Professional Documents
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Taxation Reviewer PDF
Taxation Reviewer PDF
Taxation Reviewer PDF
1. In this power of State, the person who is parting with his money or property is presumed to have received a
benefit.
a. Taxation c. Eminent domain
b. Police power d. Forfeiture power
2. The basic principle of taxation, where, “Taxes must be based on the taxpayer’s ability to pay” is called;
a. Equality in taxation c. Theoretical justice
b. Ability to pay theory d. equity in taxation
3. Which one of the following is not a characteristic of the State’s power to tax?
a. It is inherent in sovereignty
b. It is legislative in character
c. It based on the ability to pay
d. It is subject to constitutional and inherent limitations
4. That the legislative body can impose a tax at any amount underscores the legal truism that taxation is:
a. An inherent power of the State
b. Very broad as a power of the State
c. Essentially a legislative power
d. For public purpose
7. The City Council of Masbate passed an ordinance imposing an occupation tax on air-conditioning technician.
Antonio is the
only person with such occupation in the city. He challenged the validity of the ordinance as being discriminatory
since he is the only one adversely affected.
a. The contention of Antonio is tenable.
b. The ordinance is unconstitutional because Antonio is denied of his right to equal protection of the law.
c. The contention of Antonio of Antonio is not justified because the rule on uniformity is not violated
considering that the ordinance would also be imposed on all air-conditioning technicians who may come with the
jurisdiction of the city.
d. The issue on validity or invalidity of the ordinance should be set aside.
8. The final income tax return for the taxable year 2018 which was due on April 15, 2019 was filed earlier on March
15, 2019. A
Substantially amended return was filed on May 31, 2019. when is the last day to make a valid assessment?
a. March 15, 2022
b. April 15, 2022
c. May 31, 2022
d. May 31, 2025
9. First statement: The law on prescription, being a remedial measure, should be liberally construed in order to
afford protection.
Second statement: The exceptions to the law on prescription should be clearly construed.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
10. The Commissioner of Internal Revenue has the authority to do all of the following except:
a. Compromise the payment of any internal revenue tax
b. Cancel or abate tax liability
c. Credit or refund tax
d. Review the decisions of the Court of Tax Appeals
11. For cases involving financial incapacity, which of the following is not subject to 20% compromise rate based on
the basic assessed tax?
a. Dissolved corporation
b. Already non-operating companies for a period of less than 3 years.
c. Already non-operating companies for 3 years or more as of the date of application for compromise
settlement.
d. Taxpayer is declared insolvent or bankrupt.
12. A taxpayer is complaining of harassment because the BIR pursues both summary and judicial proceedings
simultaneously. Is his complaint valid?
a. Yes. Because the BIR can only pursue summary proceedings after judicial proceedings are finally resolved.
b. Yes. Because the BIR can only pursue judicial proceedings after summary proceedings are finally resolved.
c. No. Because either of the summary or judicial proceedings or both simultaneously may be pursued in the
discretion of the authorities charged with the collection of such taxes.
d. No. Because the BIR is presumed to have acted in good faith when it pursues both summary and judicial
proceedings.
13. Who shall order the distraint of personal property if the amount of delinquent tax or delinquent revenue is
P1,000,000 or less?
a. Secretary of Finance
b. Commissioner of Internal Revenue exclusively
c. Commissioner of his daily authorized representative
d. Revenue District Officer
15. If the taxpayer falls to respond withing fifteen (15) days from the date of receipt of the PAN, he shall be
considered in default, in which case , what shall be issued calling for payment of the taxpayer’s deficiency tax
liability, inclusive of the applicable penalties?
a. Formal letter of Demand and Final Assessment Notice (FLD / FAN)
b. Preliminary Assessment Notice (PAN) for the proposed assessment.
c. Notice of Informal Conference
d. Letter of Authority
16. For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his
protest within how many days from date of filling of his letter of protest, otherwise, the assessment shall become
final?
