Midterm Notes - Tax

Gross Income

Any inflow of wealth to the taxpayer that increases net worth from legal or illegal sources.

Elements of Gross Income

Includes return on capital, realized benefit, and not exempted by law, contract, or treaty.

Income Tax Model

Gross income minus allowable deductions equals net taxable income, which is then multiplied by the tax rate to calculate income tax due.

Compensation Income

All remuneration for services performed by an employee for the employer, whether paid in cash or in kind.

Regular Compensation Income

Fixed remuneration like basic salary and fixed allowances for representation.

Supplemental Compensation Income

Performance-based remuneration such as overtime pay.

De Minimis Benefits

Minimal or relatively small value benefits that are not taxable.

Minimum Wage Income Earners

Workers paid the statutory minimum wage, exempt from income tax.

Separation Pay

Amount due to an employee terminated from services for authorized causes, taxable if voluntary.

Business and Professional Income

Engagement in commercial activity or exercise of one's profession, subject to income tax.

Fringe Benefits

Additional compensation or perks provided to employees by their employer beyond their regular wages or salary.

Rank-and-File Employees

Non-managerial employees who do not hold supervisory or managerial positions within the organization.

Supervisory Employees

Staff members who have the authority to recommend managerial actions and exercise independent judgment on behalf of the employer.

Managerial Employees

Individuals with the power to establish and implement management policies, as well as make decisions regarding hiring, firing, and disciplining employees.

Gross Taxable Income

The total income of an individual or entity subject to taxation before any deductions or exemptions.

Fringe Benefit Tax

A final tax imposed on the monetary value of fringe benefits granted to employees, withheld and remitted by the employer.

De Minimis Benefits

Small, non-taxable fringe benefits provided to employees that are of minimal value and infrequent.

Grossed-Up Monetary Value

The total value of a fringe benefit including the tax amount, calculated by dividing the actual value by the grossed-up monetary rate.

Fringe Benefit Tax Rate

The percentage applied to the grossed-up monetary value to determine the amount of fringe benefit tax owed.

Monetary Value

The financial worth assigned to a fringe benefit, which can be in the form of cash, in-kind transfers, or other benefits.

Usufructuary Rights

The right to use or enjoy a property without owning it, typically for a specified period.

Forgone Interest

The interest amount that would have been earned on a loan if it had not been waived or reduced.

Foreign Travel Benefits

Fringe benefits related to travel expenses incurred for business purposes, subject to specific tax treatment based on documentation and travel class.

Educational Assistance

Benefits provided to employees for educational purposes, which may be exempt from tax if related to business needs or obligations.

Use of Aircraft, Helicopter, or Yacht

Fringe benefits associated with the use of such vehicles, with varying tax implications based on the type of vehicle used.