Bustax Solman (Chap2-Onwards)

CHAPTER 2
False 1. The Vat on importation is a business tax.

False 2. The final withholding VAT is a business tax.
False 3. The VAT on importation is 12% of the value added on importation.
False 4. The VAT on importation is 12% of the receipts from the sale of services abroad.
False 5. Importation is subject to either VAT or percentage tax.
False 6. The final withholding VAT is 12% of the contract price of purchased services from within the
Philippines.
False 7. The sale of services abroad is subject to 12% final withholding VAT.
False 8. The VAT on importation is paid to the BIR.
True 9. The final withholding VAT on services is paid to the BIR.
False 10. The importation of any agricultural or marine products is VAT exempt.
True 11. The importation of professional instruments and implements is exempt from VAT.
False 12. The importation of any product intended for human consumption is VAT exempt.
False 13. Importation is subject to either VAT or percentage tax.
False 14. The importation of professional instruments and implements in commercial quantities is
VAT-exempt.
True 15. The importation of equipment, machinery and spare parts for marine vessels is VAT-
exempt.
False 1. Resident foreigners are not subject to the VAT on importation.

True 2. All agricultural or aquaculture inputs are VAT exempt.
True 3. The sale of processed agricultural products is vatable.
True 4. The importation of books and newspapers is VAT-exempt.
True 5. The importation of life-saving equipment is VAT-exempt.
True 6. The lease of aircrafts or vessels from non-residents is exempt from final withholding VAT.
True 7. The purchase of services from foreign consultants is exempt from final withholding VAT.
True 8. The importation of fuel, goods, and supplies by international carriers is VAT-exempt.
False 9. The importation of agricultural machineries by farmers is VAT-exempt.
True 10. The importation of agricultural machineries by agricultural cooperatives is VAT-exempt.
False 11. The VAT on importation is payable only by those engaged in business.
True 12. The final withholding VAT on importation of services is payable even by those not engaged
in business.
True 13. The VAT on importation and final withholding VAT can be claimed as Input VAT creditable
against Output VAT.
False 14. In economic reality, the VAT on importation and final withholding VAT are taxes to be paid
by non-resident sellers.
True 15. Qualified exempt importation is exempt from VAT only if made by an exempt person.
1. Which is subject to VAT?
- Sheep, Sheep Wool, Cut sheep meat
2. Which agricultural products is VAT-exempt on importation?
- Wood
3. Which importation is subject to VAT?
-NEITHER importation from abroad, Purchase of goods from economic zones in the Phil
4. Which is not subject to VAT on importation?
- Importation of goods for business use.
5. Which of the following is subject to the VAT on importation when imported?
- Books
6. Which non-food agricultural products is exempt from VAT on importation?
- Live hogs
7. Which of the following is not exempt from VAT?
- Orchids
8. Which seedling is vatable?
- Narra seedlings
9. Which agricultural produce is exempt from VAT?
- Firewood
10. Which is vatable?
- Bamboo poles
11. Which is VAT-exempt?
- Cotton seeds
- Coconut lumber
13. Which is subject to VAT on importation?
- Cocoa
14. Which agricultural product is subject to VAT?
- Rattan Cane
15. Which is subject to VAT on importation?
- Cocoon silk, Pineapple Silk, Furniture
16. Seedlings of this tree are exempt from VAT on importation.
- Palm oil tree
17. Which of the following when imported is subject to VAT?
- Rubber
18. Which of these seeds is not VAT-exempt?
- Flower seeds
19. Which of the following feed is subject to VAT on importation?
- Swine feeds
20. Feeds of the following animals are considered as specialty feeds, except for,
- Zoo animals
-Eggs
2. Which is vatable on importation?
- Tobacco leaves
3. Which of these is VAT-exempt on importation?
- Almonds, Blueberries, Ginseng roots
4. Which is not exempt from VAT?
- Beeswax
5. Which is not generally considered as pet under the regulation?
- Rabbits
6. Which is these is non-vatable?
- Milkfish
7. Which is not a VAT-exempt poultry?
- Game fowl roosters
8. Which of these animals is vatable when imported?
- Race horses
9. Which is a vatable agricultural input?
- Pesticides
10. The following are generally considered as pets which are vatable when imported except for?
- Catfish
11. Which of these is taxable with VAT on importation?
- Butterfly fish
12. Which of the following seafood is considered as vegetable and therefore VAT-exempt?
- Kelp, Sea lettuce (green nori), Squids

13. Which of these is vatable?
- Sea shells
14. Examples of mollusk and shellfish: Crabs, Oysters, Lobsters, Clams
- None of these
15. Which of these agricultural products is not considered as being in this original state?
- Refined sugar
16. By revenue regulation, which of the items below is not considered in original state?
- Marinated Fish
17. Which product is non-taxable with VAT on importation?
- Fresh cow’s milk
18. Which of the items below is taxable with VAT?
- Canned fruits
19. Which is not considered as simple processing?
- Marinating
20. The following advanced technological means of packaging are deemed not to alter the nature of
agricultural marine food products thereby retaining their original state. Which is exemption?
- Canning
1. Which is not exempt from VAT on importation?
- Importation of school supplies
2. Which importation is not VAT-exempt?
- Importation of personal household effect which are subject to custom duties.
3. The importation of professional instruments and implements may be subject to VAT when the
- Importation involves vehicles and machineries
4. Which importation is exempt from VAT?
- Importation of books by school, student and a bookstore.
5. The importation of which transport medium is exempt from VAT?
- None
6. Examples of transport vehicles: bus, cars, vessels, aircraft: which is not exempt from VAT when
imported?
- Bus and Cars
7. Which importer is exempt from VAT on importation of fuel, goods and supplies?
- EITHER international carriers, domestic carriers on their international operations
8. Which of the following items is subject to VAT on importation to an individual who is intending to sttle
in the Phil?
- Vehicles
9. The importation of fuel, goods and supplies is not exempt from VAT when used in
- Domestic operation
10. Which is VAtable?
- None of these
11. The importation of vessel or aircraft for domestic operations is
- VAT exempt if the importer complies with maximum service life set by law
12.The importation of fuels, goods for domestic shipping or air transport operations is:
- VATABLE
13. The importation of farm machineries and equipment is exempt when iported by
- an agricultural cooperative
14. Who has the burden of proving exemption fromVAT on importation?
- The importer-buyer
15. Which is qualified exempt importation?
- importation by cooperative farm equipment
16. Which is not qualified exempt importation?
- importation of fuels or supplies by a person engaged in domestics transport operations
17. Which of these is non-vatable?
- None of these
18. Who shall pay VAT on imporatation when a VAT-exempt entity subsequently sells an imported
article of goods to a non-exempt entity?
- The non-exempt buyer
19. Importation is not subject to VAT when
- it involves exempt goods
20. Which is not included in landed cost?
- VAT
21. Which is not included in landed cost?
- Cost of transporting the goods from the customs warehouse to the importer’s warehouse or
residence
MC PROBLEMS 1
1. Oceaners, Inc. Purchased the following from abroad:
Sea Shells 320,000

Tuna and Salmon 120,000
Total 440,000
What is the amount of taxable importation?
a. 0 c. 200,000
b. 120,000 d. 320,000
2. Mr. A imported various personal and household effects with effects with a value aggregating
400,000. 320,000 of these was subjected to a 8% ustoms duty by the BOC. What is the the VAT
on importation?
a. 0 b.42,240
b. 41,472 c. 48,000
3.A bookstore company imported th follwing items:
Landed Cost
Books 350,000
Professional Instruments 200,000
School supplies 350,000
Total 900,000
What is the total VAT on importation?

a.0 c. 72,000
b. 66,000 d. 108,000
4. Mr. C, a VAT- registered foof retailer, imported the following from China:
Landed Cost
Fruits 250,000
Vegetables 180,000
Frozen Meat 50,000
Marinated milkfish 100,000
Total 580,000
Compute the VAT on importation.

a.0 c. 51,600
b. 66,000 d. 108,000
5. Alexis Furnitures, a percentage taxpayer, imported the following household equipment:

Landed Cost
Machineries, for bus. Use 1,150,000
Heating System, for home use 250,000
Total 1,400,000
a. 0 c. 150,000
b. 27,000 d. 168,000
6. Danes AgriCorp imported the following:

Landed Cost
Seeds 400,000
Fetilizers 750,000
Farming Equipment 450,000
Herbicides and pesticides 250,000
Total 1,850,000

a.0 c. 72,000
b. 42,000 d. 84,000
7. Home Appliance Compay imported the followin for personal use:

Furniture 600,000
Rattan 250,000
Lumber 450,000
Compte the VAT on importation.

a. 30,000 c. 156,000
b. 72,000 d. 204,000
8. Mr. Huligan imported rice from Vietnam. Details of his importation show the following:
Corn grits 1,000,000
Freight and insurance in transit 50,000
BOC and other charges 20,000
Compute the VAT on importation;

a. 0 c. 126,000
b. 120,000 d. 128,400
9. An Agricultural supply dealer imported the follwing:

Corn grits 200,000
Hog fees 350,000
Specialty feeds 300,000
Compute the VAT on importation
a. 0 c. 156,000
b. 120,000 d. 128,000
10. the following data relates to the importation of cigarretes by Mr. Shinto:
Total Invoice value 1,000,000
BOC charges 300,000
Customs Duties 200,000
Excise taxes 300,00

a. 120,000 c. 180,000
b. 145,000 d. 216,000
Multiple Choice Problems- Problems 2
1. Don Pepito imported a harvester frok the united states with a total cost of 1,100,000
before Customs duties. The importations is subject to 10% customs duties. What is the
VAT on importation?
a. 158,000 c. 129,600
b. 145, 200 d. 0
2. In he immediately preceeding problems, assuming that the importation made by an

agricultural cooperative, what is the VAT on importation?
a. 158,400 c. 129,600
b. . 144,000 d. 0
3. Mr. Smile, aprofessional practitioner, imported the following:

Calculators and computers for his firm 900,000
Books
CHAPTER 3
True or False – Part 1
False 1. Once employed, one cannot be considered engaged in business.
False 2. All sales by a businessman are considered made in the course of business.
True 3. A business involves habitual engagement in a commercial activity.
True 4. “Commercial activity” means provision of goods or services to the public for a profit.
False 5. To be construed as being engaged in business, one must be employed.
True 6. A self-employed individual is engaged in business.
True 7. An employee is not engaged in business.
False 8. All casual sales of properties are considered not made in the course of the business.
True 9. The sale of ordinary assets by a business is considered made in the course of business.
False 10. The sale of capital assets by a business is also considered made in the course of business
being incidental to business operations.
False 11. A business which is not registered is exempt from business taxes.
True 12. Government agencies and instrumentalities and non-profit organizations or associations
may be considered as businesses on their unrelated operations; hence, these are subject to
business tax.
False 13. The absence of profit motive may preclude an activity from being considered as business.
False 14. Government agencies and instrumentalities and non-profit organizations or associations
are generally considered as businesses.
False 15. A company director is considered to be engaged in business.

False 1. Marginal income earners are exempt from both business tax and income tax.
False 2. An employed professional is engaged in business.
True 3. Self-employed professionals rendering services to clients are engaged in business.
False 4. Agents and brokers are considered as employees; hence, they are not considered engaged
in business.
True 5. Consultants and movie artists are considered engaged in business.
False 6. Businesses for mere subsistence are not considered business because they are non-profit.
True 7. Businesses for mere subsistence have gross receipts not exceeding P100,000 per year.
True 8. The owner of a business for mere subsistence is called a marginal income earner.
False 9. A professional, consultant, or artist can qualify as a marginal income earner as long as his
receipts do not exceed P100,000 in any 12-month period.
True 10. A sale made by a non-resident is presumed to be made in the course of business despite
irregularity of sales transactions.
False 11. A non-profit organization is subject to business tax on all of its receipts if it engages in
activities subject to business tax.
False 12. Exemption from income tax means exemption from business tax.
False 13. A non-profit organization will be exempt from business tax if it uses the income generated
from activities subject to business tax for non-profit purposes.
True 14. An individual, trust, estate, partnership, corporation, joint venture, cooperative or
association will pay business tax.
True 15. Only sales outlets are required to pay the annual registration fee.
True 16. The Certificate of Registration shall be exhibited in a conspicuous place in the principal
place of business.
False 17. The husband and the wife are taxable as a single person; hence, they pay under a
consolidated business tax return.
Note: Spouses are separate business taxpayers.
True 18. Businesses are required to register in the revenue district office (RDO) which has
jurisdiction over their principal place of business.
False 19. Businesses pay an annual registration fees of P1,000.
False 20. Every distinct establishment with or without sales operation shall pay the annual
registration fee.

True 1. The term “goods or properties” includes real properties held primarily for sale, lease or use
in the ordinary course of business.
True 2. The term “goods or properties” includes the right or privilege to use patent, copyright,
design, secret formula, trademark and other property or right.
True 3. Businesses are classified as sellers of goods or sellers of services or purposes of business
taxes.
False 4. Sellers of goods are taxable on gross receipts while sellers of services are taxable on gross
selling price.
False 5. The sale of radio, television, satellite transmission and cable television time is a sale of
service not a sale of goods or properties.
False 6. Real estate brokerage is considered a sale of goods or properties rather than sale of
services.
Note: Brokers are sellers of services.
False 7. A contractor is a seller of goods or property not a seller of services.
True 8. Leasing or distribution of cinematographic films is a sale of service.
False 9. Dealers in securities and lending investors are sellers of goods rather than sellers of
services.
False 10. The sale of electricity by generation, transmission and distribution companies is considered
sale of goods or properties.
Note: Sales of service.
True 11. The term gross selling price excludes taxes on the sale.
True 12. Excise tax is part of the gross selling price.
True 13. Sales returns and allowances are deductible against gross selling price.
True 14. Gross selling price includes cash, accounts and installment sales.
True 15. Constructive receipts are part of gross receipts.
True 16. Constructive receipts are monies which are placed in the control of the seller of services
without restrictions.
True 17. Only discounts determinable at the point of sale are deductible against gross selling price.
True 18. The term “gross receipts” includes client or customer advances for unperformed jobs.
True 19. Gross receipts include only cash received and excludes uncollected income.
False 20. Promissory notes and other evidences of indebtedness submitted by clients or customers
are part of gross receipts.
Note: As a rule, except to life insurers.

False 1. Non-VAT taxpayers pay their quarterly tax in three monthly payments.
False 2. Loans or agency monies received by the business are part of gross receipts.
True 3. Receipts that do not redound to the benefit of the taxpayer are not included in gross
receipts.
True 4. There are three types of business taxes: VAT, percentage tax and excise tax.
True 5. There two types of business taxpayers: VAT and non-VAT taxpayers.
True 6. Normally, VAT and percentage tax are mutually exclusive.
True 7. Excise tax is an addition to either VAT or percentage tax for businesses manufacturing or
importing excisable articles.
False 8. The accounting period for business tax is called the taxable year.
Note: Taxable quarter.
True 9. VAT taxpayers pay their quarterly tax in two monthly and one quarterly payment.
True 10. The taxable quarters of an individual are patterned after that of the calendar quarter.
True 11. The taxable quarters of a corporation adopting a fiscal year for income tax purposes shall
be synchronized with its fiscal year.
False 12. Corporations pay quarterly VAT while individuals pay VAT annually.
Note: All VAT taxpayers whether individuals or corporations files monthly and quarterly VAT
returns.
False 13. VAT taxpayers use BIR Form 2551 while non-VAT taxpayers use BIR Form 2550.
Note: It is the other way around.
True 14. A few percentage taxpayers are required to pay their tax quarterly while most pay their
taxes monthly.
True 15. Exempt sales will not be subject to VAT or percentage tax.

False 1. Services specifically subject to percentage tax are subject to VAT if not subjected to
percentage tax.
Note: Always subject to percentage tax.
True 2. Sales from goods or services, other than exempt sales and services subject to percentage
tax, are vatable.
False 3. The term “vatable sales” means sales automatically subject to VAT.
False 4. All services specifically subject to percentage tax are taxed at a rate of 3%.
Note: Rates vary from ½ of 1% to 30%.
False 5. All taxpayers with vatable sales or receipts in the past 12-mpnths aggregating P1,919,500
from whatever type of sales are subject to VAT.
Note: Not all, except those who derives only exempt sales or receipts from services
specifically subject to percentage tax.
False 6. A person who wishes to register as a VAT taxpayer despite not meeting the VAT threshold
is called a “registrable person.”
False 7. The VAT payable is computed as output VAT less 3% percentage tax.
False 8. If the aggregate sales or receipts from all sources (exempt, specifically subject to
percentage tax, and others) exceed P3,000,000, the person is subject to VAT.
False 9. Franchise grantees of radio or television broadcasting companies which exceeded
P1,000,000 in annual sales must register as VAT taxpayer.
False 10. Persons who optionally register as VAT taxpayers can cancel their VAT registration within
three years.
True 11. Franchise grantees of television or radio broadcasting companies cannot cancel their VAT
registration.
False 12. Registrable persons shall be subject to VAT. They shall pay VAT with the benefit of an input
VAT credit plus the percentage tax.
Multiple Choice – Theory: Part 1

1. Which of the following entities below is not considered as a business?
a. A sari-sari store with P500,000 annual sales
b. A news stand with sales exceeding P100,000
c. A cigarette vendor with sales not exceeding P100,000
d. An employed professional earning part-time self-employment income not exceeding P100,000
2. Which of the following is not considered as engaged in business?

a. A purely self-employed individual
b. A self-employed and employed individual
c. A purely employed individual
d. A and B
3. Which of the following is not subject to business tax even if made by a registered business?
a. Sale of goods
b. Sale of services
c. Sale of properties considered as ordinary assets
d. Sale of properties considered as capital assets
4. Which is not engaged in business?

a. A corporate director
b. A broker
c. An agent
d. A security dealer
5. Which of these is least likely to be subjected to business tax?

a. Sale of stocks held as inventory
b. Sale of bonds held as inventory
c. Sale of stocks held as investment
d. None of these
6. Which is considered engaged in business even if not regularly engaged in trade?
a. A non-resident seller who exports to the Philippines
b. An importer who imports goods into the Philippines
c. A seller who makes a one-time sale of real property
d. Any seller who sells goods or services at a price above P100,000 during the year
7. Which of the following are considered engaged in business?

A. Government agencies
B. Non-profit organization
C. Sales agents
D. Consultants
a. A and B
b. C and D
c. B and C
d. None of these
8. Which of these is always presumed to be made in the course of business; hence, it is subject to
business tax under the regulations?
a. Export sales
b. Importation
c. Domestic sales
d. All of these
9. The business tax on exempt sales is

a. VAT
b. Percentage tax
c. A or B
d. None of these
10. The consumption tax on importation is

a. VAT
b. Percentage tax
c. A or B
d. None of these
11. The consumption tax on domestic sales is

a. VAT
b. Percentage tax
c. A or B
d. None of these
12. The business tax on services specifically subject to percentage tax is
a. VAT
b. Percentage tax
c. A or B
d. None of these
13. Which is more likely to qualify as a marginal income earner?

a. Artist
b. Consultant
c. Sales agent
d. Operator of a single unit tricycle
14. Statement 1: Sellers of goods are subject to percentage tax.

Statement 2: Sellers of services are subjected to VAT.
Which statement is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
15. Statement 1: Both the husband and the wife are subject to either VAT or percentage tax.
Statement 2: The husband may pay VAT while the wife may pay percentage tax.
Which statement is false?
a. Both statements
b. Neither statement
c. Statement 1 only
d. Statement 2 only
16. Statement 1: An employed taxpayer will pay an annual registration fee.