a. Sixty (60) days c. Twenty (20) days
b. Thirty (30) days d. Ten (10) days
17. Under the TRAIN (R.A No. 10963), there shall be levied, collected and paid for each taxable year upon the
income received by every alien individual employed by regional or area headquarters and regional operating
headquarters established in the Philippines by multinational companies from such regional or area headquarters and
regional operating headquarters, a tax equal to:
a. Twenty-five percent (25%) of such gross income
b. Twenty percent (20%) of such gross income
c. Fifteen percent (15%) of such gross income
d. Regular income tax rate under Section 24 (A) (2) (a) of the Tax Code
18 and 19 are based on the following Ruth Leslie is employed in LAB Corporation and is also a part-time real estate
broker. In addition to the SMW of P180,000 she received from her employer, she likewise received P75,000 as
commission from her real estate dealings for the year 2018
18. How much is the income tax due if she is under the graduated income tax regime?
a. P20, 400 c. Zero
b. P6,000 d. Some other amount
19. How much is the income tax due if she is under the 8% income tax regime?
a. P20,400 c. Zero
b. P6,000 d. Some other amount
20. A married individual deriving income within the Philippines whose spouse is unemployed or is a nonresident
citizen deriving income from foreign source, shall be entitled to a personal exemption in 2018 of:
a. P 100,000 only c. P 50,000 only
b. P 64,000 only d. None
21. A married individual deriving income within the Philippines whose spouse is unemployed or is a nonresident
citizen deriving income from foreign sources, shall be entitled to a personal exemption in 2017 of:
c. P 100,000 only c. P 50,000 only
d. P 64,000 only d. None
22 to 24 are based on the following: A married resident citizen has five (5) qualified dependent children. The
following information pertains to his income and expenses in the year 2019:
Salary, net of P20,000 withholding tax P380,000
Interest income, bank deposit-BPI, Manila 50,000
Yield from money market placement,
State Investment House, Manila 30,000
Rent expense, apartment house 36,000
Health insurance premium paid 5,000
24. Using the same data in the preceding number and assuming the information pertains to his income and expenses
in the year 2017, how much is the taxable compensation income?
a. P400,000 c. P250,000
b. P336,000 d. P230,000
25. Which of the following government-owned or enrolled corporations, agencies or instrumentalities shall pay such
rate of tax upon their taxable income as are imposed upon corporations or associations engaged in similar business,
industry or activity?
a. Government Service Insurance System (GSIS)
b. Social Security System (SSS)
c. Philippine Health Insurance Corporation (PHIC)
d. Philippine Charity Sweepstake Office (PCSO)
26. One of the following is included in the “Gross Philippine Billings” for Income Tax purposes of an international
air carrier.
a. Tickets sold outside the Philippines for passengers originating from outside the Philippines
b. Passage documents sold outside the Philippines for excess baggage originating from the Philippines
c. Tickets sold in the Philippines but are nor actually flown
d. Passage documents sold in the Philippines for cargoes originating from outside the Philippines
27. The widow of your best friend has just been paid P1,000,000 on account of the life insurance policy of the
deceased husband. She asks you whether she shall declare the amount for income tax and need not be declared for
income tax purpose.
First Advice: The proceeds of the life insurance paid to the beneficiary upon the death of the insured are
exempt from
income tax and need not be declared for income tax purposes.
Second Advise: The proceeds of life insurance will have to be declared for estate tax purposes if the
designation of the
Beneficiary is revocable, otherwise, they need not be declared.
