Practice question
A taxpayer labels consideration for a stipulated actively conducted licensing business a royalty and claims the passive-royalty final rate automatically. Its income requires active pursuit and performance of that business. Which is sound under Sections22(MM) and24(B)(5)?
- Every royalty label conclusively means passive income
- All active business income is exempt
- The earning character must satisfy the passive-income definition; the label alone does not establish the passive final-tax rule
- All royalties must be taxed at 10%
- No income classification is needed
Legal references
- RA 12214 (CMEPA), Sections 3-4, 8 and 28, amended NIRC Sections 22, 24 and 32 and transition: https://lawphil.net/statutes/repacts/ra2025/ra_12214_2025.html
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