Statement 2: A self-employed taxpayer will pay an annual registration fee.
a. Statement 1
b. Statement 2
c. Both statements
17. The term “gross selling price” excludes

a. The contract price of the goods sold
b. Discounts which are contingent upon future events
c. Delivery charges
d. Sales returns and allowances
18. The term “gross receipts” excludes
a. Reimbursements for customer expenses paid by the service provider
b. Reimbursements for out-of-pocket expenses incurred by the service provider
c. Advances made by the client for services yet to be rendered
d. Cash collections for services rendered
19. Which is not a constructive receipt?

a. Bank deposits made available to the service provider without restriction
b. Transfer of amounts retained by the payor to the account of the contractor-service provider
c. Judicial consignation by the payor of the contract price which the service provider wishes to
donate to the payor
d. Collection of revenue for past services rendered
20. Which is part of gross receipts?

a. Amounts received which will be remitted to other persons
b. Receipt of notice from a debtor to offset the consideration of the service for the debt of the
service provider
c. Receipt from bank loans
d. Receipt from issuance of stocks or issuance of certificates of indebtedness

1. A non-VAT registered service provider shall pay
a. 3% percentage tax on its gross receipts
b. 12% VAT on its value added
c. 12% VAT on its export sales or receipts
d. 3% percentage tax on its export sales
2. Which must be present to construe the existence of a business?

a. Regularity of transaction
b. Offering of services or goods to the public for a profit
c. Actual presence of profit during the period
d. Both A and B
3. A person who made a one-time or casual sale of properties is

a. Exempt from business tax.
b. Subject to percentage tax.
c. Subject to value added tax.
d. Subject to either percentage tax or value added tax.
4. A VAT-registered persons hall pay
a. 3% percentage tax and VAT
b. 12% VAT on its sales or receipts
c. 12% VAT on its value added
d. 12% VAT on its export sales
5. Who are subject to VAT?

a. Those who optionally register as VAT taxpayers.
b. Those who are mandatorily required to register as VAT taxpayers.
c. Those who are registrable to VAT.
d. Any of these.
6. Who are not required to register to the VAT system?

a. Those who are below the VAT threshold
b. Those whose only sales are exempt sales
c. Those who only derive receipts from services specifically subject to percentage tax
d. Any of these
7. A non-VAT registered seller of goods shall pay

a. 3% percentage tax on its gross receipts
b. 12% percentage tax on its value added
c. 3% percentage tax on its sales
d. 3% percentage tax on gross receipts
8. A VAT-registered seller of goods shall be subject to

a. 12% output VAT on sales
b. 12% output VAT on gross receipts
c. 3% percentage tax on sales
d. 3% percentage tax on gross receipts
9. Who is entitled to claim (deduct) input VAT against output VAT?

a. VAT registered persons only
b. VAT registrable persons only
c. Non-VAT registered persons
d. All of these
10. Who pays percentage tax?

a. Those who exceed the VAT threshold and opt to be register as non-VAT
b. Those who did not exceed the VAT threshold but are registered as VAT taxpayers
c. Only those service providers specifically subject to percentage tax
d. Those providers of services specifically subject to percentage tax and those whose sales or
receipts in any 12-month period are below the VAT threshold.
11. When the receipts from services specifically subject to percentage tax exceeds the VAT threshold,
future receipts from these services are
a. exempt from percentage tax.
b. still subject to the same percentage tax.
c. subject to VAT.
d. subject to 3% percentage tax.
12. A VAT-registered person who did not exceed the VAT threshold will pay
a. VAT
b. Percentage tax
c. Both A and B
d. Either A or B at his discretion
13. Once the vatable sales or receipts exceed the VAT threshold, future monthly sales from vatable sales
or receipts shall be subject to
a. 3% percentage tax.
b. Percentage taxes of various rates.
c. 12% VAT
d. 0% VAT.
14. A marginal income earner shall pay

b. 12% VAT.
c. Either A or B
d. Neither A or B
15. The export sales of VAT-registered taxpayers are

a. Subject to zero-rated VAT.
b. Exempt from business tax.
c. Subject to 12% VAT.
d. Subject to 3% percentage tax.
16. The export sale of non-VAT registered taxpayers are

a. Subject to zero-rated VAT.
b. Exempt from business tax.
c. Subject to 12% VAT.
d. Subject to 3% percentage tax.
17. A non-VAT person with exempt sales exceeding the VAT threshold is still
a. Exempt from business tax on exempt sales
b. Exempt from VAT on all its sales
c. Exempt from percentage tax on all sales
d. A and B
18. A VAT-registered person who exceeded the VAT threshold will pay
a. VAT
b. Percentage tax
c. Both A and B
19. A non-VAT registered person who exceeds the VAT threshold shall pay
a. VAT
b. Percentage tax
c. Both A and B
20. A non-VAT registered person who did not exceed the VAT threshold shall pay
a. VAT
b. 3% percentage tax
c. Percentage tax at various rates
21. What is the general VAT threshold?

a. P1,919,800
b. P1,919,500
c. P3,000,000
d. P10,000,000
22. Which is a special VAT threshold?

a. P1,919,800
b. P1,919,500
c. P3,000,000
d. P10,000,000
23. The mandatory or voluntary registration as VAT taxpayers under the special threshold is
a. revocable anytime.
b. revocable after the lapse of three years.
c. revocable within a year.
d. perpetually irrevocable.
24. Mandatory or voluntary registration as a VAT taxpayer under the general threshold is
c. revocable within a year.
25. The VAT registration upon commencement of operation based upon expectation of exceeding the
VAT threshold shall be
c. revocable within a year if sales do not actually exceed the VAT threshold.
Multiple Choice – Problems 1

1. Mrs. Belle, self-employed, generated the following receipts during the year:
Proceeds of health insurance 300,000
Receipts from business advisory services 250,000
Receipts of rentals from boarding house 100,000
What is the total amount subject to business tax?

a. P150,000
b. P250,000
c. P350,000
d. P650,000
2. A person engaged in business sold the following properties:

Sales of goods held for sale 200,000
Sale of personal residence 2,000,000
Sale of personal car 500,000
Compute the sales in the course of business subject to business tax.

a. P0
b. P200,000
c. P2,200,000
d. P2,700,000
3. Mr. Julio, employed, received the following from his employer:
Proceeds of property insurance 200,000
Proceeds of bank loan 300,000
Compensation income 500,000
What is the amount subject to business tax?

a. P0
b. P200,000
c. P300,000
d. P500,000
4. Mr. Jun Kim, a security broker, effected the sales of several securities of Kim Jong-un. The following
relates to the sale:
Sales Commission
Sale of stocks 120,000 1,200
Sale of bonds 280,000 2,800
Total 400,000 4,000
Compute the amount of receipts or sales of Mr. Jun Kim subject to business tax.
a. P0
b. P4,000
c. P400,000
d. P404,000
Note: The sale do not pertain to the broker because the securities sold are not his inventories
5. Assuming Kim Jong-un is an investor in stocks, what is the amount subject to business tax?
a. P0
b. P4,000
c. P400,000
d. P404,000
Note: An investor is not subject to a business tax. Only dealer of securities (those engaged in buy-
and-sell of securities) are subject to business tax.
6. Mr. Masipag had annual gross receipts not exceeding P100,000. During the month, he made the
following sales:
Sale of car rugs 2,000
Sale of cigarettes 3,000
Sale of candies 3,000
Total 8,000
Compute the total amount subject to business tax.

a. P0
b. P2,000
c. P5,000
d. P8,000
Note: Mr. Masipag is a marginal income earner who is exempt from business tax.
7. Mr. Kim Jong, a security dealer, sold the following during the month:
Sale of securities for own account 400,000
Commission income on sale of securities of clients 36,0000
Sale of vacant lot held as investment 1,000,000

a. P0
b. P36,000
c. P436,000
d. P1,436,000
Note: The sale of lot held as investment (a capital asset) is not a business sale.
8. A non-stock charitable organization realized the following during the month:

Membership contributions 300,000
Donation from various donors 400,000
Sale of souvenirs 200,000
Compute the amount subject to business tax.

a. P0
b. P200,000
c. P500,000
d. P900,000
Note: The sale of souvenir is commercial in nature, hence subject to business tax.
9. JDC Corporation, a merchandiser, had the following sales during the month.
Sale of merchandise 200,000
Commission income from consignors 50,000
Sales of stocks investments 180,000
a. P200,000
b. P250,000
c. P380,000
d. P430,000
Note: The sale of investment (a capital asset) is not subject to business tax.
10. Mang Indio has a sari-sari store with P500,000 annual sales. He had the following sales during the
month:
Sale of various merchandise 30,000
Cash donated by his brother 200,000
Cash from proceeds of bank loan 300,000

a. P0
b. P30,000
c. P230,000
d. P530,000
11. Mr. McCullot is a consultant. During the month, he had only one client from which he derived the
following receipt:
Professional fees 150,000
Less: Withholding tax 7,500
Net amount received 142,500

a. P0
b. P7,500
c. P142,500
d. P150,000
Note: The creditable income tax is not deductible against gross receipts.
12. Mang Pandong is a farmer. He sold his agricultural land costing P200,000 for P1,000,000 to start a
palay trading business. What is the amount subject to business tax?
a. P0
b. P200,000
c. P800,000
d. P1,000,000
Note: Mang Pandong is not engaged in the realty business.
13. Ms. Cumacaliua is concurrently employed at Cumanan Corporation and Paatras Company. She
received the following during the month:
Cumanan Paatras
Professional fees 50,000 40,000
Less:
Creditable withholding tax 7,000 6,000
Loan repayment - 12,000
SSS, PhilHealth, HDMF 3,000 -
Net pay 40,000 22,000

a. P0
b. P62,000
c. P77,000
d. P90,000
Note: Fees received under an employer-employee relationship is compensation income, not business
income. Hence, exempt from business tax)
14. Effective 2019, Kanlaon Corporation, a VAT-taxpayer, changed its accounting period to a fiscal year
ending every August 30. What is the deadline for the first quarter VAT return under the new
accounting period?
a. September 25, 2019
b. January 25, 2020
c. November 25, 2019
d. December 25, 2019
Note: The first quarter now ends every November 30, 2019; hence, the deadline of the quarterly VAT
return is December 25, 2019.
15. In the immediately preceding problem, the third quarterly VAT return shall be filed on or before
a. May 20, 2020
b. May 25, 2020
c. June 20, 2020
d. June 25, 2020
Note: The third quarter ends May 31, 2020; hence, the deadline of the quarterly VAT return shall be
June 25, 2020.
1. Jackpruit, a seller of goods, had the following transactions in January 2020:
Cash sales 200,000
Credit/Installment sales (40% collected) 300,000
Sales returns and allowances 40,000
Freight-out charged to customers 20,000

a. P0
b. P460,000
c. P480,000
d. 500,000
Note: (200,000 + 300,000 – 40,000 + 20,0000)
2. Atty. Saturday Sabado and Atty. Sunday Domingo formed a general professional partnership for the
exercise of their legal profession. Their partnership Sabado-Domingo Law Office started operation
on July 1, 2002 as a VAT taxpayer. The partnership adopted the calendar year basis.
The professional partnership shall file its first monthly VAT return on
a. July 20, 2020
b. July 10, 2020
c. August 20, 2020
d. August 30, 2020
Note: 20th day from the end of the month
3. In the immediately preceding problem, what is the deadline of the first quarterly VAT return?
a. July 30, 2020
b. August 30, 2020
c. August 25, 2020
d. October 25, 2020
Note: The calendar quarter ends September 30, 2020, the deadline of the quarterly VAT return is
October 25, 2020.
4. A service provider had the following income during the month:
Fees, paid in cash and checks 80,000
Fees, paid in notes 150,000
Advances by clients for future services 20,000
Reimbursement for out-of-pocket expenses 40,000
Reimbursement for client expenses 20,000
Total 330,000

a. P350,000
b. P250,000
c. P160,000
d. P140,000
Note: (80,000 + 20,000 + 40,000)
5. A taxpayer had the following sales or receipts in the past twelve months:
Exempt sales 1,500,000
Services subject to percentage tax 400,000
Other sales 800,000
Total 2,700,000
Which is correct?
a. The taxpayer is subject to VAT on all sales.
b. The taxpayer is subject to VAT on taxable sales other than exempt sales.
c. The taxpayer is subject to percentage tax on taxable sales other than exempt sales.
d. The taxpayer is subject to percentage tax on all sales.
6. Kudarat Company had the following sales and receipts data in the past twelve months:
Exempt sales 200,000
Services subject to percentage tax 400,000
Other sales 2,000,000
Total 2,600,000
Which is correct?
a. The taxpayer is subject to VAT on other sales.
b. The taxpayer is subject t VAT on taxable sales other than exempt sales.
c. The taxpayer is subject to percentage tax on taxable sales other than exempt sales.
d. The taxpayer is subject to percentage tax on all sales.
7. The following data pertain to a business taxpayer during a quarter:
January February March
Revenue (Sales) 200,000 240,000 230,000
Cash collections 180,000 240,000 220,000
Which of these properly reflect the reporting of a non-VAT service provider?

a. P170,000 P240,000 P640,000
b. P0 P0 P640,000
c. P180,000 P240,000 P220,000
d. P0 P0 P670,000
Note: Service providers are subject to tax on receipts. Non-VAT taxpayers are not subject to quarterly
filing.
8. Which of these properly reflect the reporting of a non-VAT seller of goods?

a. P0 P0 P670,000
b. P200,000 P250,000 P220,000
c. P170,000 P240,000 P640,000
d. P200,000 P240,000 P230,000
Note: Sellers of goods are subject to tax on sales.
9. Which of these properly reflect the reporting of a VAT service provider?

a. P180,000 P240,000 P640,000
b. P200,000 P250,000 P220,000
c. P170,000 P240,000 P640,000
d. P200,000 P250,000 P670,000
Note: VAT taxpayers are subject to quarterly filing.
10. Which of these properly reflect the reporting of a VAT seller of goods?
a. P170,000 P240,000 P230,000
b. P200,000 P240,000 P670,000
c. P170,000 P250,000 P640,000
d. P200,000 P250,000 P230,000
11. Mrs. Bote sells cakes to jeepney drivers who patronize her hot and sweet cakes. During the month,
Mrs. Bote sold P300,000 worth of cakes and collect P280,000. What is the amount to be reported
for business tax purposes?
a. None
b. P280,000
c. P300,000
d. Indeterminable
Note: The sale of cakes is a sale of goods; hence, subject to tax on sales.
12. The No-Taste is a restaurant offering local cuisine. Which is correct?

a. No-Taste is engaged in the sale of service.
b. No-Taste is engaged in the sale of goods.
c. No-Taste is engaged both in the sale of goods and service.
d. No-Taste is not engaged in business.
13. Marilyn is a beautician operating a beauty parlor. She is indebted to Zeus for P30,000. Unable to pay
her debt, Marilyn agreed to render services to Zeus. In return, Zeus cancelled Marilyn’s
indebtedness. Which is correct?
a. The cancellation of the P30,000 indebtedness is a gratuity subject to donor’s tax.
b. The cancellation of the P30,000 indebtedness is exempt from income tax.
c. The cancellation of the P30,000 indebtedness is a constructive receipt of Marilyn subject to
business tax.
d. The cancellation of the P30,000 indebtedness is a constructive receipt of Zeus subject to
business tax.
14. A is a VAT-registered seller with annual sales of P1M. During the month, he recorded only P10,000 in
sales and sustained an operating loss of P40,000.
Which is correct?
a. The taxpayer is exempt from business tax during the month since then is an operating loss.
b. The taxpayer shall pay VAT.
c. The taxpayer shall pay percentage tax.
d. The taxpayer shall pay VAT if his/her annual sales exceeds P3,000,000 during the year.
Otherwise, he shall pay percentage tax.
15. Chemrex Company, a non-VAT taxpayer paying 3% percentage tax exceeded the VAT threshold on
September 2019. Chemrex generated P300,000 and P400,000 sales in October and November and
paid respectively P12,000 and P28,000 input VAT in these months. CHemrex immediately registered
to the VAT system at the start of November 2019.
Compute the business tax payable in October, assuming no claim for tax credit was filed.
a. P9,000
b. P24,000
c. P27,000
d. P36,000
Note: (36,000 – 9,000 – 0 input VAT = 27,000)
16. Compute the business tax payable in October, assuming Chemrex claimed for tax credit and was
approved by the BIR.
a. P9,000
b. P24,000
c. P27,000
d. P36,000
17. Compute the business tax payable in October, assuming Chemrex filed a claim for tax refund.
a. P9,000
b. P24,000
c. P27,000
d. P36,000
18. Compute the business tax payable in November.

a. P12,000
b. P20,000
c. P36,000
d. P48,000
19. A non-VAT taxpayer paying 3% percentage tax received P104,000 cash and P6,000 CWT from the
sale of services. Compute the percentage tax.
a. P3,000
b. P3,120
c. P3,204
d. P3,300
20. A VAT-taxpayer received a P52,000 plus P4,000 creditable withholding tax certificate. What is the
output VAT?
a. P5,571
b. P5,760
c. P5,820
d. P6,000
CHAPTER 4
Exercise Drills
1. Vegetables Exempt
2. Cooked rice Vatable
3. Sundried banana Exempt
4. Canned fish Vatable
5. Fruit shake Exempt
6. Boiled eggs Exempt
7. Fresh fruits Exempt
8. Fresh sea foods Exempt
9. Lumber Vatable
10. Orchids and bonsai Vatable
11. Chicken manure Exempt
12. Bamboo Vatable
13. Bamboo shoots Exempt
14. Cotton seeds Vatable
15. Cotton Vatable
16. Wheat Exempt
17. Cacao Exempt
18. Cocoa Vatable
19. Cheese Vatable
20. Charcoal Vatable
21. Furniture Vatable
22. Zoo animals Vatable
23. Tobacco Vatable
24. Tea Exempt
25. Aquarium fish Vatable
26. Smoked or dried fish Exempt
27. Canned fish Vatable
True or False 1
True 1. The sale of processed agricultural products is vatable.
True 2. The sale of fruits and vegetables is exempt from business tax.
False 3. The sale of fertilizers, seeds, and pesticides is exempt from VAT.
True 4. Exempt sales are exempt from both the VAT and percentage tax.
False 5. Frozen meat is considered a processed agricultural food product.
False 6. A fish pond operator is subject to 3% percentage tax.
False 7. A farmer is subject to business tax on farming occupation.
False 8. All sales of agricultural or marine food products are subject to business tax.
True 9. The services provided by agricultural contract growers are vatable.
True 10. The employment of chemical treatment to agricultural or marine food products is
considered state altering.
False 11. The sale of bread is exempt from business tax.
False 12. The services of an agricultural contract grower are subject to VAT.
False 13. Restaurants are exempt from VAT.
True 14. A fruit vendor is exempt from business tax.
False 15. A manufacturer of canned sea foods is exempt from VAT.
True or False 2
True 1. The transport services of an international carrier is exempt from VAT.
True 2. Agricultural cooperatives are exempt from VAT.
True 3. Electric cooperatives are subject to VAT.
True 4. The sale of commercial lots where the selling prices do not exceed P1,919,500 a unit is
exempt.
False 5. Bookstores are totally exempt from VAT.
False 6. Schools are subject to VAT.
False 7. Hospitals are subject to VAT.
False 8. The export sales by VAT taxpayers are exempt from VAT.
False 9. The export sales of non-VAT taxpayers are subject to zero-rated VAT.
False 10. Consultants are exempt from VAT because their services are akin to employment.
False 11. The leasing of residential units is exempt from VAT if the annual rentals do not exceed
P15,000 per unit.
False 12. Domestic airliners are exempt from VAT on their transport of passengers.
False 13. The sale of a residential dwelling by a non-dealer is subject to VAT if the selling price per
unit does not exceed P3,199,200.
True 14. The sale of an adjacent lot to the same buyer shall be treated as one.
False 15. The sale of adjacent dwellings to different buyers shall be aggregated as one.

