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CPA REVIEW CENTER

TAX007Q Value Added Tax


1. When there is purchases from a VAT-registered supplier, the input VAT
allowed as tax credit against output VAT would be based on
a) Sale
b) Purchases
c) Cost of sales
d) Expenses

2. The following transactions are VAT taxable, except


a) Importations
b) Sale of goods from the Philippines to foreign country
c) P 2,000,000 domestic sales for the year of a non-VAT business
d) Sale of scrap materials by a VAT registered business

3. Coro Realty business sold a commercial lot amounting to P1, 900, 000.
This transaction is
a. VAT-exempt
b. Zero-rated
c. Subject to VAT
d. Subject to OPT

4. Statement 1: All transactions of a VAT person are VAT taxable


Statement 2: All transactions of a non-VAT person are VAT exempt
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

5. Which of the following business transactions is subject to VAT?


a) Casual sale of capital asset real property with a selling price of P
2,000,000
b) Lease of commercial property with annual gross receipts of
P 2,000,000
c) Sale of livestock and poultry products amounting to P10,000,000
d) Importation of fertilizers and seedlings amounting to P5,000,000

6. Statement 1: Annual gross receipts of P 5,000,000 received by radio


and TV broadcast franchise holder, which is registered as VAT is subject
to 12% VAT
Statement 2: The gross receipts of P 20,000,000 for the year reported
by non-VAT TV broadcast franchise are subject to VAT.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statement are incorrect

7. Which of the following business transactions is not subject to VAT?


a) Sale of gold to Bangko Sentral ng Pilipinas
b) Sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transporting operations
c) Consignment of goods where actual sale is not made within 60 days
from the date of consignment

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d) Importation of personal; and household effects belonging to
balikbayans

8. Statement 1: All VAT taxable transactions are allowed with creditable


Input VAT
Statement 2: As a rule, importations are subject to 12% VAT
regardless of who is the importer and for what purpose the imported
products will be used.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statement are incorrect

9. Statement 1: Both Zero-rated and VAT exempt transactions are not


subject to 12% Output VAT
Statement 2: Zero-rated transactions are allowed with credit for Input
VAT attributable such sales or receipts, while VAT-exempt transaction is
not.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

10. Which of the following sale is not an export sale?


a) Sale of goods from foreign country to the Phjilippines
b) Sale of gold to the Bangko Sentral ng Pilipinas
c) Sale of goods to PEZA registered/Ecozone export enterprise
d) Sale of locally manufactured goods to foreign country

11. Which of the following transaction are not allowed to deduct input VAT?
a) Importation
b) Zero-rated VAT
c) Sales to the government
d) Sale to a VAT registered person

12. Any person, in the course of business, who sells, barters, exchanges,
lease goods or properties, renders services and imports goods shall be
subject to VAT, except
a) Non-stock and nonprofit private organization
b) Government owned and controlled corporations
c) Farmers selling their farm food products in their original
state
d) Medical services rendered by professionals

13. What is the business tax rate imposed on sales of services to BOI-
registered export enterprise with 100% export sales and PEZA-
registered enterprise?
a) 12%
b) 10%
c) 5%
d) 0%

14. Statement 1: Gross receipts of more than P 1,500,000 per year from
transport of passengers by land are VAT taxable transactions.
Statement 2: Gross receipts of less than P 1,500,000 per year received
by VAT person from transport of cargo by land are VAT taxable
transactions.
a) Only statement 1 is correct

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b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

15. Which of the following transactions are subject to VAT?


a) Export Sales
b) Sales of house and lot with selling price of P 2,500,000
c) Sale of food agricultural product in their original state
d) Casual sale of goods

16. Statement 1: VAT-exempt transactions of VAT-exempt person are


allowed with attributable input tax credit.
Statement 2: Export sales of VAT registered person are allowed with
attributable input tax credit.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

17. Statement 1: Services rendered by an employee pursuant to


employee-employer relationship are VAT exempt and exempt from
other business percentage tax.
Statement 2: Professional services of medical doctors registered with
PRC are VAT exempt transactions.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

