The amount payable under the agreement is in the nature of a royalty. The term royalty is broad enough to include compensation for the use of an…

The question

The amount payable under the agreement is in the nature of a royalty. The term royalty is broad enough to include compensation for the use of an intellectual property and supply of technical know-how as a means of enabling the application or enjoyment of any such property or right. The royalties paid to the non-resident US Corporation, equivalent to 5% of the revenues derived by ABCfor the use of the program in the Philippines, is subject to a 30% final withholding tax, unless a lower tax rate is prescribed under an existing tax treaty. A resident Filipino citizen (not a dealer in securities) sold shares of stocks of a domestic corporation that are listed and traded in the Philippine Stock Exchange. (2012 Bar Question)

1. A.The sale is exempt from income tax but subject to the ½ of 1% stock transaction tax;
2. B.The sale is subject to income tax computed at the graduated income tax rates of 5% to 32% on net taxable income;
3. C.The sale is subject to the stock transaction tax and income tax;
4. D.The sale is both exempt from the stock transaction tax and income tax.

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