1. Which of the following sale is not subject to business tax?
a. Sale of a car by a dealer
b. Casual sale of a car by a non-dealer
c. Sale of real property by a dealer
d. Sale of office equipment by a business
2. Which of these pay business taxes?

a. Vegetables dealer
b. Fruit dealer
c. Gold trader
d. Fisherman
3. Which is taxable with VAT?

a. Sale of cotton in original state
b. Sale of milkfish in original state
c. Sale of muscovado sugar
d. Sale of mustard seeds
4. Which is exempt from business tax?

a. Bakery
b. Manufacturer of canned fruits
c. Manufacturer of noodles
d. Meat vendor
5. Exempt sales are not subject to

a. VAT
b. Percentage tax
c. Both A and B
d. Neither A nor B
6. All of the following are exempt agricultural produce, except

a. Palay
b. Corn
c. Garlic
d. Tobacco
7. Which of the following is considered as not in its original state?

a. Frozen fish
b. Dried fish
c. Marinated fish
d. None

a. Sale of boiled peanuts
b. Sale of peanut brittle
c. Sale of coco lumber
d. Sale of flowers
9. Which of the following sale is exempt from business tax?

a. Sale of palay
b. Sale of furniture
c. Sale of pottery
d. Sale of textile
10. The sale of this agricultural or marine product is exempt from business tax
a. Mackerel
b. Silk
c. Leather
d. Pearl
11. Which of the following establishments may qualify for exemption from business tax?
a. Hotel
b. Inn
c. Boarding house
d. Resort
12. Which of the following is least likely subject to VAT?

a. Banana cake
b. Cassava chips
c. Chocolate
d. Corn grits
13. The sale of which of the following is exempt from business tax?
a. Wine
b. Vinegar
c. Fish sauce
d. Boiled eggs
14. The sale of this agricultural supply is exempt from business tax?
a. Fertilizer
b. Farm machineries
c. Farm tools
d. All of these
15. Which is subject to VAT when sold?

a. Seeds
b. Fingerlings
c. Feeds
d. None of these
16. Which is not exempt from business tax?

a. Miller of palay into rice
b. Miller of corn into corn grits
c. Miller of sugar cane into refined sugar
d. Miller of sugar cane into raw sugar

a. Agricultural contract growers
b. Food processor
c. Paper manufacturer
d. All of these
18. Which of the following transactions is not subject to business tax?

a. Sale of game fowl
b. Sale of specialty feeds
c. Sale of genetic materials for poultry
d. Sale of aquarium fish
19. Which of the following animals is not considered as a pet?

a. Domestic animal
b. Livestock
c. Race horse
d. Aquarium fish
20. Which of the following sales is not exempt from business tax?
a. Sale of pets
b. Sale of unprocessed agricultural food products
c. Sale of processed marine foods
d. Sale of unprocessed non-food agricultural products

1. Which is subject to business tax?
a. A private hospital
b. A non-profit hospital
c. A government hospital
d. None of these
2. Which is not subject to busines tax?

a. A purely employed professional
b. A professional practitioner
c. A self-employed individual
d. All of these
3. All of these pay business tax, except

a. Stock broker
b. Insurance agent
c. Consultant
d. Employee
4. Which of the following pays business tax?

a. Regional operating headquarters
b. Regional administrative headquarters
c. Both A and B
d. Neither A nor B

a. Receipts from rental of aircraft
b. Receipts from rental of vessels
c. Sale of aircraft or vessels
d. None of these
6. Which is an exempt medical service?

a. Services of surgical doctors
b. Services of dentists
c. Services of pediatricians
d. Hospital services
7. The gross receipts or sales of the hospital from which of the following sources is not exempt from
business tax.
a. Medicines
b. Medical services
c. Dental services
d. Veterinary services
8. Which of these is exempt from business tax?

a. Sale of aircraft for domestic transport
b. Sale of aircraft for international transport
c. Both A and B
d. Neither A nor B
9. Which of these is subject to business tax?

a. Sale or lease of sea vessels for domestic transport
b. Sale or lease of sea vessels for international transport
c. Both A and B
d. Neither A nor B

a. Private school
b. Non-profit school
c. Government school
d. All of these
11. Which of these receipts by a school is more likely to be subject to business tax?
a. Tuition fee
b. Miscellaneous fee
c. Computer fee
d. Rent income
12. Which of the following items is exempt from business tax?
a. Sale of books
b. Sale of newspapers
c. Sale of ballpen and notebooks
d. Sale of magazines
13. which is not an accrediting agency for a school to be exempt from business tax?
a. Department of Education
b. Department of Health
c. Technical Education and Skills Development Authority
d. Commission on Higher Education
14. which of the following activities related to books is exempt from business tax?
a. Printing
b. Sale
c. Publication
d. All of these
15. Which of the following statements is correct?

a. The sale of real property by any person is subject to business tax.
b. The sale of real property is vatable only when the seller is a realty dealer.
c. The sale of property held for sale, lease or use in the course of business is subject tax.
d. The casual sale of real property used in business is subject to business tax.
16. The sale of real property by a person not engaged in business is

a. subject to business tax.
b. exempt from business tax.
c. partially subject to business tax.
d. automatically subject to VAT.
17. Which of the following may not be subject to business tax when sold?
a. Property held for sale
b. Property held for lease
c. Property held for use
d. Property held as investment
18. What is the price limit for the exemption of residential lot?
a. P1,000,000
b. P1,500,000
c. P1,919,500
d. P3,199,200
19. What is the price limit for the exemption of residential dwellings?
a. P1,000,000
b. P1,500,000
c. 1,919,500
d. P3,199,200
20. The lease of residential units is exempt from business tax provided that rent per month per unit is
a. more than P12,800.
b. less than P15,000.
c. not more than P12,800.
d. not less than P15,000.

1. Realty dealers, developers or lessors are usually registered as
a. Excise taxpayers
b. Percentage taxpayers
c. VAT taxpayers
d. Any of these

a. Properties classified as ordinary assets
b. Properties classified as capital assets
c. Both A and B
d. Neither A nor B
3. Which is exempt under certain price conditions?

a. Residential lot
b. Residential dwellings
c. Low-cost housing unit
d. All of these
4. The rental limit on residential dwellings does not apply to

a. an apartment.
b. a house for rent.
c. a dormitory.
d. motels.
5. Which carrier has an exemption from business tax?

a. Domestic carrier
b. International carrier
c. Both A and B
d. Neither A nor B
6. An international carrier is not involved in

a. land transport.
b. sea transport.
c. air transport.
d. any of these.
7. An international carrier is owned by a

a. Domestic corporation.
b. Foreign corporation.
c. Either A or B
d. Neither A nor B
8. Which of the following activities by any carrier is a foreign consumption exempt from Philippine
business tax for being rendered outside the Philippines?
a. Inbound transport of passengers and baggages to the Philippines
b. Outbound transport of passengers and baggage or cargoes for abroad
c. A and B
d. None of these
9. The receipts from outgoing transport of domestic carriers is

a. subject to zero percent tax.
b. subject to zero percent vat.
c. exempt from business tax.
d. subject to excise tax.
10. To an international carrier, the receipts from inbound flights is

a. subject to percentage tax.
b. subject to vat.
c. subject to vat for passenger and percentage tax for cargoes.
d. exempt.
11. Statement 1: Cooperatives are generally subject to VAT.

Statement 2: Cooperatives are generally subject to percentage tax.
Which is correct?
a. Statement 1
b. Statement 2
c. Both statements
12. The sale by non-VAT registered persons to entities in the Philippines with indirect tax exemption is
considered
a. A domestic consumption subject to VAT.
b. A domestic consumption subject to percentage tax.
c. A foreign consumption exempt from business tax.
d. A foreign consumption subject to zero-rated VAT.
13. As a rule, all cooperatives are exempt from business tax, except
a. agricultural cooperatives.
b. electric cooperatives.
c. credit cooperatives.
d. none of these
14. which of these entities do not have indirect tax exemption?

a. Philippine Amusement and Gaming Corporation (PAGCOR)
b. Development Bank of the Philippines (DBP)
c. International Rice Research Institute (IRRI)
d. Embassies
15. The export sales of non-VAT taxpayers are

a. exempt.
b. subject to percentage tax.
c. subject to 12% vat.
d. subject to 0% vat.
Multiple Choice – Problems: Part 1

1. A seller of goods had the following details of sales and collection during the month:
Receivables, beginning 200,000
Gross sales 400,000
Less: Collection 500,000
Receivables, end 100,000

a. P500,000
b. P400,000
c. P300,000
d. P200,000
2. In the immediately preceding problem, determine the amount subject to business tax if the taxpayer
is a seller of services.
a. P500,000
b. P400,000
c. P300,000
d. P200,000
3. A farm supply dealer made the following sales during a month:

Fertilizer 45,000
Hybrid corn and rice seeds 65,000
Pesticides 120,000
Water pumps and hand tractors 240,000
Total 470,000
Compute the sales subject to business tax.

a. P110,000
b. P120,000
c. P230,000
d. P360,000
4. Mang Andrew is a meat vendor. He purchases live hogs from piggery operations, butchers the hogs,
and sells their meat in a public market.
In January 2020, Mang Andrew purchased 12 live hogs for P180,000 from Mang Manso and sold
these to customers for P320,000

a. Mang Manso shall not pay business tax, but Mang Andrew shall pay business tax.
b. Mang Manso shall pay business tax, but Mang Andrew shall not pay business tax.
c. Both Mang Manso and Mang Andrew shall pay business tax.
d. Neither Mang Manso nor Mang Andrew shall pay business tax.
5. A farmer sold the following goods in March:

20 sacks rice 45,000
100 sacks corn 90,000
Total 135,000
Determine the gross selling price subject to business tax.

a. P0
b. P45,000
c. P90,000
d. P135,000
6. A restaurant reported the following revenues and receipt in May 2020:

Rice and viands 120,000
Soft drinks 10,000
Snacks 30,000
Total 160,000
Compute the exempt sales.

a. P0
b. P120,000
c. P150,000
d. P160,000
7. 888 Canning Company produces canned sardines but sells raw excess fish during peak fishing
seasons or preserves them by sun-drying and sells them to the local market.
The following were the sales in January 2020:
Canned sardines 850,000
Excess fresh sardines 130,000
Dried fish 40,000
Total sales 1,020,000
What is the amount of taxable sales?

a. P0
b. P130,000
c. P820,000
d. P850,000
8. Rodel Masipag is a vegetable trader. He buys raw vegetable from farmers and sells them to
customers.
 B. Rodel shall not pay business tax on the sale of vegetables.
9. A small “sari-sari” store has annual receipts of P80,000 on the average. It had a sales of P3,000 from
sales of candies and P5,000 from the sale of cigarettes.
Which is the taxable amount of sales?
 A. P0
10. A “sari-sari” store registered as a VAT-taxpayer had the following sales:

The total vatable sales is
 B. 95,000
11. Rovin store

 C. P470,000
12. Mr. Kwon

 A. P0
13. In the immediately preceding problem, what is the VAT on sales?
 A. P0
14. Mr. Louisville

 A. None
15. A printing press had the following revenues and collections during the month:
 B. 630,000
16. Mr. Panzer

 B. P200,000
17. An insurance agent had the following receipts during the month:
 B. 90,000
18. A realty trader sold the following properties:

 B. P800,000
19. Mr. Dobbie

 A. P0
20. Don chicken

 B. Mr. Barako is exempt from business tax.

1. Betani Hospital
 B. P5,000,000
2. Camiguin
 C. The sale of the house and lot by Camiguin is exempt from business tax.
3. Quezon Review School

 B. The P300,000 is exempt from VAT, but is subject to percentage tax.
4. Malakas Shipping Company leases two of its ferry boats to Mactan Superferries, a domestic
transport company.
 A. The rental income of Malakas Shipping is exempt from business tax.
5. Assuming that Malakas Shipping Company in the immediately preceding statement is a non-resident
lessor, which is a correct statement?
 A. The rental income of Malakas Shipping Company is subject to final withholding VAT.
6. St. Louis Elementary School
 C. The tuition fee is exempt from both percentage tax and VAT.
7. Theresita’s High School (THS)

 D. THS is exempt from business tax.
8. Cetermall
 A. P0
9. Mariz Leasing Company

 B. P500,000
10. In the immediately preceding problem, what is the business tax liability of Mariz Leasing Company?
 B. VAT
11. Excel Realty

 B. P2,000,000
12. Mr. Alabang

 B. Mr. Alabang is exempt from business tax
13. Mr. Dauz

 A. Only the sale of the car is subject to business tax.
14. Gosten Developers

 A. P0
15. Gold Realty Corporation

 B. Both properties are subject to VAT without regard to whether they are above or below
the price ceiling.

1. The Platinum Corporation
 D. The sales of both lots are exempt because their aggregate selling price is below the
price ceiling.
2. Highland Credit Cooperative

 B. P50,000
3. A bus operator had the following receipts during the month:

 D. P150,000
4. A domestic airline had the following receipts during the month:

 D. P7,000,000
5. An international sea carrier had the following receipts during the month:
 B. P2,000,000
6. A VAT-taxpayer made the following sales during the month:

 D. P3,100,000
7. A non-VAT taxpayer made the following sales during the year:

 B. P100,000
8. In the immediately preceding problem, compute the business tax?

 B. P3,000
9. A VAT-taxpayer made the following sales during the year:

 D. 220,000
10. In the immediately preceding problem, compute the output VAT.

 B. P12,000
11. A non-VAT recreational center has a senior citizen member. The normal rate for non-senior citizen
member is P2,000 per month.
 C. P1,600
12. A VAT-registered drugstore sold medicine with a total tax-inclusive price of P1,120 to a senior
citizen. Compute the output VAT.
 A. P800
13. A private hospital admitted a senior citizen. Total amount due before discharge was P112,000.
Compute the output VAT.
 A. P0
14. A VAT-registered real estate lessor leases a residential house to a family of five with two senior
citizens. The house monthly rental is P10,000 exclusive of VAT. Compute the Output VAT to be
billed.
 A. P0
15. A restaurant sold to a senior citizen who was accompanied by adult persons. The total price of their
order totaled P3,360. Compute the amount to be billed.
 C. P3,040
16. Juan Cruz, a non-VAT registered senior citizen and owner of St. Peter Drugstore, had the following
sales during the first quarter of 2019:
 D. P220,000
CHAPTER 5
Exercise Drills
1. Common carried by land – transport of passengers 3% percentage tax
2. Common carrier by land – transport of cargoes VAT or 3% percentage tax
3. Common carried by sea VAT
4. Common carrier by air VAT
5. International carrier – passengers Exempt
6. International carrier – cargoes, baggage or mails 3% percentage tax
7. Non-life insurance VAT
8. Life insurance 2% percentage tax
9. Bank – short-term loans 5% percentage tax
10. Bank – long-term loans 1% percentage tax
11. Franchise grantees of electricity VAT
12. Franchise grantees of water 2% percentage tax
13. Franchise grantees of gas 2% percentage tax
14. Franchise grantees of telephone – inbound calls Exempt
15. Franchise grantees of telephone – outbound calls 10% percentage tax
16. Operators of cinemas VAT
17. Operations of cockpits 18% percentage tax
18. Operator of jai-alai 30% percentage tax
19. Places of exhibitions of professional basketballs 15% percentage tax
20. Places of exhibitions of professional boxing 10% percentage tax
21. Bowling alleys VAT or percentage tax
22. Night or day clubs and cabarets 18% percentage tax
True or False 1
F 1. To be subject to VAT, one has to be registered under the VAT system.
Note: Even registrable taxpayers are vatable.
F 2. VAT-exempt sales are subject to percentage tax.
F 3. A seller is subject to percentage tax if he is non-VAT registered even if his sales or receipt
exceed the VAT threshold.
T 4. The 3% general percentage tax applies to non-VAT registered taxpayers.
F 5. A seller of service which is specifically subject to percentage tax is subject to VAT if its 12-month
sales or receipts exceeded the VAT-threshold.
F 6. A seller is subject to percentage tax even if he registered as VAT taxpayer if his annual sales do
not exceed the VAT threshold.
T 7. Common carriers are vatable on their transport of cargoes or baggage.
T 8. Domestic sea or air carriers are vatable on their transport of passengers or cargoes.
F 9. International carriers are vatable on their transport of cargoes or baggage.
T 10. Franchise grantees of private franchises are vatable.
True or False 2
T 1. Franchise grantees of transport operations are subject to percentage tax.
Note: 3% percentage tax
F 2. Winnings from cockpits are subject to percentage tax.
F 3. Franchise grantees of the government on utilities are subject to percentage tax.
Note: It depends upon the type of utilities; Note electricity and telecommunication franchisees
are subject to VAT.
F 4. The percentage tax of banks is called “premiums tax.”
Note: The term “premiums tax” pertains to insurance companies.
F 5. The overseas communication tax applies to both incoming and outgoing dispatch of messages or
communication.
Note: only on outgoing calls
F 6. The sale of water by water utility franchise grantees is subject to VAT.
T 7. The sale of electricity by electric utility franchise grantees is subject to VAT.
T 8. The sale of stocks directly to buyers is subject to percentage tax.
F 9. The sale of stocks by a dealer through the PSE is subject to percentage tax.
T 10. The follow-through offering of listed enterprises is exempt from percentage tax.