18. Statement 1: All transactions of cooperatives are VAT exempt.


Statement 2: Electric cooperatives transactions are subject to VAT.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

19. In sales to the government, if the actual input VAT is greater than the
standard input VAT, the excess amount shall be
a) Deducted from the output VAT
b) Deducted from the cost of sale or expenses
c) Added as part of cost of sale or expenses
d) Treated as other income
20. The amount of sales to a VAT registered person which requires that the
sales invoice should contain the customers name, address and TIN.
a) P5,000 or more
b) P3,000 or more
c) P2,000 or more
d) P1,000 or more

21. VAT is imposed only in the country where the goods or services are
consumed. This principle would refer to
a) Destination principle
b) Jurisdiction principle
c) Business tax principle
d) Consumer principle

22. This kind of tax imposed due to opportunity given to engage on sale,
exchange, or barter of goods and services.

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a) Ad-valorem tax
b) Privilege tax
c) Consumption tax
d) Indirect tax

23. Statement 1: the taxable base of 12% for the sales of goods is the
gross selling price.
Statement 2: Gross selling price includes excise tax, if any.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are not correct.

24. Statement 1: Importation of goods is subject to VAT, but export sales


are exempt from 12% VAT.
Statement 2: VAT is an additional tax imposed on goods or services for the
consumption privilege.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are not correct.

25. Which of the following VAT rates can be used as rate for output and
input VAT?
a) 12%
b) 7%
c) 5%
d) 2%

26. Statement 1: VAT is designed to be borne by the consumers.


Statement 2: VAT system establishes audit trail.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are not correct.

27. Statement 1: The gross margin is included in the determination of VAT.


Statement 2: The standard input VAT allowed to sale of goods or services
to the government is 12%.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are not correct.

28. Statement 1: If the VAT invoice amount does not indicate separately
the VAT, the sale is not covered by VAT.
Statement 2: The amount of VAT is determined by dividing the VAT sales
invoice by9.333.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are incorrect.

29. Statement 1: The creditable input VAT can only be sourced from
purchases of goods and services from VAT-registered supplier.
Statement 2: Sales discounts due to prompt payments deductible from
gross sales to determine VAT taxable base.

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a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are incorrect.

30. Statement 1: A VAT-exempt person should register under VAT system


within 30 days from the end of the last month when his sales exceeds
P1,919,500
Statement 2: In general, a VAT registered person is subject to VAT
regardless of the amount of his gross annual sales or gross receipts.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are incorrect.

31. Which of the following is not a characteristic of VAT?


a) Tax on gross sales
b) Tax on consumption
c) Tax on sellers
d) Tax on buyers

32. Statement 1: A zero-Vat business is the same with VAT- exempt


business
Statement 2: Senior citizens are exempted from VAT and subject to 20%
discount.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are incorrect.

33. The following item is not part of the taxable base for VAT purposes,
except:
a) Discounts that are expressly indicated in the invoice.
b) Sales return with proper credit or refund was made during the
month.
c) Sales allowance with proper credit or refund was made during the
month.
d) Cost of sales of the taxable goods sold.

34. Which of the following is not considered a deemed sales?


a) Installment sale of real property.
b) Merchandise inventory left upon retirement.
c) Distribution of inventory to creditors.
d) Consignment of goods if not sold within 30 days.

35. Which of the sale of real property inventory is subject to VAT?


a) Low-cost housing with sale price of P375, 000 per unit.
b) Socialized housing with sales price of P150, 000 per unit.
c) Residential lot valued at P2, 000, 000.
d) Residential house and lot value at P2, 500, 000.

36. Upon full collection of installment sale of real property, there is an


additional VAT if the
a) Zone value is higher than market value.
b) Market value is higher than zone value.
c) Total collection is higher than zone value or market value.

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d) Zonal value or market value is higher than the total
collection.

37. Which of the following is not a requisite for the VAT taxability of a
service transaction in the Philippines?
a) Services are performed in any part of the world as long as
the business is registered in the Philippines.
b) Services are performed in the Philippines only.
c) Services are not VAT-exempt under the Law, or international
agreement.
d) Services are rendered for valuable consideration actually or
constructively received.