28 to 29 are based on the following: Mr. Juan Jose, married, resident citizen with two qualified dependent children,
has the following data for the year2018:
30. Under the TRAIN (R.A. No. 10963), the books of account are required to be audited and examined yearly by an
independent CPA if the gross quarterly sales, earnings, receipts or output exceed:
a. P5,000,000 c. P2,500,000
b. P3,000,000 d. P1,500,000
31. Examination and inspection of boxes of accounts and other accounting records shall be done in the:
a. Taxpayer’s office or place of business only.
b. Office of the Bureau of Internal Revenue only.
c. Taxpayer’s office or place of business or in the office of the Bureau of Internal Revenue
d. None of the choices
32. Under the TRAIN (R.A. No. 10963) How much is the allowable standard deductive for non-resident alien
decedent?
a. Five Million Pesos (P5,000,000)
b. Three Million Pesos (P3,000,000)
c. Five Hundred Thousand Pesos (P500,000)
d. None, not allowed to deduct standard deduction
34. One of the following deductions physically diminishes the gross estate of the decedent.
a. Standard deduction c. Vanishing deductions
b. Family home deductions d. None of the choices
35. The decedent is a married man with a surviving spouse, died on February 4, 2018. The estate presented the
following data:
Conjugal real and personal properties P14,000,000
Exclusive family home P30,000,000
Conjugal ordinary deductions 2,000,000
36. A decedent who died on March 15, 2018. He left a gross estate of P20,000. One of the heirs inquired from you
whether or not a notice of death was required to be filed. What would be your answer?
a. There was no need to file a notice of death because the value of the gross estate did not exceed P20,000
b. There was a need to file a notice of death because according to Regulations a notice would be required if the
value of the gross estate was P20,000 or more.
c. Filing of a notice of death would be discretionary on the part of the heirs of the decedent.
d. Filing of notice of death had been deleted under the TRAIN so there would be no need to file it under any
circumstances.
37. Under the TRAIN (R.A. No. 10963), when is the time for filing of the estate tax return?
a. Thirty (30) days from the decedent’s death
b. Two (2) months from the decedent’s death
c. Six (6) months from the decedent’s death
d. One (1) year from the decedent’s death
38. LA Corporation donated P1,000,000 to a government agency which was created to generate profit to the
government. The agency’s total expenses amounted to P15,000,000, 30% of which were for administrative
purposes? How much was the exempt gift?
a. P4,500,000 c. P1,000,000
b. P3,000,000 d. None of the choices
39. A resident citizen of the Philippines made the following donations on one date:
Donations on account of marriage:
To legitimate son P100,000
To a legitimate daughter and her
husband-to-be, on account of marriage P 15,000
To a recognized natural son P 30,000
To an adopted child P 60,000
To an illegitimate daughter P 40,000
To a sister P 12,000
To a charitable institution P 20,000
The deductions from the gross gift is:
a. P67,000 c. P57,000
b. P60,000 d. P20,000
40 and 43 are based on the following on January 15,2018, Daisy gave a piece of land to her brother-in-law who is
getting married on February 14,2018. The assessed value and zonal value of the land were P750,000 and P1,000,000
respectively. The land had an unpaid mortgage of P200,000 which was not assumed by the donee and an unpaid
realty tax of P10,000 which was assumed by the donee.
43. When shall be the due date for the filing of donor’s tax return?
a. February 14, 2018 c. March 15, 2018
b. February 15, 2018 d. July 15, 2018
44. Which of the following sales of residential property where the instrument of sale (whether the instrument is
nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on or after January 01, 2018,
shall be subject to VAT?
a. Sale of residential lot the value of which does not exceed P1,500,000
b. Sale of residential house and lot or other residential dwellings the value of which exceed P2,500,000
c. Sale of parking lot which may or may not be included in the sale of condominium units regardless of amount
of selling price.
d. All of the choices
46. A lessor rents his 15 residential units for P14,500 per month. During the taxable year, his accumulated gross
receipts amounted to P2,610,000. To what business taxes will he be liable?