1. The percentage tax rates on services specifically subject to percentage tax ranges from:
a. ½ of 1% to 3%
b. ½ of 1% to 30%
c. 1% to 3%
d. 1% to 30%
2. To be subject to the general percentage tax, a taxable person must not be

a. VAT-registered.
b. Non-VAT-registered.
c. Operating below the VAT threshold.
d. All of these
3. Which domestic common carrier is specifically subject to percentage tax?

a. Common carrier by land
b. Common carrier by air
c. Common carrier by sea
d. All of these
4. From which of the following sources does the 3% common carriers tax specifically apply?
a. Transport of passengers
b. Transport of goods
c. Both A and B
d. Neither A nor B
5. The percentage tax specifically imposed on certain domestic transporters is called
a. Common carrier’s tax
b. Skipper’s tax
c. Transporter’s tax
d. Gross receipt tax
6. Which is not specifically subject to a percentage tax?

a. International sea or air carrier
b. Domestic common carrier by land
c. Domestic common carrier by sea
d. A and B
7. From which of the following sources is the gross receipt of an international carrier subject to
percentage tax?
a. Outgoing transport of passengers
b. Outgoing transport of cargoes
c. Incoming transport of passengers or cargoes
d. None of these
8. A domestic carrier which is also engaged in international transport operation is subject to

a. VAT
b. Percentage tax
c. Excise Tax
d. VAT and Percentage tax
9. On transport of excess baggage, cargoes or mails, an international carrier shall pay

a. Percentage tax if it is below the VAT threshold.
b. Percentage tax even if it is above the VAT threshold.
c. VAT regardless of whether it is below or above the VAT threshold.
d. No business tax.
10. Which is a VAT-exempt receipt to a bus operator?

a. Receipts from passengers
b. Receipt from cargoes
c. Receipt from baggage
d. None of these
11. To an operator of a domestic sea transport vessel, which of the following is vatable?
a. Fares from passengers
b. Fares from baggage
c. Fares from cargoes and mails
d. All of these
12. To an international carrier, which is subject to percentage tax?

a. Transport of passengers
b. Transport of cargoes, mails or baggage
c. A and B
d. Neither A nor B
13. Which is not specifically subject to common carrier’s tax?

a. Bus
b. Taxi
c. Jeepney
d. Truck
14. Which is more likely exempt from business tax?

a. Tricycle
b. Jeepney
c. Car for hire without chauffeur
d. Pedicab
15. To an operator of a domestic aircraft, which is vatable?

a. Fares from passengers
b. Fares from baggage
c. Fares from cargoes and mails
d. All of these

a. City taxis
b. Sea vessels
c. Provincial buses
d. City buses
2. Which is subject to 3% percentage tax?

a. Kalesa
b. Bangka
c. Bulldozer
d. Car for hire
3. A jeepney operator with gross receipts from passenger fares exceeding P3,000,000 in any 12-month
period is subject to
b. 8% percentage tax.
c. 12% VAT.
d. 0% VAT.
4. Franchise grantees of telephone, telegraph, and other communication equipment are subject to
percentage tax on
a. Overseas dispatch of message
b. Domestic dispatch of message
c. Both A and B
d. Neither A nor B
5. Which is not exempt from the overseas communication tax?

a. PEZA locators
b. Government
c. Diplomatic services
d. News services
6. The overseas communication tax is

a. 10% of revenue.
b. 10% of gross receipts.
c. 3% of revenue.
d. 3% of gross receipts.
7. Which is a vatable receipt to a franchise telephone franchise grantee?

a. Receipt from domestic dispatch of message
b. Receipt from incoming calls
c. Receipt from outgoing calls
d. Both A and B
8. Which of the following franchisees is subject to the franchise tax?

a. Electricity
b. Transportation
c. Water utility
d. Telephone
9. The franchise tax on radio or television franchises is

a. 2% of gross receipt.
b. 3% of revenue.
c. 2% of revenue.
d. 3% of gross receipt.
10. A radio or television broadcasting company with annual gross receipt not exceeding P9,000,000 shall
pay
a. VAT
c. 2% percentage tax
d. No business tax
11. What is the business tax liability of gas and water utilities with gross receipts not exceeding
P10,000,000?
a. VAT
d. Exempt
12. What is the business tax liability of gas and water utilities with gross receipt exceeding P10,000,000?
a. VAT
d. Exempt
13. A radio or television broadcasting company with annual gross receipts of P12,000,000 shall pay
a. VAT
d. No business tax
14. The gross receipt tax on long-term interest income is

a. 7%
b. 5%
c. 3%
d. 1%
15. Which is subject to the gross receipt tax?

a. Banks
b. Quasi-banks
c. Pawnshops
d. All of these

1. The gross receipts of banks pertain to
a. Principal collection
b. Interest collection
c. Principal and interest collection
d. None of these
2. Which is subject to percentage tax?

a. Life insurance
b. Hull insurance
c. Fire insurance
d. All of these
3. The premiums tax on life insurance applies to

a. Direct premium
b. Re-insurance premium
c. Refunded premium
d. All of these
4. Which is part of gross receipts for purposes of the premiums tax on life insurance?
a. Check
b. Bills and coins
c. Promissory notes
d. All of these
5. The gross receipt tax on banks from other items of gross income added from interest income is
a. 7%
b. 5%
c. 3%
d. 1%
6. Statement 1: Reinsurance premium is exempt from the percentage tax.

Statement 2: Reinsurance premium is exempt from VAT.
a. Statement 1
b. Statement 2
c. Both statements
7. Agents of foreign insurance are subject to

a. 2% premiums tax
b. 5% premiums tax
c. 4% premiums tax
d. 10% premiums tax
8. Which is not subject to amusement tax?
a. Places of boxing exhibitions
b. Places of professional basketball games
c. Cockpits
d. Golf course
9. The premiums tax on insurance premium is

a. 2%
b. 3%
c. 5%
d. 7%
10. The percentage tax for operators of race tracks is

a. 10%
b. 15%
c. 18%
d. 30%
11. Operators of discos or cabarets are subject to an amusement tax of

a. 10%
b. 15%
c. 18%
d. 30%
12. The general percentage tax on winnings from a horse race is

a. 3%
b. 4%
c. 5%
d. 10%
13. Which winning is subject to percentage tax?

a. Winnings from lotto
b. Winnings from derby
c. Winnings from horse race
d. Winnings from gambling
14. Which of the following events is not exempt from amusement tax?
a. World championship
b. Oriental championship
c. National championship
d. None of these
15. Which is incorrect with respect to the requisites of exemption of receipts from professional boxing?
a. Both contenders must be Filipinos
b. The promoter must be a Filipino or corporation with at least 60% Filipino ownership
c. The competition must be a world or oriental championship
d. All of these
1. Which of the following sales is subject to stock transaction tax?
a. The sale by an investor of a listed stock directly to buyer
b. The sale by a listed corporation of shares through the PSE
c. The sale by an investor of a listed stock through the PSE
d. The sale by a listed corporation of shares directly to buyer
2. The IPO tax is payable by

a. The buyers of IPO shares
b. The issuing corporation
c. Both the buyer and issuing corporation
d. The Philippine Stock Exchange
3. The stock transaction tax is withheld and remitted by

a. The Philippine Stock Exchange
b. The stock broker
c. The owner of stocks
d. The buyer of the stocks
4. Statement 1: All initial public offerings are subject to IPO tax.

Statement 2: A follow-through offering is exempt from IPO tax.
Which is correct?
a. Statement 1
b. Statement 2
c. Both statements
5. Statement 1: The percentage of block sale in primary offering is determined using the outstanding
shares after the IPO.
Statement 2: The percentage of stock sale in secondary offering is determined using the outstanding
shares before the IPO.
Which is correct?
a. Statement 1
b. Statement 2
c. Both statements
6. A public corporation is a corporation at least 50% in the value of its outstanding capital stock is
owned by
a. less than 20 shareholders.
b. more than 20 shareholders.
c. 20 or more shareholders.
d. at least 20 shareholders.
7. If the block sale of primary shares exceeds 1/3 of the outstanding shares after the IPO, the IPO tax is
a. 4%
b. 2%
c. 1%
d. ½ of 1%
8. What is the tax rate on the sale of stocks through the facilities of the PSE?
a. 4%
b. 2%
c. 1%
d. ½ of 1%
9. The percentage tax on double forecast, quinella, or trifecta bets on horse race is
a. 3%
b. 4%
c. 5%
d. 10%
10. Which is subject to premiums tax?

a. Health insurance premiums
b. Reinsurance premiums
c. Property insurance premiums
d. Fire insurance premiums
11. All of the following pays monthly percentage tax, except?

a. Franchise grantees of gas and water
b. Domestic carriers and keepers of garage
c. Proprietors of cockpits
d. Life insurance companies
12. Which is specifically subject to percentage tax?

a. Credit cooperatives
b. Property insurance companies
c. International carriers
d. Domestic shipping companies
13. Which is the correct percentage tax on the following service providers?
a. Operators of jai-alai – 30%
b. Keepers of garage – 5%
c. Franchisees of water utility – 3%
d. Life insurance companies – 5%
14. Interest income on loans is specifically subject to percentage tax if earned by a

a. Lending investor
b. Dealer in security
c. Quasi-banking institution
d. All of these
15. The gross receipt tax does not apply to

a. Bangko Sentral ng Pilipinas.
b. rural banks.
c. urban banks.
d. industrial banks.

1. Grace is a proprietor of a mini-store with sales in any 12-month period not exceeding P1,900,000.
She shall pay
a. Percentage tax
b. VAT
c. Excise tax
d. Percentage tax and Excise tax.
2. Tony, a VAT-registered taxpayer, reported P200,000 sales in the month of May. Tony’s annual sales
never exceeded P1,800,000. Compute Tony’s percentage tax.
a. P0
b. P6,000
c. P24,000
d. P54,000
3. Donnel, a non-VAT-registered operator of jeepney, reported a total receipt of P200,000 during a

month, including P20,000 rentals for cargo transport. Compute the percentage tax.
a. P0
b. P5,400
c. P6,000
d. P6,600
4. Mr. Ngina owns and operates a taxi unit. He also teaches as an accounting professor the University
of Baguio and renders taxation advisory services to various clients. Mr. Ngina is registered as a VAT-
taxpayer. In March 2020, he had the following receipts:
Compensation income – teaching 200,000
Receipts from taxi 50,000
Receipts from professional practice 350,000
Total 600,000
Compute the percentage tax payable of Mr. Ngina for March 2020.
a. P0
b. P1,500
c. P12,000
d. P18,000
5. In the immediately preceding problem, compute the total receipts of Mr. Ngina subject to the VAT.
a. P0
b. P350,000
c. P400,000
d. P550,000
6. Michael Jackson is an operator of a fleet of 10 taxis operated under the “boundary system.” A total
of P150,000 “boundary” payments from chauffeurs was received in July 2015. A total of P20,000 is
still receivable from chauffeurs for family advances. The percentage tax for the month is
a. P360
b. P600
c. P4,500
d. P5,100
7. Mr. Pogi-it practices his profession as a medical practitioner. He registered as a VAT taxpayer. Mrs.
Pogi-it is a nurse employed by a public hospital.
a. Mr. Pogi-it shall pay percentage tax.
b. Mrs. Pogi-it shall pay percentage tax.
c. Mrs. Pogi-it is exempt from business tax.
d. Mr. Pogi-it is exempt from business tax.
8. There are two competing keepers of garage with the following receipts:
Parcorito 1,200,000
Parkodun 2,500,000
Which will pay 3% percentage tax?
a. Parcorito
b. Parkodun
c. Both
d. None of them
9. Mr. Conner has two taxis which were both grounded during the month of February 2020 because of
technical problems. The applicable presumptive quarterly gross receipt for each taxi was P3,600.
Compute the percentage tax due for February 2020.
a. P0
b. P72
c. P108
d. P216
10. Mr. Frank Sinatra owns a cargo truck for rent. During the month, it generated total receipts of
P40,000 from various clients. The percentage tax is
a. P0
b. P1,200
c. P2,000
d. P4,800
11. Mr. Jackson Michael, a non-VAT taxpayer, is an operator of four buses plying the route Baguio-
Manila. In November 2020, the buses remitted a total of P320,000 including P30,000 freight and
charges for passenger baggage and mails. Compute Michael’s common carrier’s tax.
a. P0
b. P8,700
c. P9,600
d. P10,500
12. In the immediately preceding problem, compute the percentage tax if Mr. Michael is a VAT-
registered taxpayer.
a. P0
b. P8,700
c. P9,600
d. P10,500
13. Cagayan Ferry Boats transport passengers and cargoes between the islands of Palaui and Sta. Ana. It
earned a total of P120,000 in March 2020 excluding P10,000 freight for cargoes.
What is the percentage tax if Cagayan Ferry Boats registered respectively as a non-VAT taxpayer and
as a VAT-taxpayer?
a. P0; P0
b. P3,600; P0
c. P3,900; P3,600
d. P3,900; P0
14. Lavezares Ferries transports passengers and land vehicles between Samar and Sorsogon. Lavezares
usually had an average annual receipts of P5,000,000. During the month, it earned a total of
P400,000 from customers. The percentage tax is
a. P0
b. P12,000
c. P138,000
d. P150,000
15. An operator of car with chauffeurs for hire had the following financial results of operators during a
month:
Total collections 240,000
Less:
Fuel 100,000
Other car supplies 24,000
Driver’s salaries 20,000 144,000
Net income 96,000
What is the percentage tax?

a. P2,880
b. P4,200
c. P4,320
d. P7,200
16. DANUMI is a local water district with annual sales exceeding P10 a year. During the month, it
collected P4,000,000 from sales of water. Compute the percentage tax.
a. P0
b. P80,000
c. P120,00
d. P200,000
17. Radyo Bolero had annual sales not exceeding P10 a year. During the month, it posted a revenue of
P2,000,000 out of which P1,800,000 was collected. Compute the percentage tax.
a. P0
b. P36,000
c. P54,000
d. P60,000

1. Regga Transporters, a transportation contractor, transports employees of Euro Textiles Industries to
and from Cagayan de Oro City to a distant factory plant in Impasug-ong, Bukidnon. In March, Regga
Transportation was paid P300,000 by Euro Textile Industries. The percentage tax is
a. P0
b. P9,000
c. P15,000
d. P36,000
2. Napartas Company is a transportation contractor of Haring Padala, a mail courier company.

Napartas Company delivers the mails to addresses location specified in the mail. During the month,
Napartas Company was paid P400,000 by Haring Padala. The percentage tax is
a. P0
b. P12,000
c. P24,000
d. P48,000
3. Malaysian Birdie, an international air carrier, collected a total of P30,000,000 from transport of
passengers during the month. It also collected a total of P5,000,000 from transport of mails and
baggage. Compute for the percentage tax.
a. P0
b. P150,000
c. P900,000
d. P1,050,000
4. Puro-Air is a domestic airliner with annual receipts exceeding P50,000,000. During a month, it
generated the following receipts:
Passengers 5,000,000
Cargoes and baggage 1,500,000
Total 6,500,000
The percentage tax is
a. P0
b. P45,000
c. P150,000
d. P195,000
5. European Seagull, an international shipping carrier, had the following receipts on its Philippine
operations:
Gross receipts from: Passengers Baggage Total
Incoming voyages 2,000,000 1,500,000 3,500,000
Outgoing voyages 3,000,000 1,800,000 4,800,000
Total 5,000,000 3,300,000 8,300,000
How much is the percentage tax?
a. P0
b. P54,000
c. P99,000
d. P144,000
6. American Hawk, an international air carrier, recorded the following taxable receipts during a month
for outgoing flights:
From booking agencies in
Philippines Abroad Total
Passengers 2,000,000 3,000,000 5,000,000
Mails and baggage 500,000 1,200,000 1,700,000
Total 2,500,000 4,700,000 6,700,000
Compute for the percentage tax.

a. P15,000
b. P51,000
c. P60,000
d. P75,000
7. DEF Insurance Corporation has the following receipts and receivables from its insurance products:
Life Property Total
Cash and check collections 1,000,000 500,000 1,500,000
Promissory notes 200,000 100,000 300,000
Total 1,200,000 600,000 1,800,000
Compute for the premiums tax.

a. P20,000
b. P24,000
c. P30,000
d. P36,000
8. Bullion Bank reported the following receipts during the month:

Interest income:
- 1 to 3 year loan 1,200,000
- 3 to 5 year loan 800,000
- 6 to 8 year loan 600,000
- 8 to 10 year loans 400,000
Total 3,000,000
Compute for the gross receipts tax.

a. P100,000
b. P110,000
c. P80,000
d. P70,000
9. Venture Bank had the following summary of receipts:
Interest income on short term loans 2,000,000
Interest income on long-term basis 1,000,000
Rent income on ROPOA 800,000
Services fees and gains 200,000
Total 4,000,000
How much is the gross receipts tax?
a. P220,000
b. P200,000
c. P180,000
d. P160,000
10. A quasi-bank receives the following from its short-term placement of excess funds:
Dividend income 500,000
Bank interest income, net of final tax 800,000
Total 1,300,000
Compute for the gross receipts tax.

a. P0
b. P40,000
c. P50,000
d. P91,000
11. A cellular company had the following receipts:

P2,000,000 – From domestic calls
P3,000,000 – Incoming calls to the Philippines
P2,500,000 – Outgoing calls abroad
What is the percentage tax?

a. P0
b. P75,000
c. P165,000
d. P250,000
12. Boy Manok is an operator of a cockpit. During the quarter, it collected P200,00 from gate receipts,
P240,000 from “tongs” and P300,000 from totaled P2,400,000. What is the amusement tax?
a. P0
b. P74,000
c. P111,000
d. P133,200
13. Borneo Corporation, a publicly listed company, is planning to increase its public ownership by
issuing additional 1,000,000 share for P10 per share. 2,500,000. Compute for the IPO tax.
a. P0
b. P100,000
c. P200,000
d. P400,000
14. In a recently completed race, Sta. Ana Hippodrome noted the following winning tickets:
Straight bets – P40,000, 20 tickets at P100 per ticket
Combination bets – P20,000, 2 tickets at P200 per ticket
Compute the percentage tax to be withheld on the winnings.

a. P0
b. P3,800
c. P4,584
d. P5,760
15. Mr. Magno owns 1,000,000 shares representing 40% of the outstanding stocks of Calatna
Corporation, a closely-held corporation, which is conducting an initial public offering. Mr. Magno
sold 700,000 shares during the initial public offering for P100 per share.
Compute the IPO tax due from Mr. Magno.

a. P350,000
b. P700,000
c. P1,400,000
d. P2,800,000
Note: The outstanding shares is 1,000,000/40% = 2,500,000. The IPO % is 700,000/2,500,000 = 28% -
equivalent to 2% tax. Hence, the tax is 700,000 x P100 x 2% = P1,400,000.
16. Assuming further that Mr. Magno sold his remaining 300,000 shareholdings after the IPO for P90 per
share, compute the IPO tax.
a. P161,000
b. P270,000
c. P540,000
d. P1,080,000
Note: 300,000 x P90 x ½ x 1% = P161,000
17. Helix Company is conducting an initial public offering of 2,000,000 shares. Helix Company already
had 4,000,000 issued and outstanding shares. The new IPO shares shall be sold at P3 per share.
What is the tax on the initial public offering?
a. P0
b. P60,000
c. P120,000
d. P240,000
18. Geneva Corporation, a non-VAT taxpayer, leases commercial spaces to various businesses. During a
month, it received P142,500 rentals, net of 5% creditable withholding tax. Compute the percentage
tax.
a. P0
b. P4,061
c. P4,275
d. P4,500
Note: (142,500/95%) x 3% = 4,500
19. Almendras Corporation sells bread to various stores and makes P150,000 monthly sales on the
average. During the month, it made total sales of P200,000 out of which only P160,000 was
collected. Compute the percentage tax.
a. P0
b. P4,500
c. P4,800
d. P6,000
Note: P200,000 x 3% = P6,000

CHAPTER 6
Drill exercises
1. Seller of agricultural food products Exempt
2. Furniture shop Vatable
3. Vegetable trader Exempt
4. A private high college Exempt
5. A private hospital Exempt
6. A dentist Vatable
7. Hospital drugstore Vatable
8. A non-profit elementary school Exempt
9. A government college Exempt
10. Restaurant Vatable
11. Bus operator % Tax
12. Hotel Vatable
13. Operator of domestic sea vessel Vatable
14. Life insurance company % tax
15. Mall Vatable
16. Domestic airliner Vatable
17. Lessor vessels or aircraft Vatable
18. Banks % tax
19. Operator of taxi % tax
20. International carriers % tax
21. Keepers of garage % tax
22. Book publishers Exempt
23. Quasi-banks % tax
24. Dealer of household appliances Vatable
25. Dealer of commercial lot Vatable
26. Insurance agent Vatable
27. Employee Exempt
28. Contractor Vatable
29. Processor of sardines Vatable
30. Auto parts dealer Vatable
31. Manufacturer of hog feeds Exempt
32. Seller of fertilizer and seeds Exempt
33. Fisherman Exempt
34. Fish vendor Exempt
35. Textile manufacturer Vatable
True or False 1
T 1. A person who exceeded the VAT-threshold in any 12-month period must register as a VAT-
taxpayer.
T 2. The VAT applies on receipts or sales other than those exempted and those specifically subject to
percentage tax.
T 3. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a non-
VAT taxpayers.
T 4. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a VAT-
taxpayer.
Note: (by optional registration) the statement did not say “must”
T 5. A person who commences business with an expectation to exceed the VAT-threshold must
register as a VAT-taxpayer.
Note: see revenue regulation provisions
F 6. A registrable person is exempt from VAT.
Note: He is vatable.
T 7. A VAT-registered person is exempt from VAT on VAT-exempt sales.
Note: VAT exempt sales are not subject to VAT regardless of the seller
T 8. A non-VAT taxpayer shall not bill VAT on his sale.
F 9. A VAT-registered person is liable to VAT on exempt sales and services specifically subject to
percentage tax.
Note: Only on vatable sales
F 10. The threshold for franchise grantees of electricity is P10,000,000.
Note: Franchise grantees of gas and water only.
T 11. The VAT threshold for sellers of goods or services is P3,000,000.
T 12. The VAT threshold for franchise grantees of gas and water is P10,000,000.
T 13. The VAT threshold applicable to professional practitioners is P3,000,000.
T 14. Exempt sales shall not be billed with an output VAT.
F 15. A sale to the government shall not be billed with output VAT since it is exempt from VAT.
Note: It is subject to 12% output VAT
True or False 2
F 1. Export sales shall be billed with output VAT.
Note: No output VAT because the VAT rate is 0%
F 2. The export sale of a VAT-taxpayer is an exempt sale.
Note: It is a zero-rated sale. For a non-VAT taxpayer, it is exempt.
F 3. A non-VAT-registered person who invoiced VAT on his sale shall be subject to 12% VAT without
the benefit of an input VAT 3% percentage tax, and 25% surcharge.
Note: 50% surcharge
T 4. Exempt sales which are billed as regular sales shall be considered as regular vatable sales.
F 5. The VAT payable of a VAT-registrable person is the output VAT without benefit of input VAT plus
3% percentage tax.
Note: Output VAT but without benefit of input VAT, no percentage tax.
T 6. No input VAT traceable to exempt can be claimed sales as tax credit.
F 7. No input VAT traceable to government sales is claimable as tax credit.
Note: The 7% standard input VAT is claimable in lieu of the actual input VAT.
F 8. A VAT-registered person shall be subject to a final withholding VAT of 12% on sales to the
government.
Note: 5% final withholding VAT
F 9. The VAT payable of any person is always 3% of the value-added on the sales of goods.
Note: Sometimes it becomes 12% of the sale when no input VAT is claimable
T 10. The claimable input VAT on government sales is 7% of the sales.
T 11. The VAT payable on zero-rated sales is always zero.
Note: Technically true because the VAT payable is always negative
F 12. There is no way VAT payable could be negative in a particular month or quarter.
T 13. VAT is paid in three monthly installments similar to the percentage tax.
Note: Two monthly installments, and a quarterly payment
F 14. Exempt sales must be indicated as such; otherwise, they will be regarded as regular sales.
T 15. The standard input VAT is 5% of government sales.