38. Transfer of amounts retained by the contractee to the account of the


contractor is an example of:
a) Actual receipts.
b) Installment collection.
c) Advanced collection.
d) Constructive collection.

39. Which of the following item is not included as part of the taxable base
of imported goods?
a) Value used by the Bureau of Customers (BOC) in determining tariff
and custom duties.
b) Custom duties and community tax of the importer.
c) Custom duties and excise taxes.
d) Tax to be paid by the importer prior to the release of the goods from
the BOC.

40. Which of the following non-VAT business is required to register under


VAT system within 30 days upon reaching the threshold amount?
a) Trading business
b) Common carrier business
c) Franchise grantees of radio/television broadcasting
d) Agricultural food products in original state

Items 41 - 45
One cold rainy evening, Lady Osang saw a handsome man, chilling in a
corner of a street, bathe in the rain. Seeing an opportunity that very
moment, Lady Osang rushed to offer her last remaining piece of rain
coat to the young man, Mr. Moan Moan, for a big sum worth 1,000
pesos.
41. Suppose Mr. Moan got the big money inside his very wet jeans, how
much VAT will result in the sale transaction?
a) 120 Php
b) 107 Php
c) 134 Php
d) None

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42. Suppose Mr. Moan, instead, offered Lady Osang the necessary service
of carrying on her behalf the banana inventories of the lady for the
rain coat in exchange, how much will be the related VAT on the
transaction?
a) 120 Php
b) 107 Php
c) 134 Php
d) None

43. Suppose Mr. Moan got some 600 pesos in his pocket. If Lady Osang
however accepts the money, hence, incurring a net loss of 400 pesos,
how much will be the related VAT?
a) 107 Php
b) 72 Php
c) 64 Php
d) None

44. One year later, Mr. Moan and Lady Osang met again. This time,
the handsome man, in gratitude for the kindness of the lady way back,
decided to buy all the banana cues in her stall worth 5,000 pesos.
How much is the related VAT therefrom?
a) 600 Php
b) 536 Php
c) 672 Php
d) None

45. Suppose, however, Lady Osang, hesitant to accept the offer, instead
sold her inventories worth 5,000 pesos for a loss of 20%. How much
will be the resulting VAT, if any?
a) 480 Php
b) 429 Php
c) 600 Php
d) None, its on a loss

46. Sony International acquired 80% of Sony Philippines. During the year,
Sony Phils incurred advertising expenses worth P20 million. Sony
International decided to subsidize the subsidiary for the amount
incurred. How much output VAT can Sony International claim from the
pertinent transaction?
a) 2,400,000
b) 2,142,857
c) 2,688,000
d) Output VAT not allowed

47. Nokia Corporation acquired 60% of Alcatel Lucent on a condition that


the latter will provide the exclusive services to the former in its mobile
division. The service contract, worth P20 million, however provides that
the subsidiary will receive payment from the parent on a
reimbursement-on-cost basis only, without realizing profit. How much
will be the related VAT therefrom?
a) 2,400,000
b) 2,142,857
c) 2,688,000
d) The entity is not profit-oriented, hence, VAT not applicable.

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48. Ayala Land Incorporated, a real state conglomerate, acquired a fleet of
vehicles for the exclusive use of its employees in line of its business.
The management, however, decided to sell the vehicles to its
employees. Was the transaction entered under a normal course of
business?
a) No, it was violative of the Rule of Regularity.
b) No, it was not undertaken in business activity.
c) No, there was an employer-employee relationship. Hence, not a
business.
d) Yes, it is an incidental transaction.

49. Any person shall be held liable, under sec. 105, who in the course or
trade of business renders the following, but
a) Sells, barters, or exchanges
b) Leases goods or properties
c) Renders services
d) Imports goods

50. Which of the following is not considered a business activity?


a) Selling of goods
b) Production of goods for a consideration
c) Employment
d) Rendering services for a fee

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