpayer has the following income and expenses during the year:

a. Compensation income – Philippines P400,000

b. Compensation income – Singapore 600,000
c. Business income – Philippines 1,200,000
d. Business income – Japan 900,000
e. Allowable deductions – Philippines 20,000
f. Business expenses – Philippines 110,000
g. Business expenses – Japan 67,000

Required: Show computations for the taxable income and tax due for the following
individuals:

1. Resident citizen
2. Non-resident citizen

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 3. Resident alien
4. Non-resident alien engaged in trade or business
5. Non-resident alien not engaged in trade or business

What’s More

The Bureau of Internal Revenue (BIR)

It is an attached agency of the Department of Finance. Its

task is to assess and collect all national internal revenue
taxes, fees, and charges, and to enforce all forfeitures,
penalties, and fines connected therewith.

The current Commissioner of BIR is Caesar Dulay under

Duterte administration.

Primary Registration Requirements

A. Securing a Taxpayer Identification Number (TIN)

Taxpayer identification number (TIN) is a unique number assigned to each taxpayer

whether individual or juridical person. Once a person has TIN, it will be his lifetime
number for BIR, thus he cannot have several numbers. This is intended to monitor
the payment of the taxpayer to their obligation to the government in the form of tax
returns. You can apply for a TIN by visiting the nearest branch or online at
https://ereg.bir.gov.ph.

Requirements to get a TIN:

a. Identification documents such as birth certificate, passport, driver’s license,

or cedula.
b. Marriage contract for married women
c. Duly accomplished BIR Form 1901 (for self-employed/ starting a business),
or BIR 1902 (for employee) or BIR 1904 for unemployed with transactions in
the government, whichever is applicable.

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 B. Registration of Business in BIR

Registering a business to BIR is one of the things that make the business legal and
will avoid the risks of being a tax evader. BIR form 2303 or the Certificate of
Registration (COR) is proof that the business is registered. The requirements differ
in many lines of business or type of industry. These are some basic requirements
for a single proprietor.

Requirements to get BIR 2303 (Certificate of Registration)

1. DTI certification
2. Mayor’s permit
3. TIN
4. BIR Form 1901 (Self-employed)
5. BIR Form 0605 (Payment form)
BIR Forms

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Image source: BIR 1901/0605-busap.blogspot.com, BIR 2303-induced.info

16
 Notes to the Teacher
BIR Form 2303 or Certificate of Registration should always be
displayed in the office where people can see it. Every business is
different in BIR Forms to be submitted. To see the required forms and
its respective deadlines, always refer to the Certificate of Registration.

What I Have Learned

Discuss the following concepts.

1. What is income?
___________________________________________________________________________
___________________________________________________________________________

2. What is taxable income?

___________________________________________________________________________
___________________________________________________________________________

3. Describe the differences of each individual in the computation of taxable

income.
___________________________________________________________________________
___________________________________________________________________________

4. How is tax due being computed?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

5. What is the function of the Bureau of Internal Revenue?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

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 What I Can Do

Fill out the BIR Forms below with the following details (Item 1-14):

a. TIN 123-456-999
b. Single proprietor
c. Applying at a branch office
d. Current date as registration date
e. RDO is 020
f. Use your personal details in other taxpayer information.

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Assessment

A. Compute for the tax due for the following individuals.

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 1. A resident citizen with taxable income of P420,000.
2. A non-resident citizen with taxable income of P7,845,662.
3. A resident alien with taxable income of P420,880.
4. A non-resident alien ETB with taxable income of P1,540,736.
5. A non-resident alien NETB with taxable income of P10,540,736

B. A taxpayer has the following income and expenses during the year:

a. Compensation income – Philippines P330,580

b. Compensation income – Korea 763,210
c. Business income – Philippines 991,540
d. Business income – London 1,820,070
e. Allowable deductions – Philippines 24,000
f. Business expenses – Philippines 270,320
g. Business expenses – London 291,400

Required: Show computations for the taxable income and tax due for the following
individuals:

1. Resident citizen
2. Non-resident citizen
3. Resident alien
4. Non-resident alien engaged in trade or business
5. Non-resident alien not engaged in trade or business

Additional Activities

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A taxpayer has the following income and expenses during the year:

a. Compensation income – Philippines P430,580

b. Compensation income – Korea 463,210
c. Business income – Philippines 491,540
d. Business income – London 1,420,070
e. Allowable deductions – Philippines 44,000
f. Business expenses – Philippines 240,320
g. Business expenses – London 491,400

Refer to the details above and answer the following questions.

______________1. How much is the gross income if the individual is a resident
citizen?
______________2. How much is the taxable income if the individual is a resident
citizen?
______________3. How much is the gross income if the individual is a non-resident
alien not engage in trade or business?
______________4. How much is the taxable income if the individual is a resident
alien?
______________5. How much is the tax due if the individual is a non-resident alien
not engage in trade or business?

References
Beticon, Josefina L, James Christopher D Domingo, and Fermin ANtonio D. Yabut.
2016. Fundamentals of Accounting , Business and Management 2 (Teacher's
Manual). Vibal Group, Inc.
n.d. Bureau of Internal Revenue. Accessed October 10, 2020.
https://www.bir.gov.ph/index.php/tax-information/income-tax.html.
n.d. National Internal Revenue Code (As Amended by RA 10963). Accessed 10 12,
2020. https://www.bir.gov.ph/index.php/tax-code.html.
Ong, Flocer Lao, and Janelle Gomendoza. 2017. Fundamentals of Accounting,
Business and Management 2 for Senior High School. C & E Publishing, Inc.

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For inquiries or feedback, please write
call: or

Department of Education – Region III,

Schools Division of Bataan - Curriculum Implementation Division
Learning Resources Management and Development Section (LRMDS)

Provincial Capitol Compound, Balanga City, Bataan

Telefax: (047) 237-2102

Email Address:
[email protected].
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