I- Value Added Tax
II- 3% Percentage under Section 116 of the Tax Code
47 and 48 are based on the following: A manufacturer purchased capital goods on different occasions as follows:
47. When is the last month of amortization of the capital good purchased on January 2018?
a. December 2022 c. November 2026
b. January 2022 d. None of the choices
48. When is the last month of amortization of the capital good purchased on January 2022?
a. December 2022 c. November 2026
b. January 2022 d. None of the choices
49 to 52 are based on the following: Sweet Tooth, Inc. manufactures refined sugar. The following selected data are
taken from its books:
Sale of refined sugar, NET of VAT P2,000,000
Purchase of sugar cane from farmers 500,000
Purchases of packaging material, gross of VAT 784,000
Purchase of labels, gross of VAT 112,000
Advance payment of VAT before release from refinery 60,000
51. How much is the VAT payable using 12% VAT rate?
a. P124,000 c. P64,000
b. P84,000 d. P20,000
55. Can the VAT-registered taxpayer register his carriage of passengers under the VAT system?
a. Yes. Any person who is VAT- registered but enters into transactions which are exempt from VAT (mixed
transactions)
may opt that the VAT apply to his transactions which would have been exempt from VAT
b. No. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed
transactions) cannot optionally register his transactions which would have been exempt from VAT
c. Yes. As a rule, it is mandatory for VAT-registered taxpayers to register all transactions under the VAT
system
d. No. It is the other way, the taxpayer may opt that the VAT-subject transactions be exempted from VAT
56. Which of the following statements is incorrect?
a. The provision under Local Government Taxation shall govern the exercise by provinces, cities,
municipalities and Barangays of their taxing and other revenue-raising powers
b. Taxation shall be uniform in each local government unit.
c. The collection of local taxes, fees, charges and other impositions may be delegated to any private person
provided such delegation is approved by the Sanggunian
d. The revenue collected pursuant to the provisions of the Local Government Code shall inure solely to the
benefit of, and be subject to disposition by, the local government unit levying the tax, fee, charge or other
imposition unless otherwise specifically provided herein.
58. Which of the following is incorrect with respect to local transfer tax?
a. It must not exceed 50% of 1%
b. It is based on total consideration or the fair market value, whichever is higher
c. It is accrued from effective date of transfer of ownership of title over real property
d. It is paid in the province where the owner of the property resides.
59. The 20% discount on sales of goods and services to senior citizens and PWDs shall be:
a. Deducted from gross sales for income tax purposes.
b. Deducted from gross income for income tax purposes
c. Shall be claimed as input tax credit for VAT purposes
d. Shall either deducted from gross sales for income tax purposes or claimed as input tax for VAT purposes
60. Subject to the Regulations to be issued by the Secretary of Finance, upon the recommendation of the
Commissioner of theBureau of Internal Revenue, the 5% special income tax on gross income earned, in lieu of all
taxes (except real property tax on land owned by developer) pursuant to Section 24 of R.A 7916 as
amended, shall be directly paid and remitted by registered ECOZONE enterprises as follows:
I- 3% to the national government
II- 2% to the Treasurer’s office of the Municipality or City where the ECOZONE registered enterprise is
located. (Section 1, IRR, Omnibus Investment Code; Revenue Regulations No. 1-2000)
61 and 62 are based on the following: A PEZA-registered enterprise under the 5% special tax regime engaged as an
export enterprise provided you with the following information for the taxable year 2018:
Export sales P40,000,000
Direct costs 20,000,000
Administrative expenses 5,000,000
Marketing expenses 2,500,000
Other operating expenses 1,200,000
Incidental losses 400,000
62. How much is the tax due to the city or municipality where the enterprise is located?
a. P1,000,000 b. P600,000
c. P400,000 d. None of the choices
63. A person applying to be registered as a BMBE shall meet the following qualifications except:
a. With an asset of not more than Three Million Pesos (P3,000,000.00) excluding land;
b. Engaged in the production, processing, or manufacturing of products or commodities, including agro-
processing, trading and services;
c. Registered with the Department of Trade and Industry (DTI) for sole proprietorships, for juridical persons;
with Securities and Exchange Commission (SEC) for corporations.
d. For natural persons, passed a licensure examination administered by the government.
64. The Income Tax Holiday (ITH) of newly registered non-pioneer firms shall be:
a. six (6) years from commercial operations.
b. four (4) years from commercial operations.
c. three (3) years from commercial operations.
d. two (2) Six (6) years from commercial operations.