1. All of these are vatable, except
a. Engineering contractors
b. Lawyers
c. Employee
d. Brokers
2. What is non VAT-exempt?

a. Importation of agricultural or marine food products
b. Gross receipts of professional practitioners
c. Receipts from taxicabs
d. Gross receipts of hospitals
a. Sale of fertilizers
b. Sales of fruit
c. Sale of bamboo handicrafts
d. Sale of vegetables
4. All of these businesses are vatable, except

a. Non-life insurance business
b. Banks
c. Security dealers
d. Merchandisers
a. Fruit dealer
b. Department store
c. Cooperative
d. Meat vendor
6. Which of the following will pay VAT?

a. Farmer
b. Food processor
c. Rice or corn miller
d. Fruit dealer
7. Which will not pay VAT?
a. International carrier
b. Domestic air carrier
c. Domestic sea carrier
d. All of these
8. Which of the following is vatable?

a. An operator of cockpits
b. A disco
c. A bowling alley
d. An operator of a race track
a. Local water districts
b. Gasoline stations
c. Internet service providers
d. Schools

a. Sale of buses and jeepneys
b. Sale of vessels
c. Sale of aircraft
d. Lease of vessels or aircrafts
11. Which will not pay VAT on its receipts?

a. Hospitals
b. Real property dealers
c. Bookstores
d. Taxicab operators

a. Sales of agricultural or marine food products
b. Gross receipts of medical practitioners
c. Sales of books
d. Sales of fertilizers, seeds and seedlings
13. Which statement is correct?

a. Husband and wife are considered separate taxpayers for business tax purposes.
b. For purposes of the VAT threshold, both exempt sales and receipts from services subject to
percentage tax must be included.
c. A VAT-registered taxpayer must pay VAT on services subject to percentage tax.
d. All of these
14. What is the general lock-in period for those who voluntarily register as VAT taxpayers?
a. 3 years
b. 5 years
c. 1 year
d. Perpetual
15. To franchise grantees of radio or television, the VAT-registration shall be

a. Revocable in 3 years.
b. Irrevocable in 3 years.
c. Revocable in 1 year.
d. Irrevocable perpetually.
16. which is not vatable as a separate entity?

a. A branch
b. A subsidiary company
c. A spouse
d. A parent company
17. Statement 1: Sellers of services are subject to VAT on gross receipts.

Statement 2: Sellers of goods are subject to VAT on gross selling price.
Which is correct?
a. Both statements
c. Statement 1
d. Statement 2
18. Statement 1: As a rule, percentage tax is paid monthly.

Statement 2: VAT is paid monthly and quarterly
Which is false?
a. Both statements
c. Statement 1
d. Statement 2
19. Statement 1: “Gross receipt” means collections and advances by clients.

Statement 2: “Gross selling price” means gross sales including delivery charges and excise tax on the
sales if any.
Which is incorrect?
a. Both statements
c. Statement 1
d. Statement 2
20. Statement 1: Discounts that are contingent to a future event are deductible from gross selling price.
Statement 2: Expenses of the service provider that are reimbursed by the client forms part of the
gross receipt.
Which is incorrect?
a. Both statements
c. Statement 1
d. Statement 2

1. Which is non-vatable?
a. Exempt sales billed as regular sales by VAT persons
b. Export sales of VAT-registered persons
c. Regular sales of registrable persons
d. Export sales of non-VAT registered persons
2. Statement 1: Input VAT is creditable only by VAT-registered taxpayers.

Statement 2: Input VAT is deductible by non-VAT taxpayers against their gross income for purposes
of income tax.
a. Statement 1
b. Statement 2
c. Both statements
3. Statement 1: A VAT taxpayer who purchases goods from non-VAT suppliers will effectively pay a VAT
equivalent to the output VAT.
Statement 2: No output VAT shall be billed on export sales and exempt sales.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
4. Which is the tax payable by a non-VAT taxpayer who issues a VAT invoice or VAT official receipt?
a. Output VAT plus 3% percentage tax
b. Output VAT less input VAT, plus 3% percentage tax and 50% surcharge
c. Output VAT plus 3% percentage tax and 50% surcharge
d. 3% percentage tax
5. What is the business tax payable by a person who is VAT-registrable?
a. The output VAT
b. The input VAT
c. Output VAT less input VAT
d. Output VAT plus 3% percentage tax
6. The claimable input VAT is 12% of purchases from

a. VAT-registered taxpayers.
b. Non-VAT-registered taxpayers.
c. A or B
d. None of these
7. Which is a source of input VAT?

a. Purchase of agricultural or marine food products from VAT-sellers
b. Purchase of agricultural or marine food products from non-VAT-sellers
c. Purchase of vatable goods or services from non-VAT suppliers
d. Purchase of vatable goods or services from VAT suppliers
8. Which is not a sales category for VAT taxpayers?

a. Exempt sales
b. Zero-rated sales
c. Sales to the government
d. Sales to non-profit institutions
9. What is the VAT due and payable on regular sales?

a. Output VAT less input VAT
b. Output VAT less input VAT plus 3% percentage tax
c. Output VAT + 3% percentage tax
d. Output VAT + 3% percentage tax plus surcharge
10. Which is subject to withholding VAT?

a. Regular sales of real properties
b. Zero-rated sales
c. Sales to the government
d. Exempt sales
11. A VAT taxpayer can claim the actual input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
12. Which is a possible source of input VAT?
a. Importation
b. Purchase from VAT-sellers
c. Purchase from no-VAT sellers
d. A and B
13. A VAT taxpayer can claim the actual input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
14. A VAT taxpayer may claim only partial or full input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
15. The output VAT on government sales is

a. 12% of sales
b. 0% of sales
c. None
d. 12% of value added
16. The output VAT on export sales is

a. 12% of sales
b. 0% of sales
c. None
17. The output VAT on exempt sale is

a. 12% of sales
b. 0% of sales
c. None
18. No input VAT is creditable on

a. Government sales
b. Regular sales
c. Export sales
d. Exempt sales
19. The claimable input VAT on government sales is
a. 12% of purchases from VAT suppliers
b. 12% of purchases from non-VAT suppliers or VAT suppliers
c. 7% of purchases from VAT suppliers
d. 7% of sales
20. Statement 1: The VAT due and payable on regular sales is always positive.
Statement 2: The VAT due and payable on export sales is always negative.
Which statement is generally correct?
a. Both statements
c. Statement 1
d. Statement 2
21. Statement 1: Sellers always pay VAT on government sales.

Statement 2: Sellers will not pay VAT on export sales.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
22. Which is a correct statement regarding the VAT?

a. The taxable quarter of any taxpayer must be aligned to the calendar year.
b. The taxable quarter of an individual taxpayer must be aligned to the calendar year.
c. The taxable quarter of a corporate taxpayer must be aligned to the calendar year.
d. All of these.
23. Statement 1: The VAT returns for the first two months of the quarter are prepared on a monthly
basis.
Statement 2: The VAT return on the third month of the quarter reflects a monthly balance.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
24. Statement 1: VAT paid in the first two months of the quarter is deductible against the Output VAT
for the entire quarter.
Statement 2: The VAT paid in a quarter is deductible against the output VAT of future quarters of
the taxable year.
Which is correct?
a. Statement 1
b. Statement 2
c. Both statements
25. The monthly VAT return is referred to as

a. BIR Form 2551M
b. BIR Form 2550M
c. BIR Form 2551Q
d. BIR Form 2550Q

1. An agricultural supplier had the following sales during the last 12-month period:
Sales of fertilizers and corn seeds 1,200,000
Sales of seedlings 400,000
Farm equipment 700,000
What is the business tax liability of this taxpayer?

a. VAT on all these categories of sale
b. VAT on equipment and seedlings
c. Percentage tax on equipment and seedlings
d. Percentage tax on farm equipment
2. Mrs. Escala had the following sources of income in the past 12 months:
Salaries 1,200,000
Professional fees 800,000
Which is correct?
a. She shall be subject to VAT on the salaries and professional fees.
b. She shall be subject to percentage tax on the salaries and professional fees.
c. She shall pay percentage tax on the professional fees only.
d. She shall pay VAT on the professional fees only.
3. Aciga Corporation had the following sales in the past 12-month period:
Home office sales 2,000,000
Branch 1 sales 1,200,000
Total company sales 4,200,000
Which is correct?
a. Home office shall pay VAT.
b. Branch 1 and branch 2 shall pay percentage tax.
c. The home office and branches shall all pay VAT.
d. A and B
4. Assuming Aciga Corporation is a parent corporation with two subsidiaries with the following sales in
the past 12-month:
Home office sales 2,000,000
Total company sales 4,200,000
Which is incorrect?
a. Aciga Corporation shall pay VAT.
b. Subsidiary 1 and Subsidiary 2 shall pay percentage taxes.
c. All companies in the group shall pay VAT.
d. A and B
5. Mr. and Mrs. Lallo had the following sales in the past 12 months:
Mr. Lallo Mrs. Lallo Total
Fruits and vegetables sales 1,400,000 - 1,400,000
Fish and meat sales - 1,200,000 1,200,000
Grocery sales 800,000 600,000 1,400,000
Total 2,200,00 1,800,000 4,000,000
Which is correct?
a. Both Mr. and Mrs. Lallo shall pay VAT.
b. Both Mr. and Mrs. Lallo shall pay percentage tax.
c. Mr. Lallo shall pay VAT, but Mrs. Lallo shall pay percentage tax.
d. Mrs. Lallo shall pay VAT, but Mr. Lallo shall pay percentage tax.
6. Mr. Vegetta, a VAT-registered taxpayer, owns a mini-store with the following sales in the past 12
months:
Sales of meat and vegetables 1,800,000
Sales of cooked rice and viands 1,200,000
Sales of snacks and softdrinks 500,000
Which is correct?
a. Mr. Vegetta shall pay percentage tax on the sales of rice, viands softdrinks and snacks.
b. Mr. Vegetta shall pay VAT on the sale of rice, viands, snacks and softdrinks.
c. Mr. Vegetta shall pay VAT on all sales.
d. Mr. Vegetta shall pay percentage tax on all sales.
7. A non-VAT realty lessor had the following receipts during a month:
Bed spacers’ rooms with P2,000 monthly rental each 120,000
Houses for rent with P10,000 monthly rental each 1,000,000
Commercial spaces with P5,000 monthly rental each 900,000
Which is correct?
a. The taxpayer shall pay VAT on all receipts.
b. The taxpayer shall pay VAT on the commercial spaces.
c. The taxpayer shall pay percentage tax on all receipts.
d. The taxpayer shall pay percentage tax on the commercial spaces.
8. A service provider had the following data during the month:

Revenue, including VAT 268,800
Gross receipts, including VAT 180,000
Input VAT 12,000
Assuming the taxpayer is VAT-registered, compute the VAT payable.

a. P7,283
b. P9,600
c. P16,800
d. P19,286
Note: Closest answer. A seller of goods is taxable on “gross receipts” not on revenues.
Output VAT (180,000 x 12/112) = P19,286 – P12,000 input VAT = P7,286
9. Assuming the taxpayer is a VAT-registrable person, compute the VAT payable?

a. P7,283
b. P9,600
c. P16,800
d. P19,286
Note: The output VAT is the VAT due and payable if the taxpayer did not register as VAT taxpayer.
10. A seller of goods had the following data during the month:
Sales invoice (total billed prices) 436,800
Total cash collections 380,800
Sales returns and allowances, billed price 11,200
Input VAT 14,000
Assuming the taxpayer is VAT-registered, compute the VAT payable.

a. P0
b. P26,800
c. P31,600
d. P35,600
Note: Billed prices are inclusive of VAT.

Output VAT (P436,800 – P11,200) x 12/112 = P45,600 – P14,000 input VAT = P31,600
11. Assuming the taxpayer is VAT-registrable person, compute the VAT payable.
a. P0
b. P26,800
c. P45,600
d. P46,800
12. The following sales and purchases were taken from the books of accounts of a VAT taxpayer:
Sales April May June
Sales 625,000 400,000 600,000
Purchases 400,000 420,000 200,000
What is the VAT payable in April?

a. P75,000
b. P48,000
c. P27,000
d. P0
Note: Data from the books of accounts are exclusive of VAT. Sales and purchases accounts exclude
VAT.
Output VAT (12% of sales) – 75,000; 48,000; 195,000
Input VAT (12% of purchases) – 48,000; 50,400; 122,400
VAT due – 27,000; 2,400; 72,600
13. What is the VAT payable in June?

a. P72,600
b. P72,000
c. P48,000
d. P45,600
A VAT taxpayer had the following sales and purchases during the month:
Sales, excluding VAT 300,000
Purchases, inclusive of P14,000 VAT 280,000
14. The sale is VAT-exempt

a. P20,000
b. P34,000
c. P50,000
d. P57,000
Note: The input VAT on exempt sales will be part of costs. Thus, P300,000 – P280,000 = P20,000.
15. The sale is made to the government

a. P20,000
b. P34,000
c. P41,000
d. P41,000
Note: The P280,000 purchases is inclusive of VAT. Hence, the standard input VAT (7% of the
P300,000 sales can be deducted from the P280,000 purchases. This is because excess actual input
VAT over the standard input VAT is included as part of costs and expenses. While the excess of
standard input VAT over the actual input VAT is included as gain part of gross income.
Hence, P300,000 sales – P280,000 – (7% x P300,000) = P41,000
16. The sale is made to regular customers

a. P20,000
b. P34,000
c. P41,000
d. P50,000
Note: The input VAT must be removed from the purchases (cost of sales).
Hence, P300,000 sales – P280,000 purchases – P14,000 input VAT = P34,000
17. The sale is made by a registrable person

a. P20,000
b. P34,000
c. P41,000
d. P50,000
Note: Input VAT on sales of registrable persons cannot be claimed as input VAT. Since, there is not
express provision that disallowed tax credits can be claimed as a deduction, it is safe to treat it as
nondeductible against gross income. It must be emphasized that the claim of deductions and tax
credits are construed against the taxpayer.

1. A sale was invoiced by a VAT-seller at P500,000. Compute for the Output VAT.
a. P0
b. P50,000
c. P53,571
d. P60,000
Note: P500,000 x 12/112 = P53,571
2. A VAT-registered seller wishes to bill the sale of unprocessed meat for P50,000. At what amount
should the sale be billed?
a. P50,000
b. P51,500
c. P53,571
d. P60,000
Note: Meat is VAT exempt he
3. A VAT-registered department store had an un-invoiced sale with the following selling prices:
1 cavan rice 2,500
Vegetables 1,500
Cooking oil 200
Noodles 1,300
Total sales 5,500
What should be the invoice price?

a. P5,500
b. P5,545
c. P5,665
d. P5,680
Note:
1 cavan rice 2,500 2,500
Vegetables 1,500 1,500
Cooking oil (200 x 112%) 200 224
Noodles (1,300 x 112% 1,300 1,456
Total sales 5,500 5,680
4. The sale of a residential lot was invoiced for P1,680,000.

What is the Output VAT?
a. P0
b. P180,000
c. P200,000
d. P201,600
Note: The sale is exempt since it did not exceed the P1,919,500 price ceiling on the sale of residential
lots.
5. The sale of a residential dwelling was invoiced for P3,920,000.

What is the Output VAT?
a. P0
b. P420,000
c. P462,000
d. P470,400
Note: The price exceeds the P3,199,200 price ceilings. Hence, the invoice is inclusive of VAT. The VAT
is computed as P3,920,000 x 12/112 = P420,000.
6. The sale of fruits was involved in a VAT invoice at P24,000.

