Name: Mary Joy Cabil

Date: study first

Chapter 7: Business Taxes MCQ's

1. A. According to definition, business taxes are those imposed upon onerous transfers such as
sale, barter, exchange and importation. (Transfer and Business taxation 2019 edition, pg.
205)
2. D. Under the tax code, the major internal revenue business taxes are Value-added tax
(VAT), Other percentage taxes (OPT) and Excise taxes. (Transfer and Business taxation 2019
edition, pg. 206)
3. D. Neither "a" nor "b" are correct statements because for statement 1, not all business
transactions or exchanges are subject to VAT. It may be subject to other percentage taxes,
excise taxes and tax exemptions such as business transactions for subsistence or livelihood.
For statement 2, Business transactions can be VAT exempt or not subject to other
percentage tax but not both. (Transfer and Business taxation 2019 edition, pg. 206)
4. D. All statements are correct. It is called as such because without a business pursued in the
Philippines except importation by the taxpayer, business taxes cannot be applied. "In the
course of trade or business" means the regular conduct or pursuit of a commercial or an
economic activity, including transactions incidental thereto, by any person, regardless of
whether or not the person engaged therein is a non-stock, non-profit private organizatioa
or government entity (Section 105 NIRC; Section 4.105-3, RR 16-2005). According to
Revenue regulations 16-2005, Services rendered in the Philippines by a non-resident foreign
person shall be considered as being rendered in the course of trade or business even if the
performanceis not regular. (Transfer and Business taxation 2019 edition, pg. 205)
5. D. Isolated transactions are generally not considered in the ordinary course ot trade or
business, hence, not subject to business tax unless rendered by a non-resident foreign
person in the Philippines (RR 16-2005). (Transfer and Business taxation 2019 edition, pg.
205)
6. B. According to RR 16-2005, services rendered in the philippines by a non-resident foreign
person shall be considered as being rendered in the course of trade or business even if
performance is not regular. (Transfer and Business taxation 2019 edition, pg. 205)
7. C. All statements are correct. Gross selling price definition states that the total amount of
money or its equivalent which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties, excluding VAT.
Furthermore, the excise tax, if any, on such goods or properties shall form part of the gross
selling price. (Transfer and Business taxation 2019 edition, pg. 212)
8. D. All statements are correct. Fair Market Value definition. In the case of sale, barter or
exchange of real property subject to Vat, gross selling price shall mean the consideration
stated in the sales document or the fair market value, whichever is higher. Fair market value
shall mean whichever is higher of: (1) FMV determined by the commissioner or (2) FMV as
shown in schedule of values of the provincial and City assessors. However, in the absent of
which the gross selling price refers to the market value shown in the latest real property tax
declaration or the consideration, whichever is higher (RR 4-2007). (Transfer and Business
taxation 2019 edition, pg. 213)
9. C. Only Statements 2 & 3 are correct. Transactions subjected to vat should no longer be
subjected to other percentage tax. However, such is not the case with respect to excise
taxes. A transaction subjected to either vat or other percentage tax may still be subjected to
excise tax. (Transfer and Business taxation 2019 edition, pg. 206)
10. D. Value added tax is a Proportional tax, hence, a tax based on a fixed percentages of
amount of the property, receipts or other basis to be taxed such as VAT. (Income Taxation
2018 edition pg. 17)
11. C. All statements are correct. The seller is the one statutorily liable to pay for the payment
of the tax but the amount of the tax may be shifted or passed on the buyer or transferee or
lessee of the goods, properties or services. This rule likewise exist under the effectivity of RA
9337 ( VAT Reform Act). The "burden of the tax" is borne by the final consumers although
the producers and suppliers of these goods and services are the ones who have to file their
VAT returns to the Bureau of Internal Revenue (BIR). Hence, what is transferred or shifted
to the consumers is not the liability to pay tax but the tax burden. (Transfer and Business
taxation 2019 edition, pg. 208-209)
12. B. A taxpayer who is subject to percentage tax on his gross receipts will also be subject to
income tax on his net income. (Transfer and Business taxation 2019 edition, pg. 325)
13. C. In addition to VAT, excise taxes apply to goods manufactured or produced in the
philippines for domestic sales or consumption or for any other disposition, and goods
imported. The goods manufactured or imported under this category are classified as either
"sin products" or "non-essential goods" under the tax code such as Tobacco products, cigars
and cigarettes etc. (Transfer and Business taxation 2019 edition, pg. 218)
14. B. Both statements are incorrect. As mentioned earlier, in addition to VAT, excise taxes
apply to goods manufactured or produced in the philippines for domestic sales or
consumption or for any other disposition, and goods imported. The goods manufactured or
imported under this category are classified as either "sin products" or "non-essential goods"
under the tax code such as Tobacco products, cigars and cigarettes etc. Therefore, Alex
must pay both VAT and excise tax for the importation and sale of cigarettes in the
Philippines. (Transfer and Business taxation 2019 edition, pg. 218)
15. C. Statement C is correct because for us to be able to assess whether a transaction resulted
in a gain or loss, which will be the basis of taxability, it must be analyzed, per transaction,
therefore, tax imposed therein is transaction tax.
16. C. in addition to VAT, excise taxes apply to goods manufactured or produced in the
philippines for domestic sales or consumption or for any other disposition, and goods
imported. The goods manufactured or imported under this category are classified as either
"sin products" or "non-essential goods" under the tax code such as Tobacco products, cigars
and cigarettes etc. Therefore, Alex must pay both VAT and excise tax for the importation
and sale of cigarettes in the Philippines. (Transfer and Business taxation 2019 edition, pg.
218)
17. D. All items are subject to Vat. Letter "b" is under Revenue regulations 16-2005, Services
rendered in the Philippines by a non-resident foreign person shall be considered as being
rendered in the course of trade or business even if the performanceis not regular. Letter "C"
is under in the Mandatory registration for VAT states that persons mandated to register if
the person is required to register as VAT taxpayer but failed to register. Letter "a" is under
in the Optional Registration where the taxpayer is VAT registered however its gross sales or
receipts do not exceed 3,000,000 in a following twelve (12) month and may apply for the
cancellation of his VAT registration and revert back in being VAT-exempt. (Transfer and
Business taxation 2019 edition, pg. 214-215)
18. D. A non- VAT registered whose sales for the year exceeded 3,000,000 is a person required
to register as VAT taxpayer, hence, subject to 12% VAT. (Transfer and Business taxation
2019 edition, pg. 214)
19. A. Only statement 1 is correct. Statement 2 is incorrect because a Vat-registered person
may apply for cancellation of vat registration and revert back to being vat exempt, his gross
sales/or receipts for only twelve (12) months did not exceed 3,000,000. (Transfer and
Business taxation 2019 edition, pg. 215)
20. D. Statement D is incorrect because it for subsistence or livelihood where the gross sales or
receipts do not exceed 100,000 is Vat-exempt and not subject to any business taxes.
(Transfer and Business taxation 2019 edition, pg. 205)