65. The 20% discount on sales of goods and services to senior citizens and PWDs shall be:
a. deducted from gross sales for income tax purposes.
b. deducted from gross income for income tax purposes.
c. shall be claimed as input tax credit for VAT purposes.
d. shall either be deducted from gross sales for income tax purposes or be claimed as input tax for VAT
purposes.
66. Bikes Are Us, an importer of bicycles from USA, imported 10 racing bikes. The importer agreed to pay
US$10,000 for the shipment. The amount was exclusive for US$400 freight cost and US$200 insurance, packed
ready for the Philippines. No selling commission, assist or royalty or limitation was imposed on the Bikes Are Us as
buyer. Assuming a forex rate of P50:US$1 and a 15% rate of customs duty, how much is the customs duty on the
importation?
a. P79,500 c. P75,000
b. P78,000 d. None of the choices
68. Which of the following is not among the functions of the Bureau of Customs?
a. The assessment and collection of customs revenues from imported goods and other dues, fees, charges,
fines, and penalties accruing under The Customs Modernization and Tariff Act.
b. Simplification and harmonization of customs procedures to facilitate movement of goods in international
trade.
c. Supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign
commerce.
d. Provide the President and the Congress with independent analysis, information and technical support on
matters related to tariff and non-tariff measures affecting Philippine industries and exports for policy
guidance.
END OF EXAMINATION
MULTIPLE CHOICE
ANSWER KEY
INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for each
item. Strictly no erasures allowed.
1.A 11.C 21.C 31.C 41.C 51.C 61.B
2.C 12.C 22.A 32.C 42.C 52.D 62.C
3.C 13.D 23.B 33.D 43.A 53.B 63.D
4.B 14.A 24.C 34.D 44.A 54.D 64.B
5.C 15.A 25.D 35.D 45.A 55.A 65.B
6.B 16.A 26.B 36.D 46.B 56.C 66.A
7.C 17.D 27.A 37.D 47.A 57.B 67.A
8.C 18.C 28.D 38.D 48.D 58.D 68.D
9.A 19.B 29.A 39.D 49.B 59.B 69.C
10.D 20.D 30.B 40.A 50.A 60.A 70.A
SUPPORTING COMPUTATIONS
8. C
If the return is amended substantially different from the original return, the three (3)-year prescriptive period shall
be counted from the filing of the amended return.
There is substantial amendment when a new return is filed declaring more losses, which can only be done either:
1) In reducing gross income, or
2) In increasing the items of deductions claimed.
If the amendment is minimal, the counting of the prescriptive period is still the original period. (CIR vs. Phoenix
Assurance, Inc.’ G.R. L-19727, May 20, 1965, 14 SCRA 52)
9. A
Negligence or oversight on the part of the BIR cannot prejudice taxpayers, considering that the prescriptive period
was precisely intended to give them peace of mind. (CIR vs. Goodrich Phils., Inc. G.R. 104171, February 24, 1999
The normal three (3)-year prescriptive period expires on the 1095 th day, notwithstanding the fact that within the
period, there is a leap year which is 366 days. (Revenue Memorandum Circular (RMC) 48-90)
18. C
Total income received P255,000
Less: Statutory minimum wage 180,000
Taxable income - commission P75,000
Tax due (first P250,000) Exempt
19. B
Taxpayer’s income as MWE does not exceed P250,000; hence, not subject to income tax and the withholding tax.
Since taxpayer is a mixed income earner and has received income from other sources in addition to her
compensation income, the commission received during the taxable year is subject to income tax and consequently,
to withholding tax.