What is the output VAT?
a. P0
b. P2,571
c. P2,880
d. P4,000
Note: The sale of fruit is VAT exempt. However, if it is invoiced in a VAT invoice not on an “exempt”
invoice, the sale will be treated as a regular vatable sale.
The VAT can be computed as P24,000 x 12/112 = P2,571.
7. A taxpayer had the following purchases of vatable goods, exclusive of VAT:

Purchases from non-VAT suppliers 180,000
Purchased from VAT-suppliers 1,000,000
Total purchases 1,180,000
What is the input VAT?

a. P107,143
b. P120,000
c. P126,429
d. P141,600
Note: P1,000,000 purchases from VAT suppliers x 12%.
8. A non-VAT registered taxpayer purchased goods which was invoiced by the seller as follows:
Selling price 50,000
Output VAT 6,000
Total invoice 56,000
What is the claimable input VAT?

a. P0
b. P6,000
c. P6,720
d. P7,200
Note: A non-VAT taxpayer cannot claim input VAT.
9. In the immediately preceding problem, what is the claimable input VAT if the purchaser is a VAT-
registered taxpayer?
a. P0
b. P6,000
c. P6,720
d. P7,200
Note: The input VAT of the purchaser shall be the output VAT billed by the seller.
10. An insurance company had the following gross receipts:

Last Current
12-months month
Sales of fertilizers and seeds 4,600,000 700,000
Sales of equipment 1,920,000 200,000
Input VAT on processed foods 140,000 10,000
What is the VAT payable for the current month?

a. P0
b. P14,000
c. P24,000
d. P108,000
Note: The VAT payable shall be computed out of vatable receipts (non-life premiums only)
Output VAT (P200,000 x 12%) = P24,000 – P0 input VAT = P24,000
11. A VAT-registered taxpayer with several businesses had the following sales:
Last Current
12-months month
Sales of fertilizers and seeds 1,800,000 200,000
Sales of equipment 1,500,000 150,000
Input VAT on processed foods 140,000 13,000
Compute the VAT payable for the current month.

a. P0
b. P5,000
c. P18,000
d. P29,000
Note: Even if the taxpayer did not exceed the VAT threshold in the past 12 months if it is registered
as a VAT taxpayer, it will be nonetheless subject to VAT.
Output VAT (P150,000 x 12%) – P13,000 input VAT = P5,000
12. A VAT taxpayer is engaged in mixed transactions:

Exempt sales Export sales Regular sales
Output VAT N/A - 300,000
Input VAT 12,000 36,000 200,000
What is the creditable input VAT?

a. P0
b. P200,000
c. P236,000
d. P248,000
Note: Input VAT traceable to exempt sales are non-creditable.
P36,000 + P200,000 = P236,000.
13. In the immediately preceding problem, what is the VAT payable?

a. P100,000
b. P64,000
c. P52,000
d. P0
Note: (P300,000 – P236,000 = P64,000)
14. The taxpayer made a sale P400,000 to the government from goods he purchased for P300,000 from
VAT taxpayers.
What is the actual input VAT?
a. P0
b. P20,000
c. P28,000
d. P36,000
Note: The P300,000 purchases is understandable exclusive of VAT because there is no
15. A VAT taxpayer sold goods to the government for P1,000,000 and paid P40,000 input VAT traceable
to the sale. What is the creditable input VAT on government sale?
a. P0
b. P40,000
c. P50,000
d. P70,000
Note: The creditable input VAT on government sale is the standard input VAT equivalent to 7% of the
sale. Hence, 7% x P1,000,000 = P70,000
16. A VAT-taxpayer exported P1,000,000 worth of goods. It incurred P36,000 input VAT on such sales.
What is the creditable input VAT?
a. P0
b. P36,000
c. P50,000
d. P70,000
17. A non-VAT-taxpayer exported P1,000,000 worth of goods. It incurred P36,000 input VAT on such
sales. What is the creditable input VAT?
a. P0
b. P36,000
c. P50,000
d. P70,000
Note: The export sales of non-VAT sellers is an exempt sales. Input VAT traceable to it are
noncreditable but are part of costs and expenses.
18. A taxpayer collected the following from lessors of commercial spaces:
Billing for rentals 1,500,000
Less: Creditable withholding tax 75,000
Net receipt 1,425,000
Compute the output VAT?

a. P0
b. P160,714
c. P180,000
d. P200,000
Note: The output VAT must be based on the gross receipts not on the net receipts. The billing should
be understood to include the output VAT but since there is no answer for 12/112 x P1,500,000. The
same is impliedly exclusive of VAT.
The Output VAT should therefore be computed as P1,500,000 x 12% = P180,000.
19. A VAT taxpayer received a 5% creditable withholding tax plus P48,150 cash from a VAT invoice.
a. P5,159
b. 5,778
c. 5,373
d. 5,400
Note: If X is invoice price, (95%X + 12% = P48,150); X = P45,000;

Then the Output VAT is P45,000 x 12% = P5,400.
20. A VAT taxpayer received a sum of P74,900 and a P3,500 certificate of creditable withholding tax.
a. P9,396
b. P8,568
c. P8,400
d. P8,988
Note: Invoice price = P74,900 + P3,500 = P78,400.

Then the Output VAT shall be P78,400 x 12/112 = P8,400.
CHAPTER 7
True or False 1
False 1. Sellers of services are subject to VAT on their gross sales or receipts. (GR)
False 2. Sellers of goods are subject to VAT on gross receipts. (GSP)
False 3. Sellers of properties are subject to VAT on the fair market value of the property sold or
disposed of. (FMV or GSP)
False 4. Gross receipts include agency monies and bank loans received by the taxpayer.
True 5. When the discount exceeds 30% of the actual market value, the selling price is considered
unreasonably lower.
False 6. If the selling price exceeds the fair value, the basis of the output VAT is the fair value.
False 7. If the selling price is below fair value, the basis of the output VAT is the fair value.
False 8. If the selling price is unreasonably lower, the basis of the output VAT is the selling price.
(FMV)
False 9. “Gross receipt” means collections including evidences of indebtedness such as
promissory notes given by the client. (except notes)
True 10. Advances given by the client are included in gross receipts.
False 11. Client expenses reimbursed by the client to the business taxpayer are part of gross
receipt.
True 12. Out-of-pocket expenses of the services provider reimbursed by the client are part of gross
receipt.
False 13. Only dealers in real properties are subject to VAT on the sale of real properties. (Ordinary
assets are also vatable)
True 14. A person not engaged in business is not subject to VAT on his sale of goods or properties.
False 15. For purposes of the VAT, fair value of real property means the higher of independent
appraisal value and zonal value. (AV or ZV whichever is higher)
False 16. If the VAT is based on the fair value of the property, the same is presumed to be inclusive
of the VAT. (exclusive)
False 17. The VAT on the installment sale of goods may be reported in installment. (only real
property)
False 18. The VAT on the sale of real property is always reported in installment.
False 19. The installment reporting of output VAT on services is as allowed so long as the initial
payments do not exceed 25% of the agreed contract price. (not services, real property
only)
False 20. The installment reporting of VAT must be over the estimated life of the property in
months or 60 months whichever is lower.
True or False 2
True 1. The sale of properties considered ordinary assets is subject to output VAT.
True 2. The sale of real property on the deferred payment basis not on the installment basis, shall
be subject to VAT similar to a cash sale.
True 3. Interest and penalties are subject to VAT in the months they are collected.
True 4. The sale of capital assets such as investments is not subject to output VAT.
True 5. The donation of business properties considered ordinary assets by the business owner is
a transaction “deemed sale”.
False 6. The distribution of cash dividends is a deemed sale subject to output VAT.
False 7. The distribution of property dividend in the form of stocks of another corporation is
subject to output VAT. (unless taxpayer is dealer in securities)
False 8. The sales of all ordinary assets are exempt from VAT.
False 9. The exchange of investments in payment of debt is a deemed sales transaction subject to
VAT.
False 10. The exchange of residence in payment of debt is subject to VAT as a deemed sale
transaction.
False 11. Consignment is deemed sold if not returned by the consignee in 30 days. (60 days)
True 12. The consignee is subject to VAT on the commission income on sales of consigned goods.
True 13. The consignor is subject to VAT on the sales of consigned goods by its consignees.
True 14. The vatable inventories and properties of a VAT taxpayer upon retirement or cessation of
business are subject to VAT as deemed sales.
True 15. The output VAT on deemed sales upon retirement or cessation of business shall be based
on the market price or cost of goods whichever is lower.
True 16. The commissioner shall determine the market value in cases of transactions deemed
sales and sales with unreasonably lower gross selling prices.
False 17. The change in corporate control over a corporation is considered a deemed sale
transaction.
False 18. When a business changes its trade name, vatable items or properties in its possession
shall be deemed sold at the date of change.
True 19. The consolidation of a corporation with another corporation is not considered a deemed
sale transaction.
False 20. The merger between two corporations shall result in a deemed sale transaction.

1. What is the tax basis of the output VAT on sales of services?
a. Gross selling price
b. Gross receipts
c. Fair value
d. Fair value or gross selling price whichever is higher
2. What is the tax basis of the output VAT on sales of goods?

b. Gross receipts
c. Fair value
3. What is the tax basis of the output VAT on exchange of properties?

b. Gross receipts
c. Fair value of properties received
d. Fair value of gross selling price whichever is higher
4. What is the tax basis of the output VAT on sales of real properties?
a. Selling price
b. Gross receipts
c. Fair value
d. Fair value or selling price whichever is higher
5. What is the tax basis of the output VAT on sales of goods with unreasonably lower selling price?
b. Gross receipts
c. Fair value
6. What is the tax basis of the output VAT on installment sales?

b. Installment received
c. Fair value of property sold
7. What is the tax basis of the output VAT on deemed sales?

b. Gross receipts
c. Fair value
8. Which of the following selling prices is considered unreasonably lower?

Fair value Selling price Discount
a. 200,000 240,000 -None-
b. 250,000 172,500 77,500
c. 400,000 300,000 100,000
d. 500,000 380,000 120,000
9. Which of these is excluded in the gross selling price?

a. Excise tax
b. Output tax
c. Contract price
d. Delivery charges
10. Which of the following is excluded in gross receipts?

a. Cash collection
b. Check collection
c. Promissory note given by the buyer
d. None of these
11. Which is not considered in the determination of the tax base of the VAT on sale of real properties?
a. Selling price
b. Zonal value
c. Assessed value
d. Appraisal value
12. Which of the following is subject to the Output tax?

a. Sale of books
b. Sale of agricultural or marine food products
c. Sale of non-food agricultural or marine products
d. Sale of educational services by a school
13. Which is subject to Output tax?

a. Gross receipts of domestic common carriers by land
b. Gross receipts of international common carriers
c. Gross receipts of banks
d. Gross receipts of non-life insurance companies
14. Which is subject to the 12% regular output tax?

a. Sale of residential dwelling with P1,500,000 unit price
b. Gross receipts from residential dwelling with P15,000 monthly rental
c. Receipts from publishing of books
d. Gross receipts of hospital
15. Which is not subject to the 12% output tax?

a. Gross receipts from restaurant
b. Gross receipts from professional practice
c. Gross receipts from race track operations
d. Sale of medicines

1. Which of the following is subject to output tax if sold by a person not engaged in business?
a. Sale of personal residence
b. Sale of car
c. Sale of investment in stocks
d. None of these
2. Which of the following when sold will result in an output VAT?

a. Vegetables
b. Furniture
c. Fruits
d. Rice
3. A real property is sold by a dealer for P1,900,000. The property had a zonal value of P2,000,000,
assessed value of P1,800,000 and independent appraisal value of P2,400,000.
What is the “gross selling price” for VAT purposes?
a. P1,800,000
b. P1,900,000
c. P2,000,000
d. P2,400,000
4. Which of the following is not subject to output tax when sold by a realty dealer?
a. Sale of properties held for sale
b. Sale of properties used in business
c. Sale of investment in stocks
d. Exchange of properties held for sale in settlement of debt
5. The output VAT on the installment sale of property may be reported in installment if
a. The ration of initial payment exceeds 25% of the selling price.
b. The ration of initial payment exceeds 25% of the fair value.
c. The ration of initial payment does not exceed 25% of the selling price.
d. The ration of initial payment does not exceed 25% of the fair value.
6. Which is not a deemed sales transaction?

a. Distribution of property dividend
b. Dacion en pago
c. Consignment of goods when actual sale is made within 60 days
d. Cessation of status as VAT taxpayer
7. Which is a deemed sales transaction subject to VAT?

a. Retirement of business by a non-VAT taxpayer
b. Dacion en pago of properties by a person not engaged in business
c. Distribution of property dividend by a VAT taxpayer
d. All of these
8. Which of the following dividend declaration is a deemed sale subject to VAT?

a. Distribution of stock dividends
b. Distribution of investments as property dividends
c. Distribution of cash dividends
d. Distribution of properties held for sale as dividends
9. Which of the following properties is not subject to VAT in a foreclosure sale (i.e. dacion en pago)?
a. Cars held for sale
b. Machineries
c. Corporate building
d. Vacant lot not used in business
10. Which is a deemed sale transaction?

a. Change in corporate name
b. Merger or consolidation of corporations
c. Sale of the entire business
d. Placement of an investment by a shareholder
11. Statement 1: If the output VAT is erroneously billed, the amount shown in the invoice is deemed
exclusive of VAT.
Statement 2: If the output Vat is not separately indicated in the invoice, it shall be computed as
12/112 of the invoice price.
Which statement is false?
a. Statement 1
b. Statement 2
c. Both statements
12. Statement 1: By revenue regulation, the VAT shall be displayed separately from the selling price in
the invoice.
Statement 2: If the seller failed to indicate the VAT on the invoice, the sale shall be presumed
exempt.
a. Statement 1
b. Statement 2
c. Both statements
13. Statement 1: Only VAT taxpayers are generally subject to the output tax.
Statement 2: Non-VAT taxpayers never pay the 12% output tax.
a. Statement 1
b. Statement 2
c. Both statements
Note: Non-VAT taxpayers who issues VAT invoice or OR will pay VAT.
14. Which is subject to the 12% regular output VAT?

a. Sale of silver to the Bangko Sentral ng Pilipinas
b. Sale of services to a non-resident person
c. Sale of office supplies to the Asian Development Bank
d. Export sale by a non-VAT taxpayer
15. Which of the following receipts from a domestic common carrier are not subject to regular output
tax?
a. Receipts from transport of passengers by land
b. Receipts from transport of cargoes by land
c. Receipts from transport of passengers by sea
d. Receipts from transport of cargoes by air

1. A non-VAT taxpayer sold goods for P20,000, half of which are paid by the buyer who gave a
promissory note for the balance. The output VAT is
a. P0
b. P1,200
c. P2,400
d. P4,800
Note: A non-VAT taxpayer is not subject to VAT.
2. A VAT-taxpayer sold goods for P40,000 which excludes a P1,000 delivery charge and VAT. The buyer
paid P30,000 downpayment and promised to pay the P11,000 balance plus the VAT in 30 days.
a. P4,920
b. P4,800
c. P3,600
d. P0
Note: (P40,000 + P1,000) x 12% = P4,920
3. A VAT-taxpayer compiled the following for the purpose of filing his BIR Form 2550M:
Sales to VAT taxpayers 200,000
Sales to non-VAT taxpayers 150,000
Total 350,000

a. P0
b. P18,000
c. P24,000
d. P42,000
Note: P350,000 x 12% = P42,000
4. A VAT-registered car dealer sold the following goods to a relative:

Selling price 300,000
Fair market value 500,000

a. P0
b. P36,000
c. P42,000
d. P60,000
Note: P500,000 x 12% = P60,000. Unreasonably lower SP.
5. A VAT-registered realty dealer sold a parking lot on the following terms:

Zonal value (fair value) 2,000,000
Less: 10% discount 200,000
Selling price 1,800,000

a. P0
b. P168,000
c. P216,000
d. P240,000
Note: P2,000,000 x 12% = P240,000. Basis is FMV as fixed by law.
6. A VAT- registered seller sold various merchandise at wholesale price, exclusive of VAT:
Product total retail price 300,000
Less: Trade discount (10%) 30,000
Product wholesale price 270,000
Less: Cash discount (5%)* 13,500
Net price due in 15 days 256,500
* If customer pays in 15 days
a. P0
b. P30,780
c. P32,400
d. P36,000
Note: P270,000 x 12% = P32,400. Cash discount is contingent.

7. A non-VAT taxpayer prepared the following summary of sales for the purpose of filing his BIR Form
2551Q:
Sales to VAT taxpayers 200,000
Sales to non-VAT taxpayers 150,000
Total 350,000

a. P0
b. P18,000
c. P24,000
d. P42,000
Note: Non-VAT taxpayer.
8. Mr. Venta is a VAT-registered seller of “Hot Siopao”. During the month, it sold a total of P400,000
out of which P300,000 were paid by customers. During the month he made a total collection of
P420,000 inclusive of collection of past accounts.
a. P50,400
b. P48,000
c. P36,000
d. P0
Note: P400,000 x 12% = P48,000. This is sales of goods.
9. A VAT-registered practicing lawyer disclosed the following during a month:

Total professional fees billed 800,000
Total professional fees collected 600,000
Advances by certain clients 200,000

a. P120,000
b. P96,000
c. P72,000
d. P88,286
Note: (P600,000 + P200,000) x 12% = P96,000. The term “fees” inherently excludes Output VAT.
10. A VAT-registered service provider prepared the following list of cash collections during a month:
Gross receipts inclusive of VAT 504,000
Client advances 200,000
Proceeds of bank loan 300,000
Total 1,014,000

a. P54,000
b. P78,000
c. P84,480
d. P108,643
Note: (P504,000 x 12/112) + (P200,000 x 12%)

1. A VAT-registered seller of goods billed a customer the following:
List price 800,000
Trade discount 125,000
Net price 675,000
The credit term for the sale was 2%/15, n/60 days.

a. P96,000
b. P81,000
c. P79,380
d. P70,875
Note: P671,000 x 12% = P81,000
2. A VAT-registered seller of goods reported the following during a month:

Gross sales 500,000
Less:
Cash discount for early payment 50,000
Sales returns 20,000 70,000
Net sales 430,000
What is the output VAT for the month?

a. P51,600
b. P54,000
c. P57,600
d. P60,000
Note: (P500,000 – P20,000) x 12% = P57,600

3. A restaurant which also caters for special events had the following date which may be relevant in
filing its BIR Form 2550M:
Gross receipts from customers 500,000
Gross receipts from advanced reservations 50,000
Client balances evidenced by promissory notes 70,000
Total 620,000

a. P60,000
b. P66,000
c. P68,400
d. P74,400
Note: (P500,000 + P50,000) x 12% = P66,000
4. A VAT-registered seller merely indicated an amount of P300,000 on a bill without separately

indicating the VAT thereon.
a. P0
b. P32,143
c. P36,000
d. P40,000
Note: P300,000 x (12/112). Presumption: invoice is inclusive of VAT.
5. A VAT-registered seller indicated the following in a VAT invoice evidencing the sale of vegetables:
Selling price 5,000
Output VAT 600
Total amount due 5,600

a. P0
b. P600
c. P6,520
d. P6,720
Note: The Output VAT is correctly billed, hence, it is the output VAT.
6. In the immediately preceding problem, compute the output VAT assuming the sale is made by a
non-VAT seller.
a. P0
b. P600
c. P6,250
d. P6,720
Note: Non-VAT sellers billing VAT are nevertheless subject to VAT.
7. A VAT taxpayer had the following invoiced sales during the first quarter 2020:
January 280,000
February 347,200
March 313,600
What is the reportable output Vat respectively in January, February and March?
a. P33,600; P41,664; P37,632
b. P33,600; P41,664; P112,896
c. P30,000; P37,200; P33,600
d. P30,000; P37,200; P100,800
Note: Monthly, monthly, and quarterly.
8. A real property dealer sold an agricultural lot for P2,500,000 with the following values:
Appraisal value 3,000,000
Zonal value 2,000,000
Assessed value 1,500,000

a. P180,000
b. P240,000
c. P300,000
d. P360,000
Note: June is end of second quarter, July and August are months of third quarter, hence, monthly
reporting applies.
9. A VAT-registered building contractor who reports under the calendar year basis had the following
billings and collections (inclusive of VAT) regarding its construction contracts:
Bill Collection
June 448,000 403,200
July 504,000 453,600
August 336,000 302,400
What is the output VAT respectively in June and July?

a. P53,760; P114,240
b. P48,000; P54,000
c. P43,200; P91,800
d. P43,200; P48,600
10. In the immediately preceding problem, what is the output VAT in August?
a. P138,000
b. P124,200
c. P36,000
d. P32,400
Note: P2,500,000 x 12%, appraisal is not used

