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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

Facts: A resident Filipino individual, Liza Navarro, derives 240,000 in foreign-sourced royalties from a foreign licensor in Country T. Country T withholds 40,000 as foreign tax on that royalty. The Philippine income tax on the foreign-sourced royalty would be 68,000. Assuming no double taxation relief under a treaty with Country T, which of the following statements best describes the doctrine and computes the foreign tax credit and net Philippine tax on this income?

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The doctrine is territorial taxation; foreign-sourced income is taxed only in Country T; Philippine tax on such income is zero, so net Philippine tax = 0. Relief by deduction; foreign taxes paid are deductible from gross income; Philippine tax on the foreign-sourced income remains 68,000; net tax = 68,000. The doctrine is avoidance of double taxation through the foreign tax credit; the credit is limited to the lesser of foreign tax paid or Philippine tax on the foreign-sourced income; FTC = 40,000 and net Philippine tax on that income = 28,000. Treaty-based exemption; if a tax treaty exists, the foreign-sourced income may be fully exempt from Philippine tax; without treaty, no relief applies.

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