In his instant case, if the taxpayer selected the graduated income tax regime, her commission income is subject to
income tax at 0% since it did not exceed P250,000 and she is also subject to business. However, if she selected the
8% income tax regime, she is liable for income tax amounting to P6,000, but this is in lieu of the graduated income
tax and the percentage tax under Section 116 of the Tax Code, as amended. (Section 6, R.R. No. 11-2018)
Likewise, Minimum Wage Earners (MWEs) receiving other income from other sources in addition to compensation
income, such as income from other concurrent employers, from the conduct of trade, business, or practice of
profession, except income subject to final tax, are subject to income tax only to the extent of income other than
Statutory Minimum Wage (SMW), holiday pay, overtime pay, night shift differential pay, and hazard pay earned
during the taxable year.
22. A
Gross compensation income (P380,000 + P20,000) P400,000
23. B
Taxable compensation income) P400,000
24. C
Gross compensation income (P380,000 + P20,000) P400,000
Less: Basic personal exemption (P50,000)
Additional exemption (100,000) (150,000)
Taxable compensation income P250,000
28. D
None, Pure compensation income earners are not allowed optional standard deduction.
29. A
Gross compensation income (P200,000 + P50,000) P250,000
Under the TRAIN, personal exemptions and deduction for health and/or hospitalization insurance premium are no
longer allowed.
34. D
Standard deduction, family home deduction and vanishing deduction do not physically diminish the gross
estate of the decedent. No outflows of property or assets are involved among these three (3) items of deduction.
35. D
38. D
Gifts made to or for the use of the National Government or any entity created by any of its agencies which is
not conducted for profit, or to any political subdivision of the said Government shall be exempt gifts.
39. D
Donation to charitable institution P20,000
40. A
Zonal value P1,000,000
41. C
Unpaid realty tax assumed by the donee P10,000
42. C
45. A
Orchids and other ornamental plants are agricultural non-food products.
46. B
He is not subject to VAT since the monthly rent per unit does not exceed P15,000. He is also not subject to 3%
Percentage Tax.
Using the same example, assuming he has 20 residential units with the same monthly rent per unit and his
accumulated gross receipts during the taxable year amounted to P3,480,000, he is still not subject to VAT even if
the accumulated earnings exceeded P3,000,000 since the monthly rent per unit does not exceed P15,000. He is
also not subject to 3% Percentage Tax.
47. A
For purchase made on January 2018, the amortization shall be for the shorter period of 5 years only or up to
December 2022 although the useful life is 6 years.
48. D
For purchase made on January 2022, no amortization shall be made and the input VAT shall be claimed on the
month of purchase or January 2022.
49. B
Presumptive tax on sugar cane (500,000 x 4%) P20,000
50. A
Presumptive input tax on sugar cane P20,000
Passed-on VAT on packaging materials (784,000 x 12/112) 84,000
Passed-on VAT on labels (112,000 x 12/112) 12,000
Total input taxes P116,000
51. C
Output Tax (P2,000,000 x 12%) P240,000
Less: Input Taxes
Presumptive input tax on sugar cane (P500,000 x 4%) P20,000
On packaging materials (P784,000 x 12/112) 84,000
On labels (P112,000 x 12/112) 12,000 (116,000)
VAT Payable P124,000
Less: Tax payments/credits
Advance VAT paid (60,000)
Tax payable P 64,000
52. D
Gross receipts (transport of passengers) P1,000,000
Tax rate 3%
Common carrier’s tax P 30,000
53. B
Gross receipts (transport of goods) P1,500,000
Gross receipts (transport of cargoes) 500,000
Total 2,000,000
Tax rate 12%
Value-added tax P 240,000
61. B
62. C
Export sales P40,000,000
Less: Direct costs 20,000,000
Gross income 20,000,000
Tax rate 5%
Tax due P 1,000,000
Due to the National Government (3/5 x 1,000,000) P 600,000
Due to the Local Government (2/5 x 1,000,000) P400,00
66. A
Agreed price US$10,000
Add: Freight cost 400
Insurance 200
Total US$10,600
Multiplied by 50
Total in Philippine pesos PHP530,000
Multiplied by rate of customs duty 15%
Customs duty PHP79,500
END OF EXAMINATION
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