1. In June 2019, a realty dealer sold a residential lot for P2,000,000. The lot had a fair value of
P2,500,000 at the date of sale. The buyer agreed to pay in P100,000 monthly installments starting
June 2019.
What is the output VAT respectively in June 2019 and July 2019?
a. P300,000; P0
b. P240,000; P0
c. P15,000; P15,000
d. P12,000; P12,000
2. On April, 2020, a VAT-registered realty developer sold a condominium unit at a selling price of
P3,600,000. The buyer agreed to pay in 36 monthly installments. The property had a zonal value of
P4,000,000 and assessed value of P3,000,000 at the date of sale.
What is the output VAT on every installment?
a. P13,333
b. P12,000
c. P10,000
d. P0
Note: IP/SP = 25%. Hence, P4,000,000 x 12% x 1/36 = P13,333
3. A VAT-registered realtor sold a commercial building at a selling price of P20,000,000 payable over 20
monthly installments of P1,000,000. A sample monthly bill of the realtor depicts the following:
Installment due 1,000,000
Plus: Output VAT 144,000
Invoice price 1,144,000
What is the fair value of the property sold?

a. P20,000,000
b. P22,000,000
c. P24,000,000
d. P30,000,000
Note: [(P144,000/12%)/(1/20)] = P24,000,000
4. A realtor sold a commercial land for P1,500,000 on November 2020. A 20% downpayment was
required and the balance was due in 20 monthly installment of P60,000 starting December 2020.
What is the output VAT respectively for November and the quarter ending December 2020?
a. P180,000; P180,000
b. P36,000; P43,200
c. P36,000; P7,200
d. P180,000; P0
Note: IP = (20% x P1.5M) + P60k) = P360k; P360k/P1.5M = 24%; Output VAT = P1.5M x 12% = P180k
November = P300k/P1.5M x P180k = P36k
December = P60k/P1.5M x P180k = P7.2k; but December is end of quarter; Hence, P36k + P7.2K =
P43.2k
5. A real property developer exchanged one of its land inventories with a zonal value of P2,000,000
and assessed value of P1,500,000 for the stocks of another corporation.
What is the output VAT on the exchange?

a. P0
b. P180,000
c. P214,286
d. P240,000
Note: P2,000,000 x 12% = P240,000
6. A VAT-registered seller of goods reported the following in a month:

Cash sales 200,000
Credit sales 300,000
Installment sales 400,000
Consignment sales (30 days old) 100,000
Total 1,000,000

a. P24,000
b. P60,000
c. P72,000
d. P108,000
Note: (P200,000 + P300,000 + P400,000) x 12% = P108,000

7. A VAT-registered seller received the following statement from its consignees:
Gross price 500,000
Less:
Commission (20%) 100,000
Freight charges 20,000
Net remittance 280,000
What should be the output VAT on the sales?

a. P44,000
b. P45,600
c. P57,600
d. P60,000
Note: P500,000 x 12% = P60,000
8. A VAT- registered seller had the following summary of sales and consignments in April:
Cash sales 200,000
Credit sales 150,000
Sales reported by consignees 250,000
Unsold January consignment 50,000
Unsold February consignment 30,000
Unsold March consignment 40,000
Unsold April consignment 65,000
Assuming that the rules on deemed sale was properly applied in prior months, what is the output
VAT for April?
a. P42,000
b. P75,600
c. P78,000
d. P81,600
Note: (P200k + P150k + P250k + P30k) x 12% = P75,600. The January unsold must have been deemed
sold in March.
9. Delfin Corporation, a security dealer, declared the following dividends in March 2020:
Cash dividend 1,200,000
Property dividend 800,000
The property dividend represents various merchandise inventories.

a. P0
b. P96,000
c. P144,000
d. P240,000
Note: P800,000 x 12% = P96,000
10. After consecutive years of persistent losses, Luigi Corporation decided to liquidate its business. It
had the following items in its possession upon termination of operations:
Book value Fair value
Receivables 1,200,000 1,200,000
Investments 200,000 400,000
Inventories 600,000 700,000
Properties and equipment 1,200,000 800,000
Compute the output VAT on the deemed sale transaction.

a. P0
b. P168,000
c. P216,000
d. P240,000
Note: (P600,000 + P800,000) x 12% = P168,000

1. Mr. Yaobang is a VAT-registered professional. He also owns a hotel and has a professional practice.
He instructed his accounting staff to indicate zero-rated sales in hotel receipts
During the month, he had the following receipts from his business and exercise of profession:
Gross receipts from profession 1,000,000
Gross receipts from hotel 800,000
Total 1,800,000

a. P0
b. P96,000
c. P120,000
d. P216,000
Note: P1,800,000 x 12% = P216,000
2. Mang Juan applied for the cancellation of his VAT registration. His application was granted by the
BIR. At that time, he had the following inventories of vatable goods:
Supplies, bought from non-VAT suppliers 50,000
Supplies, bought from VAT suppliers 80,000
Merchandise, bought from VAT suppliers 100,000
Merchandise, bought from non-VAT suppliers 20,000
Total 250,000
Compute the output VAT on the deemed sales.

a. P0
b. P8,400
c. P21,600
d. P30,000
Note: P250,000 x 12% = P30,000
3. A VAT-registered farm supply dealer sold the following during a month:

Fertilizers 200,000
Corn seeds 250,000
Farm equipment 1,200,000
Pesticides 300,000
Total 1,950,000

a. P234,000
b. P204,000
c. P180,000
d. P144,000
Note: (P1,200,000 + P300,000) x 12% = P180,000
4. A VAT-registered bookstore had the following revenues during a month:

Commission income on sales of books 300,000
Sales of books held as inventory 400,000
Sales of school supplies 900,000
Total 1,000,000

a. P192,000
b. P156,000
c. P144,000
d. P108,000
Note: (P900,000 + P300,000) x 12% = P144,000
5. A VAT taxpayer made the following sales during the quarter:

Domestic sales:
Sales of VAT-exempt goods 1,200,000
Sales of vatable goods 900,000
Export sales 800,000

a. P348,000
b. P252,000
c. P204,000
d. P108,000
Note: P900,000 x 12% = P108,000. Zero-rated sales do not result in any output VAT.
6. Oval Corporation owns a coliseum which caters to large indoor events. The coliseum had the
following receipts during a month:
Sources of gross receipts Amount
Professional basketball games 400,000
Professional boxing competitions 500,000
Amateur basketball games 100,000
Amateur boxing competitions 150,000
Musical concerts 250,000
Religious gatherings 50,000
Other special events or gatherings 120,000
Total 1,570,000

a. P188,400
b. P168,214
c. P80,400
d. P71,786
Note: (P100k + P150K + P250K + P50k + P120k) x 12% = P80,400. Professional basketball and boxing
are subject to % taxes.
7. King Bank presented the following gross receipts during the quarter:
Interest income – short term loans 4,000,000
Interest income – long-term loans 1,200,00
Rental of ROPA 800,000
Processing fees 200,000
Total 6,200,000

a. P0
b. P107,143
c. P120,000
d. P744,000
Note: Banks are subject to % tax.
8. Phil-Air is a domestic air carrier with both domestic and international operations. During a month, it
had the following gross receipts:
Domestic operations
Transport of passengers 40,000,000
Transport of cargoes 12,000,000
International operations
Transport of cargoes 8,000,000

a. P1,440,000
b. P4,800,000
c. P6,240,000
d. P10,800,000
Note: (P40M + P12M) x 12% = P6,240,000. International operations is zero-rated.
9. Cebu Ferries has a fleet of ships traversing the islands of Bohol and Cebu. It reported the following
total receipts during a month:
Transport of cargoes and baggage 1,000,000
Total 9,000,000

a. P0
b. P120,000
c. P960,000
d. P1,080,000
Note: P9,000,000 x 12% = P1,080,000
10. Victor Lines is a VAT-registered operator of buses. During the month, it had the following total
receipts:
Transport of cargoes and baggage 1,000,000
Total 15,000,000

a. P0
b. P120,000
c. P1,680,000
d. P1,800,000
Note: P1,000,000 x 12% = P120,000. The passenger receipts is subject to 3% tax.
11. Mr. Asuncion is a non-VAT registered operator of 40 taxis. During a month, he collected a total
receipt of P1,300,000 under the “boundary” system.
a. P0
b. P278,572
c. P312,000
d. P321,000
Note: Non-VAT taxpayer, taxi operators are subject to % tax.
12. A non-VAT registered radio broadcasting company collected a total of P800,000 during a month.
a. P0
b. P48,000
c. P85,714
d. P96,000
Note: It is subject to % tax.
13. A VAT-registered real property dealer sold the following during a quarter:
House and Lot – 2B-A 2,000,000
House and Lot – 2B-D 3,000,000
House and Lot – 2C-E 4,000,000
Residential Lot – 1A 1,000,000
Residential Lot – 2B 2,000,000
Compute the total output VAT.

a. P0
b. P720,000
c. P1,080,000
d. P1,320,000
Note: (P4,000,000 + P2,000,000) x 12% = P720,000. Remember the exemption limits on house & lot =
P3,199,200 and residential lot = P1,919,500.
14. A VAT-registered dealer sold two residential units to the same buyer with the following separate
prices:
House and Lot – 1C-A 1,500,000
House and Lot – 1C-B 2,000,000

a. P0
b. P180,000
c. P240,000
d. P420,000
Note: (P1.5M + P2M) x 12% = P240,000. Adjacent lots are consolidated for purposes of the
exemption threshold.
15. A VAT-registered realty dealer sold the following adjacent residential lots to the same buyer. The
separate deeds of sale had the following respective prices:
Residential Lot – 2A 800,000
House and Lot – 2B 900,000

a. P0
b. P96,000
c. P108,000
d. P204,000
Note: The consolidation/aggregation rules applies to house and lot and house and lot, and
residential lot and residential lot.
16. An insurance company had the following gross receipts during a month:
Cash collections from life premiums 1,800,000
Notes receivable for life premiums 200,000
Cash collections from non-life premiums 1,100,0000
Notes receivable for non-life premiums 300,000

a. P0
b. P360,000
c. P180,000
d. P132,000
Note: P1.1M x 12% = 132,000

CHAPTER 8
True or False 1
False 1. To be zero-rated, all forms of export sales must be paid for in acceptable foreign
currencies.
False 2. Vat exemption results in total tax relief while zero-rating results in partial tax relief.
False 3. Input taxes on zero-rated sales are deductible as part of costs or expenses.
True 4. Input taxes on zero-rated sales are claimable as tax credit or tax refund.
True 5. As a rule, effectively zero-rated sales require prior application with the BIR for zero-
rating.
False 6. Sales to tax-exempt persons will be subject to 12% VAT in default of an approved
application for zero-rating.
Note: Zero-rated if with approved application, exempt if otherwise.

True 7. The foreign currencies must be inwardly remitted and accounted for under the rules
of the BSP to be zero-rating.
False 8. The 60-day rule on deemed sales of consignment applied to export sales.
False 9. The sale of good to the BSP must be paid for in acceptable foreign currencies to be
subject to zero-rating.
False 10. The sale to a local export oriented enterprise is subject to zero-rating only if paid for in
acceptable foreign currencies.
False 11. Legal title over exported goods must pass abroad to be subject to zero-rating.
False 12. Export sales that are not paid for in acceptable foreign currencies are subject to the
12% VAT.
Note: Treated as exempt.

False 13. The export sales by non-VAT registered person are exempt from VAT but are subject
to the 3% percentage tax.
Note: Exempt from % tax.

True 14. When the remittance of the foreign currency-denominated sale is not accounted for
under BSP rules, the same shall be considered VAT-exempt.
False 15. An export-oriented enterprise is an entity that exports at least 70% of its total annual
production.
Note: More than 70%
True or False 2
False 1. The direct export by an export trader shall be considered an export sale subject to
12% VAT.
Note: 0% VAT.
True 2. The sale of an export trader to a fellow export trader is subject to zero-rated VAT.
False 3. The commission income from export sales by export traders is exempt from VAT.
Note: Subject to 0% VAT.

True 4. The sale to a bonded manufacturing warehouse of an export-oriented enterprise is
subject to effective zero-rating.
True 5. The sales of goods or services to export-processing zones are subject to an automatic
zero-rating without the need for a BIR application for effective zero-rating.
False 6. The sales to diplomatic missions are exempt from VAT.
True 7. The sales to a BOI-registered manufacturer are subject to zero-rated VAT as long as
100% of its annual production is actually exported.
True 8. The sale of goods or services to a domestic carrier for its international operations is
subject to zero-rated VAT.
False 9. The sale of goods or services to a domestic carrier for its domestic operations is
exempt from VAT.
True 10. The transport of domestic carriers of passengers, baggage and mails from the
Philippines to a foreign country is subject to zero-rated VAT.
True 11. The transport of passengers by an international carrier from the Philippines to a
foreign country is exempt.
Note: Exempt from % tax and VAT.

False 12. The transport of cargoes, baggage or mails by an effective zero-rated if paid for in
acceptable foreign currencies.
True 13. The sale of locally manufactured goods to overseas Filipinos is subject to an effective
zero-rating if paid for in acceptable foreign currencies.
True 14. Sales to the Asian Development Bank are subject to zero-rated VAT.
False 15. The sale to embassies with VEC and embassy personnel with VEIC is not subject to the
zero-rated VAT.

1. Which statement is correct?
a. Zero-rated sales are taxable, but will not result in an output VAT.
b. Zero-rated sales are non-taxable; hence, these will not result in an output VAT.
c. VAT zero-rating ang VAT exemption are synonymous concepts.
d. All of these
2. Which is correct regarding the treatment of input VAT?

a. Input VAT on zero-rated sales is deductible from gross income.
b. Input VAT on zero-rated sales is creditable against output VAT or refundable.
c. Input VAT on zero-rated sales is both deductible from gross income and creditable against
output VAT.
d. Input VAT on exempt sales is refundable or creditable.
3. Which of the following requires prior BIR application for effective zero-rating?
 D. Sales to export-oriented enterprises
4. What sale is not subject to zero-rating?

 A. Sale to a senior citizen
5. Which is not a constructive export?
 A. Direct export to a foreign country
6. Which is non-vatable?
 D. Sales to senior citizens
7. Statement 1: The export of VAT-exempt goods is subject to zero-rated VAT.

Statement 2: The domestic sale of VAT-exempt goods is subject 12% VAT.
Which is incorrect?
 B. Statement 2
8. Which is subject to zero-rated VAT?

 A. Sale of fruits and vegetable to an embassy personnel with VEIC
9. What is the requirement for zero-rating of sales to BOI-registered enterprises?

 C. 100% of production must be exported
10. What is the requirement for zero-rating of sales to a PEZA-registered enterprise?

 D. None
11. What is the requirement for zero-rating of sales to an export-oriented enterprise?

 B. Export sales must exceed 70% of annual production
12. Which is not subject to zero-rating?

 B. Export of automobiles to a local export-oriented enterprise
13. Which is correct with constructive export?

 D. None of these
14. Which of the following is not subject to zero-rated VAT?

 C. Export sales paid for in the local currency
15. Prior BIR application for effective zero-rating is not required for
 A. direct export to a foreign country.
16. Which of the following may not qualify as export sale?

 C. Sale to an export trader
17. Which is not a constructive report?

 D. Sale to a foreign customer abroad
18. A non-large taxpayer shall file the application for effective zero-rating with the
 C. Audit Information, Tax Exemption and Incentive Division.
19. An approved application for effective zero-rating is given

 B. a prospective effect.
20. An approved application for zero-rating is valid for

 A. one quarter only.

1. The sale of services to the following cannot qualify for zero-rating
 A. Sale to a resident person doing business in the Philippines
2. Statement 1: Services to non-residents are always subject to zero-rated VAT if rendered abroad.
Statement 2: Services to residents may be subject to zero-rating if paid for in acceptable foreign
currencies.
Which is incorrect?
 C. Both statements
3. Which is correct?
 D. Service rendered abroad is exempt from any business tax.
4. Which is subject to zero-rating?

 B. Non-resident foreign corp.; Philippines; $10,000
5. Which is not required in the zero-rating of services rendered to a non-resident?

 B. The non-resident alien must be a resident in the Philippines at the time the services were
rendered
6. Sales of services to this entity is subject to the 12% VAT.

 A. Development Bank of the Philippines

 B. Sale of services to a BOI-registered enterprise
8. To which of the following is a sale not subject to zero-rated VAT?

 D. Government agencies

 B. Sale to a domestic sea carrier on its domestic operations
10. Which is incorrect with effectively zero-rated sales?
 D. The sale must be made by a VAT-exempt person
11. Which is incorrect with foreign currency-denominated sales?

 B. Title to the goods must pass to the buyer outside Philippine territory
12. Which is subject to zero-rating?

 C. Outgoing transport of passengers, cargoes, excess baggage or mails by a domestic carrier
13. Which of these services is subject to zero-rating?

 D. None of these
14. Which of these entities is subject to zero-rating on the sale of renewable sources of energy?
 A. Generation companies
15. Which of the following power generation plants is not qualified to a zero-rating treatment on the
sale of electricity?
 D. Coal power plant

1. A business payer reported the following sale during a period:
 B. P300,000; P0
2. A VAT-registered export trader purchased and sold an equipment. The details of the purchase and
sale are as follows:
Compute the gross income for taxation purposes.
 B. 200,000
3. For a taxpayer subject to a 30% tax rate, compute respectively the tax benefits of a P60,000 input
VAT deduction and a P40,000 input VAT credit.
 B. P18,000; P40,000
4. A Philippine company exported goods for $140,000 to a non-resident customer. The payment;
however, was not inwardly remitted. The same was remitted to its home office abroad.
Which is correct?
 B. The sale is an exempt sale
5. A VAT-registered taxpayer made the following sales:

Compute the total zero-rated sales.
 B. P820,000
6. Compute the output VAT.

 B. P0
7. An exporter entered into the following transaction during the month:

Compute the zero-rated sales.
 E. No answer
8. Export Co. made the following export and foreign consignments:

 A. P2,494,000
9. A PEZA locator sold scraps to a domestic business for $12,000. Which is correct?
 D. The sale is subject to the VAT on importation to the domestic business.
10. Which is an export-oriented enterprise in 2018?

