Topic 14

• Inclusions

  interest, rents, royalties, dividends, annuities, prizes and winnings, pensions
• Compensation Income


  is income arising out of an employer employee relationship.
• Forms and Measurement of Compensation 


  compensation may be paid in money or in some medium other than money such as stocks bonds or other forms of property.
• Regular Compensation 


  includes basic salary fixed allowances for representation, transportation and others paid to an employee per payroll period
• Supplemental Compensation 


  includes payments to an employee in addition to the regular compensation
• Compensation income received after termination of employee employer relationship 


  renumeration for services constitutes compensations income even if the relationship of employer and employee does not exist any longer at the time when payment is made between the person in whose employ the services had been performed and the individual who performed them.
• Fringe benefits 


  is any goods service or other benefit furnished or ganted by an employer in cash or in kind in additon to basic salaries to individual employees.
• Fixed or Variable Allowances 


  which are received by a public officer or employee or officer or employee of a private entity in addition to the regular compensation, fixed his position or offices compensation subject to income tax and consequently creditable withholding tax on compensation income.
• Examples of Fixed or Variable Allowances

  Transportation Allowances, Representation Allowances, Communication Allowances, Living away from home Allowance
• Advances and reimbursements for travelling and entertainment expenses 


  reasonable amounts of reimbursement / advances for travelling and entertainment expenses
• Tips and Gratuities 


  paid directly to an employee by a customer of the employer that re not accounted for by the employee to the employer are considered as taxable income subject to basic tax.
• Vacation and Sick Leave Allowances 


  are amounts of vacations allowances or sick leave credits which are paid to an employee treated as compensation income.
• Stipends of Resident Physicians 


  the stipends received by resident physicians during their intensive training in the residency program of a hospital are subject to creditable withholding tax ( CWT )
• Service fees and royalties 


  to distinguish between compensation for service and royalty payments, the taxpayers must inquire on whether the payee has proprietary interest in the property that gave rise to the income.
• Business Income 


  gross income derived from the connduct of trade or business or the exercise of profession.
• Bad debt recovery


  subsequent recovery of a bad debt previously written off in the books is a taxable income provided that the written off of the account resulted to a lower taxable income at the time of write off.
• Tax Refund 


  also applies with respect to refund or credit
• Debt Restucturing 


  is a process used by companies individuals and even countries to avoid the risk of defaulting on their existing debts such as by negotiating lower interest rates
• Give the following tax refunds are not taxable

  Income tax ( except fringe cancellation or condonation of debts benefit tax ), Estate Tax, Donor's Tax, Special Assessment, Stock Transaction Tax