 C. CDE Co. P150M, P108M, P180M, P126M

1. Johnny Company, a maintenance contractor, had the following receipts from the following clients in
June 2019:
 C. P2,000,000
2. A BSP assay report on a sale of gold nuggets discloses the following:

 B. P1,539,500; P1,140
3. A non-VAT taxpayer had the following sales during the month:

Assuming the exchange rate is P43,20: $1, compute the zero-rated sales.
 A. P0
4. Carefree, a security service provider, had the following receipts during the month:
 C. P5,200,000
5. A VAT-registered service provider had the following receipts from services rendered in the
Philippines in February 2018:
 B. P500,000
6. Legazpi Corporation had the following sales in March 2020:

 D. P5,000,000
7. A domestic enterprise made the following sales:

Compute the zero-rated sales.
 D. P4,100,000
8. DrimPhil Enterprises, a VAT taxpayer, sold the following to various exporters in July 2018:
 C. P4,000,000
9. A PEZA locator made the following sales to entities within the custom territories:
 A. P0
10. An electric cooperative sold the following during the month:

What is the zero-rated sale of the electric cooperative?
 A. P0
CHAPTER 9
CHAPTER 9
True or False 1
True 1. Only VAT-registered taxpayers can claim input VAT.
True 2. There is no input VAT from purchases made from non-VAT-registered suppliers.
True 3. The total consideration pay by purchasers to VAT taxpayers includes the selling price
and the VAT.
False 4. Registrable persons can claim input VAT.
True 5. Those who cannot claim input VAT can deduct those input VAT as part of their cost or
expenses.
False 6. Input VAT can be claimed as a tax credit or a deduction at the option of the taxpayer.
True 7. The term creditable input VAT means input VAT deductible from output VAT.
False 8. Exempt persons who issue VAT invoices can claim input VAT.
False 9. Input VAT is computed as 12/112 of the selling price of the seller.
True 10. Input VAT may come from importation and domestic purchase.
Ture 11. The purchase of exempt goods and services has no input VAT/
True 12. If the VAT is not separately billed, it shall be computed as 12/112 of the selling price in
the sales document.
False 13. Input taxes on purchases for personal consumption are creditable against output VAT.
True 14. Only input VAT for purchase of goods or services in the course of business is
creditable.
True 15. Input VAT needs to be evidenced by a VAT invoice or official receipt to be creditable.
True or False 2
True 1. The transitional input VAT is 2% of the vatable beginning inventory.
True 2. The input VAT on importation is creditable upon release of the goods from the
Customs custody.
False 3. The input VAT on domestic purchase of goods is deductible upon payment.
False 4. The input VAT on purchases of services is claimable in the month the services are
rendered not when paid.
True 5. Persons transitioning to the VAT system shall submit an inventory of goods.
True 6. The input VAT on the purchase of real properties may be paid in installment.
False 7. The input VAT on depreciable capital goods or properties must be amortized over a
period of 60 months.
False 8. The input VAT on depreciable capital goods or properties with aggregate acquisition
costs exceeding P1M must be amortized over a period of 60 months.
True 9. The input VAT on non-depreciable vehicles is disallowed as tax credit.
False 10. The presumptive input VAT is 4% of the agricultural and marine purchases.
False 11. Traders of sardines, mackerel, milk, and cooking oil can claim presumptive input VAT.
False 12. The standard input VAT is 5% of sales to the government.
False 13. The standard input Vat is 7% of the purchases sold to the government.
True 14. There is a deductible expense when the actual input VAT exceeds the standard input
VAT on government sales.
True 15. There is a reduction in costs or expenses or an item of gross income when the
standard input VAT exceeds the actual input VAT on government sales.
True 16. The excess of the input VAT over the output VAT is referred to as input VAT carry-over.
True 17. Input VAT carry-over is included as part of the creditable input VAT of the following
month.
True 18. The input VAT carry-over in a quarter is deductible in the following quarter.
False 19. The input VAT carry-over cannot be credited over a period of 3 years.
False 20. The input VAT carry-over in the second month of a quarter is creditable on the third
month of that quarter.

1. Which is creditable?
 D. Input VAT traceable to vatable sales
2. Which is a likely source of a creditable input VAT?

 C. Purchase of goods from aliens who are not engaged in business abroad
3. Partial credit for input VAT is allowed on

 A. Government sales
4. Full input VAT credit is allowed on

 D. A and B
5. No input VAT credit is allowed on

 C. Exempt sales
6. Which of the following input VAT can be claimed as tax refund?

 D. Input VAT traceable to export sales
7. The input VAT on purchases of non-VAT-registered taxpayers shall be claimable as

 B. Deduction against gross income for income tax purposes
8. Who can claim the VAT on importation as tax credit?

 C. An importer of goods for business use
9. The traditional input VAT is whichever is the

 B. Higher of 2% of beginning vatable inventory or the actual input VAT thereon.
10. Which is included in the basis of the traditional input VAT?

 C. Vatable goods only purchased from VAT or non-VAT suppliers
11. Which is included in the VAT basis of the 2% transitional input VAT?
 D. A and C
12. Which of the following properties may be included in the basis of the 2% transitional input VAT?
 C. Land or building classified as inventory held for sale
13. Which of the following input VAT may be amortized?
 D. Input VAT on the purchase of depreciable property
14. The amortization of input VAT on certain properties is allowed when the aggregate acquisition costs
 A. exceeds P1M.
15. The input VAT on purchases of real properties may be claimed in installment if
 A. the VAT seller is subject to VAT on the installment payments.

1. The amortization period for depreciable capital goods or properties shall be
 B. whichever is shorter between the actual useful life in months or 60 months.
2. Statement 1: The input VAT on non-depreciable vehicles shall be claimed to the month purchased.
Statement 2: The input VAT on construction in progress shall be claimed in the month billing is paid.
Which is correct?
 B. Statement 2
3. The final withheld final VAT is

 B. 5% of the sales made to government.
4. Which of the following cannot claim presumptive input VAT?

 B. Manufacturer of grease oil
5. The presumptive input VAT is

 D. 4% of primary agricultural input.
6. The standard input VAT is equivalent to

 A. 7% of the sales made to government.
7. The withheld final percentage tax is

 B. 3% of the sales made to government.
8. If the standard input VAT exceeds the actual input VAT traceable to
 A. an item of gross income subject to income tax.
9. Statement 1: VAT-registered persons do not pay VAT on zero-rated sales.

Statement 2: VAT-registered persons always pay VAT on government sales.
 C. Both statement
10. Statement 1: The excess of the output VAT over creditable input VAT is paid to the government.
Statement 2: The excess of creditable input VAT over output VAT is claimed as a tax credit or tax
refund.
Which statement is incorrect?
 B. Statement 2
11. The excess of creditable input VAT over output VAT is

 C. Input VAT carry-over
12. Which of the following Input VAT carry-over is creditable against output VAT of the quarterly VAT
return?
 C. Those arising from the prior quarter
13. Which of the following is creditable against the input VAT of the quarterly VAT return?
 D. All of these
MC Problem Part 1
1. Andrew, a VAT-taxpayer, imported a golden necklace as a gift to his girlfriend. –0
2. A VAT-taxpayer purchase services from a non-VAT-registered person in which he paid a total of
P56,000 on the purchase. – P0
3. A VAT-Taxpayer imported vatable goods from a non-resident person who is not engaged in
trade or business. – P18,000
4. A non-VAT registered person purchased goods invoiced at P112,000 – P0
5. A VAT taxpayer incurred the following during the month:
Consultancy fees P 700,000 – P162,000
6. A Vat-registered purchaser received the following billing from a VAT-registered seller: - P23,571
7. A VAT-taxpayer made the following purchases during the year:
Purchases of goods, exclusive of VAT P50,000 – P13,320
8. Mr. Alarcon is a percentage taxpayer. – P0
9. A taxpayer who became subject to VAT on the third quarter of 2020 – P72,000
10. Mr. Dontetsk – P4,286
11. Ms. Kibungan – P30,000
12. A VAT-taxpayer received and paid the following billings for vatable goods purchased: Purchase
from non-VAT taxpayers P 50,000 - P26,789
13. A VAT taxpayer had the following transactions during a first calendar quarter of 2020: - P6,000
14. What is the creditable input VAT in February 2020? – P9,600
15. What is the creditable input VAT for the 1st quarter of 2020? – P45,600
16. Mr. and Mrs. Sikorsky – P0; P20,000
17. A VAT taxpayer had the following input VAT during the year: Input VAT on exempt sales
P204,000 – P324,000
MC Problem Part 2
1. Dino Rado – P4,600
2. A taxpayer who is transitioning to the VAT system had the following inventories – P7,600
3. Miss Beauty Fooled – P26,400
4. The vatable sales of an agricultural supplier exceeded the VAT threshold. – P1,928.57
5. A realty development company is commencing business. – P224,000
6. A VAT registered taxpayer purchased equipment which is expected to last 10 years in January
2020. – P120,000; P0
7. In January 2020, a VAT taxpayer made the following purchases: Goods, exclusive of VAT
P800,000 – P180,000
8. Popogiron Corporation – P192,000
9. Master Pogi – P0; P0
10. A VAT-registered individual purchased the following from various suppliers in November 2020: -
P96,000
11. In the preceding problem, what is the creditable input VAT in the December quarterly VAT
return – P3,200
12. A VAT-registered corporation reports on a fiscal year. – P2,650
13. In the preceding problem, what is the creditable input VAT in July 2020 – P2,650
14. In the preceding problem, what is the creditable input VAT for the quarter ending August 2020?
– P79,950
15. A VAT-registered individual purchased the following capital goods – P3,000
16. In the preceding problem, what is the creditable input VAT in August 2020? – P5,750
17. Still on the same problem, September 2020 – P14,500
18. A VAT-taxpayer purchased a commercial lot payable in 10 monthly installments – P24,000;
P48,000
19. Thor Corporation – P2,400
20. In the preceding problem, what is the creditable input VAT for May 2020 – P122,400
21. In the preceding problem, what is the creditable input VAT for the quarter ended June 30, 2020
– P151,200
22. Lupao Corporation – P116,000
23. In the immediately preceding problem, what is the claimable input VAT in the second calendar –
P120,000
24. VPI Corporation – March – P1,344,000
25. In the immediately preceding problem, what is the creditable input VAT in the first quarter –
P366,000
MC Problems Part 3
1. Sardinia – P6,000
2. What is the total creditable input VAT of Sardinia – P18,000
3. A wholesale trader of canned sardines – P0
4. Sugarland Corporation – P20,000
5. A sugar refiner processes raw sugar – P0
6. Mr. Mantica – P30,000
7. Nizzin manufacturers – P800
8. Assuming the vatable purchases in the preceding problem were exclusive of VAT – P34,400
9. Misamis Company – P38,500
10. In the immediately preceding problem, what is to be included in the calculation – P9,500 loss or
expense
11. Abenson Builders – P300,000
12. In the immediately preceding problem, what is the final withholding VAT – P200,000
13. Still on the same problem, what is the standard input VAT – P280,000
14. Still on the same problem, what is the treatment – P200 000 loss
15. Mayon Corporation – P60,000
16. What is the creditable input VAT in April – P360,000
17. What is the input VAT carry-over to be credited in June – P40,000
18. A VAT taxpayer had the following data in a quarter: Input VAT carry-over, prior quarter –
P60,000
19. Him Corporation – P30,000
CHAPTER 10
CHAPTER 10 VAT STILL DUE
True or False
FALSE 1. Traders who import wheat shall pay advanced VAT.
FALSE 2. The importation of sugar cane is subject to advanced input VAT.
TRUE 3. A manufacturer of refined sugar shall pay advanced VAT before pulling out the refined sugar at
the point of production.
TRUE 4. Millers who Imports wheat shall pay advanced VAT.
TRUE 5. The owner of naturally grown timber shall pay advanced VAT prior to its transport to buyers
FALSE 6. Traders of refined sugar and flour shall pay advanced VAT.
TRUE 7. Millers of refined sugar and flour shall pay advanced VAT.
TRUE 8. A non-VAT registered person who transport naturally grown timber sale shall pay advanced
percentage tax In lieu of the VAT.
TRUE 9. Unclaimed advanced VAT may be claimed as tax credit
FALSE 10. Unutilized advanced VAT may be claimed as tax refund.
FALSE 11. Unutilized advanced VAT may only be claimed as tax credit certificate.
TRUE 12. Unutilized input VAT can be refunded upon termination of the business of the taxpayer.
TRUE 13. A VAT overpayment may be carried over in the succeeding periods.
FALSE 14. Advanced VAT is an input VAT
FALSE 15. The quarterly VAT due of the taxpayer is paid within 20 days following the end of the quarter,
MULTIPLE CHOICE
I. Which is not subject to payment of advanced Input VAT?
a. Milk
b. Refined sugar
C. Flour
d. Timber
2. Which is a correct statement regarding the advanced input VAT?

a. The advanced input VAT is synonymous to the VAT on importation
b. The advanced Input VAT is the final VAT due from the seller.
c. The advanced input vat is a down payment of the vat on the ultimate sale of refined sugar, flour or
timber.
d. The advanced input vat in lieu of the actual input vat traceable to the sales of refined sugar, flour or
timber
3. Which of the following tax credit can be claimed through a tax credit certificate
Answer: INPUT VAT ON EXPORT SALES AND ADVANCED INPUT VAT
4. Which of the following is not subject to the requirement to pay advanced VAT
a. Wheat traders
b. Millers of flour
c. Sugar refineries which process sugar for their own accounts
d. Owners of harvested timber
5. Which of the following can be claimed as VAT refund?
a. Input VAT on export sales
b. Advanced Input VAT
c. Input VAT on sales to the government
d. A and B
6. Which is not a tax credit against net VAT payable?

a. Advanced VAT c. Standard input VAT
b. Monthly VAT payments d. Final withheld VAT
7. Which Industry is not subject to VAT?

a. Mining c. Banking
L Construction d. Air transport
8. Which is not a VAT compliance requirement?

a. VAT Invoicing
b. Transactional Recording
c. Filing monthly summary list
d. None of these
9. The summary list is required for

a. Large tax payers c Non .VAT taxpayers
b. Non large taxpayers d. All VAT taxpayers
10. What is the effectivity of the request for cancellation of VAT registration?
a. On the day of the request is approved
b. On the day following the date the request was approved
c. On the month following the month the cancellation was approved
d. On the quarter following the quarter when the cancellation was approved
Multiple choice- Problems PART 1
1. Sabina Flour Milling (SFM) Corporation imports and mills wheat.

 B. 288,000
2. Sugar Nanny Corporation (SNC) buys sugar cane from farmers and processes
D. 336,000
3. In the immediately preceding problem, what is the total credit

C. 456,000
4. A VAT Taxpayer had the following data on its VAT obligation on the last quarter of the year:
B. 40,000
5. Mr. Esperon, a VAT taxpayer, recorded the following during the month.
A. 84,000
6. Ms. Chelsea had the following transactions in June 2019
D. 18,000
7. The following gross receipts and input VAT relate to a non profit and non stock
B. 116,000
8. A seller of goods reported the following in the month:

C. 24,000
9. The net income of AKLAN Trading Company during the quarter is as follows.
D. 30,600
10. ABC Construction Company started work on a 5,6000,000 fixed price construction contract.
C. 213,600
11. A VAT registered seller of goods had the following sales and purchases exclusive of VAT:
D. 26,400
12. Mrs.Baniaga, A fruit and vegetable dealer, had the following sales and purchases.
A. 0
13. A VAT registered traded reported the following during the month
A. 24,000
14. A domestic seller and exporter had the following summary of trading activities in the quarter:
C. 60,000
MC- Problem Part 2
1. A realty dealer disposed two residential units during the month.
Unit 141-B 2,500,000

Unit 142-C 3,500,000
Total sales, Exclusive of VAT 6,000,000
Total input Vat During the month 210,000
Compute the VAT payable.

C. 297,500
2. A vat registered restaurant had the following transaction during the month:
Receipt from foods served 600,000
Receipts from soft drink 200,000
Purchase of rice,meat and vegetable 200,000

Purchase of vegetable 100,000
Purchase of soft drink 120,000
Purchase of food condiments 80,000
Assuming all amounts are exclusive of VAT, compute the vat Payable
D. 72,000
3. A Vat-registered tax practitioner who uses the cash basis of accounting disclosed the ff results of
operation (exclusive of Vat)
d. 654,000
4. A manufacturing subcontractor generated the ff receipt from various clients.
Compute the VAT payable
D. 0
5. DZQC, a radio broadcasting company with 8M annual receipt, generated a total revenue of 1M out f
which of 800,000 was collected.
A. O
6. A Vat- taxpayer had the following data during the month. Regular sale 3M export sale 1.5 M input
vat o reg sale 240k input vat on export sale 100k. compute the VAT payable B. 100,000
7. An insurer had the ff receipt and input Vat data during the month. Compute the VAT payable.
D. 195,000
8. A lessor of commercial spaces had the ff receipts and input VAT data for the month. Compute for VAT
Payable
B. 270,000
9. a domestic airliner had the following transaction during the month
B. 192,000
10. A seller of goods had the ff. sale
C. 48,800
Chapter !0- MC Probs Part 3
1. Denzi company bought a building

- B. 64, 000
2. A VAT- registered bus company has the following receipts on January 2020:
What is the VAT Payable for January
- B. 27, 400
3. A domestic sea carrier has the following receipts and attributable input VAT for the month:
What is the VAT payable:
- C 24, 000
4. A VAT registered television company with annual receipts of P8M reported P 1M total revenue
What is the VAT payable:
-C. 68, 5715
5. A bookstore had the following summary of transaction during the month:

What is VAT payable?
-C. 78, 120
6. Danes Bakeshop had the following details of operations during the month:
-D. 180, 000
7. Sweet Papa Corporation is a VAT- registered sugar refiner.
What is the VAT payable?
-D. 32, 000
8. Baguio General Hospital has the following receipts and input VAT:
-B. 360, 000
9. A VAT –registered professional review school has the following receipts during the month:
-C. 92, 000
10. Cordon College had the following receipts and input VAT payments:
-A. 0
11. Polaris Company, a VAT seller, has the following sales and purchases
-A. 71, 000
12. A VAT taxpayer made the following sales:
Compute the VAT payable:
-C. 56, 500

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CHAPTER 2

False 1. The Vat on importation is a business tax.

False 1. Resident foreigners are not subject to the VAT on importation.

- Sheep, Sheep Wool, Cut sheep meat

2. Which agricultural products is VAT-exempt on importation?

3. Which importation is subject to VAT?

4. Which is not subject to VAT on importation?

- Importation of goods for business use.

5. Which of the following is subject to the VAT on importation when imported?

6. Which non-food agricultural products is exempt from VAT on importation?

7. Which of the following is not exempt from VAT?

8. Which seedling is vatable?

9. Which agricultural produce is exempt from VAT?

10. Which is vatable?

11. Which is VAT-exempt?

12. Which is VAT-exempt?

14. Which agricultural product is subject to VAT?

15. Which is subject to VAT on importation?

- Cocoon silk, Pineapple Silk, Furniture

16. Seedlings of this tree are exempt from VAT on importation.

- Palm oil tree

17. Which of the following when imported is subject to VAT?

18. Which of these seeds is not VAT-exempt?

19. Which of the following feed is subject to VAT on importation?

2. Which is vatable on importation?

3. Which of these is VAT-exempt on importation?

- Almonds, Blueberries, Ginseng roots

4. Which is not exempt from VAT?

5. Which is not generally considered as pet under the regulation?

6. Which is these is non-vatable?

7. Which is not a VAT-exempt poultry?

- Game fowl roosters

8. Which of these animals is vatable when imported?

9. Which is a vatable agricultural input?

11. Which of these is taxable with VAT on importation?

- Kelp, Sea lettuce (green nori), Squids

14. Examples of mollusk and shellfish: Crabs, Oysters, Lobsters, Clams

17. Which product is non-taxable with VAT on importation?

- Fresh cow’s milk

18. Which of the items below is taxable with VAT?

19. Which is not considered as simple processing?

- Importation of school supplies

2. Which importation is not VAT-exempt?

- Importation of personal household effect which are subject to custom duties.

- Importation involves vehicles and machineries

4. Which importation is exempt from VAT?

- Importation of books by school, student and a bookstore.

5. The importation of which transport medium is exempt from VAT?

- Bus and Cars

- EITHER international carriers, domestic carriers on their international operations

10. Which is VAtable?

11. The importation of vessel or aircraft for domestic operations is

14. Who has the burden of proving exemption fromVAT on importation?

15. Which is qualified exempt importation?

- importation by cooperative farm equipment

16. Which is not qualified exempt importation?

- importation of fuels or supplies by a person engaged in domestics transport operations

17. Which of these is non-vatable?

- The non-exempt buyer

19. Importation is not subject to VAT when

- it involves exempt goods

20. Which is not included in landed cost?

21. Which is not included in landed cost?

1. Oceaners, Inc. Purchased the following from abroad: