Part I – Determine whether the income described below is subject to final withholding tax on passive

income, basic income tax or exempt from income tax.

Write the following in the TAX TYPE column:

 FWTx = if the income described is subject to final withholding tax on passive income. In addition,
if such income is subject to FWT, provide the correct FWT rate in the TAX RATE column.

 BTx = if the income described is subject to basic income tax

 Exempt = if the income described is exempt from income tax

Unless provided otherwise, assume the taxpayer is a resident citizen.

TAX TYPE TAX RATE

1) Interest from peso bank deposit, BDO, Makati FWTx 20%
2) Interest from US dollar bank deposit, BPI-Manila FWTx 20%
3) Interest from a foreign currency deposit in Japan FWTx 15%
4) Interest from money market placement, Philippines FWTx 20%
5) Interest from a foreign currency deposit in Australia EXEMPT
by a nonresident citizen
6) Interest from overdue accounts receivable, BTx
Philippines
7) Compensation income, Philippines BTx
8) Business income, Philippines BTx
9) Gain from sale of car for personal use CGT
10) Gain from sale of delivery truck BTx
11) Royalties, in general, Davao City FWTx 20%
12) Royalties, books published in Manila FWTx 10%
13) Prizes amounting to P30,000, Philippines FWTx 20%
14) Prizes amounting to P10,000, Philippines FWTx / BTx Graduated
Rate
15) Prizes amounting to P40,000, USA FWTx 15%
16) P30,000 other winnings, Philippines FWTx 20%
17) P10,000 other winnings, Philippines FWTx 20%
18) P15,000 other winnings, Canada FWTx 15%
19) P10,000 Phil. Lotto/PSCO winnings EXEMPT
20) P100,000 PSCO winnings by a resident alien FWTx 20%
21) Philippine Lotto/PSCO winnings by a nonresident FWTx 25%
alien not engaged in trade or business
22) Lotto winnings in London FWTx 15%
23) Interest income from long-term bank deposit by a EXEMPT
resident alien
24) Interest income from long-term bank deposit by a EXEMPT
nonresident alien not engaged in trade of business
25) Interest income from a government issued bonds EXEMPT
with maturity of ten (10) years
26) Interest income from bonds issued by PLDT with FWTx 20%
maturity of ten (10) years
27) Dividend income from a domestic corporation FWTx 10%
28) Dividend income from a resident foreign corporation FWTx/ BTx Graduated
Rate
29) Dividend income from a nonresident foreign FWTx/ BTx Graduated
corporation rate
30) Dividend income from a domestic corporation by a FWTx 20%
nonresident alien engaged in trade or business
31) Dividend income from a domestic corporation by a FWTx 25%

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 nonresident alien not engaged in trade or business
32) Gain on sale of shares of stock of a domestic CGT
corporation sold directly to a buyer
33) Gain on sale of shares of stock of a domestic CGT
corporation traded in the local stock exchange
34) Gain on sale of real properties used in business BTx
35) Gain on sale of real properties classified as capital CGT
asset located in Singapore

Part II – Multiple Choice

Choose the letter of the correct answer

1. Under Section 1, Art. IV of the Philippine Constitution, a Filipino citizen is one who is/are:
I. Born (by birth) with Father and/or mother as Filipino citizens
II. Born before January 17, 1973 of Filipino mother who elects Philippine citizenship upon
reaching the age of majority; or
III. Acquired Philippine citizenship after birth (naturalized) in accordance with Philippines
laws.

a. I and II only c. II and III only

b. I and III only d. I, II and III

Use the following data for the next five (5) questions:
A taxpayer, married without qualified dependent child, had the following data for taxable year 2021:
Gross income, Philippines P 800,000
Gross income, USA 600,000
Expenses, Philippines 400,000
Expenses, USA 300,000

2. If the taxpayer is a resident citizen, married, his taxable income is:

a. P400,000 c. P700,000
b. P350,000 d. P650,000

3. If the taxpayer is a non-resident citizen, married, his taxable income is:

a. P400,000 c. P700,000
b. P350,000 d. P650,000

4. If the taxpayer is resident alien, married, his taxable income is:

a. P400,000 c. P700,000
b. P350,000 d. P650,000

5. If the taxpayer is non-resident alien engage in trade or business in the Philippines, married and
his country grants P40,000 as a personal exemption for married individuals, his taxable income
is:
a. P400,000 c. P700,000
b. P360,000 d. P660,000

6. If the taxpayer is a non-resident alien not engage in business in the Philippines, married and his
country grants P40,000 as a personal exemption for married individuals, his taxable income is:
a. P800,000 c. P360,000
b. P400,000 d. P350,000

7. Mr. George Hames is a Syrian and a resident of Damascus, Syria. He requested you to file his
Philippine income tax return for 2021. The following information were forwarded to you:
Gross income from Philippines:
Interest income from BPI bank deposits P3,000,000

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 Dividend income from domestic corporations 500,000
Less: Expenses (300,000)
Net income in the Philippines 3,200,000
Add: Net income in Syria (Peso equivalent) 5,000,000
Total net income P8,200,000
Taxable income you will report is:
a. P3,000,000 c. P3,500,000
b. P3,200,000 d. P -0-

8. Which of the following received by an individual taxpayer is not subject to final tax but subject
to tax under Section 24(A) of the Tax Code?
a. Cash dividend from domestic corporation
b. Property dividend from regional operating headquarters of multinationals
c. Share in the distributive net income after tax of taxable partnership in the Philippines
d. Cash dividends from a foreign corporation with Philippine branch

9. Which of the following is an income subject to the basic tax?

a. Dividends received from domestic corporation
b. Prizes from USA lotto
c. Interest income from BDO
d. Share in the net income of ordinary partnership

10. Individual taxpayers not subject to tax under Section 24(A)

a. Resident citizens on their net income within and without the Philippines
b. Resident citizens and resident aliens on their net income within the Philippines
c. Nonresident aliens engaged in trade or business on their net income within the Philippines
d. Nonresident aliens not engaged in trade or business on their gross income within the
Philippines

11. Statement 1: Passive income are subject to separate and final tax rates.

Statement 2: Passive incomes are included in the computation of taxable income from
compensation or business/professional income.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

12. Final tax is generally withheld:

On passive income From Philippine Sources
a. Yes Yes
b. No No
c. Yes No
d. No Yes

13. Binay, a Filipino overseas contract worker and his spouse, a resident of the Philippines, have a
joint US dollar account at PS Bank, Makati. Their gross interest earnings in 2020 from the bank
deposit amounted to US $4,000. Which of the following statement is correct?
a. The interest income shall be treated as tax exempt because Binay is non-resident citizen.
b. The interest income shall be taxable in full because Binay and his spouse are both Filipino
citizens.
c. Fifty percent (50%) of the interest income shall be treated as exempt while the other fifty
percent (50%) shall be subject to the graduated rates.
d. Fifty percent (50%) of the interest income shall be treated as exempt while other fifty
percent (50%) shall be subject to a final withholding tax of 15%.

14. Cash and/or property dividends shall be subject to 10% final withholding tax if actually or
constructively received from

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 I. Domestic companies or from joint stock companies
II. Insurance or mutual fund companies
III. Regional operating headquarters of multinationals
IV. Philippine branch of a foreign corporation

a. I only c. IV only
b. I and II only d. I, II and III only

15. A resident citizen received a prize of P50,000. Which of the following statements is correct in
connection with the imposition of final tax on the prize?
a. The first P10,000 is subject to Section 24(A), the remaining P30,000 is subject to 20% final
tax.
b. The first P10,000 is exempt from tax, the remaining P30,000 is subject to 20% final tax.
c. The whole amount shall be subject to 20% final tax.
d. The whole amount shall be subject to 25% final tax.

16. Which of the following passive income is exempt from tax when received by resident citizen and
non-resident aliens engaged in trade or business in the Philippines, but subject to 25% final tax
when received by nonresident aliens not engaged in trade or business?
a. Prizes of more than P10,000
b. Interest income from long-term deposit or instrument evidenced by certificates prescribed
by the Bangko Sentral ng Pilipinas
c. Yield or any other monetary benefit from trust funds and similar arrangements
d. Other winnings

17. A resident citizen received a raffles prize of P40,000 from NBA while watching a basketball game
between LA Lakers and Boston Celtics in LA California, USA. Which of the following statements is
correct?
a. The whole amount of P40,000 is part of his taxable income
b. The first P10,000 is part of his taxable income while the remaining P30,000 is subject to 20%
final tax
c. The whole amount of P40,000 shall be subject to 20% final tax
d. The first P10,000 shall be exempt from tax while the remaining P30,000 is subject to 20%
final tax

18. Which of the following income is taxable in the Philippines?

a. Interest income in the Philippines earned by a nonresident alien
b. Cash dividend received by a nonresident citizen from a foreign corporation
c. Salary received for working abroad by a nonresident citizen
d. Business income earned in USA by an American citizen residing in Palawan

Use the following data for the next two (2) questions:
Pedro, a resident citizen, received the following during 2020:
Proceeds from copyright royalty, net of tax P 11,250
Proceeds from mineral claim royalty, net of tax 12,000
Share from trading partnership, net of withholding tax 270,000

19. How much is the total final tax on Pedro’s income?

a. P50,000 c. P31,250
b. P34,250 d. P 4,250

20. How much is the income tax still due and payable of Pedro in 2020?
a. P50,000 c. P31,250
b. P34,250 d. P - 0 -

Use the following data for the next two (2) questions:
A taxpayer received in 2021 the following passive income within Philippines, net of applicable tax, if any:
Interest on bank deposit under FCDU P212,500

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 Royalty on books 94,500
Dividend income from a domestic corporation 144,000

21. If taxpayer is a resident alien, the final tax on the above passive income would amount to:
a. P41,194 c. P64,000
b. P46,500 d. P84,000

22. If taxpayer is a non-resident alien engaged in business, the final tax on the above passive income
would amount to:
a. P41,194 c. P64,000
b. P46,500 d. P84,000

23. Statement 1: There is capital gain tax on share of stock only if the shares are those of a domestic
corporation held as capital asset and not listed and traded in a local stock exchange.

Statement 2: The capital gain tax on share of stock is paid within thirty days from the date of
sale.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

24. Which of the following transactions is exempt from capital gains tax?
Case 1 Sale of the principal residence of the taxpayer where the entire proceeds is used to
purchase a vacation lot in Tagaytay.

Case 2 Sale of a beach lot of the taxpayer where the entire proceeds is used to construct
his principal residence.

Case 3 The sale of the principal residence of the taxpayer availing tax exemption for the
second time in ten (10) years to purchase another principal residence.

A B C D
Case 1 Yes Yes No No
Case 2 Yes Yes No No
Case 3 Yes No No Yes

Use the following data for the next two (2) questions:
Pedro inherited from his parents a large parcel of undeveloped land acquired by them years ago with
total cost of P2,500,000. Pedro now sold the land for P25,000,000.

25. How much of the gain should Pedro report in his income tax return for the year?
a. None, because the property is a capital asset and the transaction is subject to capital gains
tax, not basic income tax.
b. P22,500,000 because although the property is a capital asset and the transaction is subject
to capital gains tax, such tax is still considered income tax. Thus, the gain shall also be
reported in Pedro’s income tax return.
c. Pedro has the option to report an income of P22,500,000 subject to basic income tax or
exclude the income from his income tax return and pay 6% capital gains tax.
d. Any of the choices above

26. Assume that the parcel of land inherited by Pedro was already a well-developed real estate
subdivision divided into small lots being sold on installment basis. He sold the entire property
for P25,000,000. How much of the gain, if any, should Pedro report in his income tax return for
the year?
a. None, because the property is a capital asset and the transaction is subject to capital gain
tax, not basic income tax.

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 b. P22,500,000 because the property is classified as ordinary asset. Thus, the gain shall also be
reported in Pedro’s income tax return.
c. Pedro has the option to report an income of P22,500,000 subject to basic income tax or
exclude the income from his income tax return and pay 6% capital gains tax.
d. Any of the choices above

27. If the proceeds are from the disposition of principal residence and fully utilized in acquiring or
constructing a new principal residence, the capital gain is not subject to tax if the
a. Acquisition or construction of the new principal residence is within 18 calendar months from
the date of disposition.
b. The historical cost or adjusted basis of the real property sold or disposed shall be carried
over to the new principal residence built or acquired.
c. The Commissions shall have been duly notified by the taxpayer within 30 days from the date
of sale or disposition through a prescribed return of his intention to avail of the tax
exemption.
d. All of the above

28. Juan is a resident of Olongapo City. He sold his family home of P4,000,000 which was previously
acquired for P2,000,000. Juan complied all BIR requirements to avail of tax exemption and spent
P2,500,000 in acquiring new family home. How much is the capital gains tax to be paid by Juan?
a. P -0- c. P150,000
b. P90,000 d. P240,000

Use the following data for the next two (2) questions:
Cliff is a self-employed and professional accountant. He provided the following information for 2021
taxable year:
Gross sales P 1,650,000
Cost of sales 500,000
Business expenses 425,000
Rental income (net) 308,750
Philippine charity sweepstakes winnings 500,000
Royalty income - books 120,000
Other royalty income - Philippines 60,000
Dividend income - domestic corporations 40,000
Interest income, BDO Olongapo City 100,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Creditable withholding tax from business income 65,000
Quarterly tax payments 82,500

29. How much is the income tax payable of Cliff?

a. P 9,500 c. P 57,500
b. P10,500 d. P205,000

30. How much is the income tax payable of Cliff assuming he opted to be taxed at 8% income tax
rate?
a. P (9,500) c. P 57,500
b. P10,500 d. P205,000

31. Cliff is deriving compensation and business income. He provided the following information for
2021 taxable year:
Gross compensation income P 600,000
Gross sales 1,650,000
Cost of sales 500,000
Business expenses 425,000
Rental income (net) 308,750
Philippine charity sweepstakes winnings 500,000
Royalty income - books 120,000

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 Other royalty income - Philippines 60,000
Dividend income - domestic corporations 40,000
Interest income, BDO Olongapo City 100,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Creditable withholding tax from business income 65,000
Quarterly tax payments 82,500

How much is the income tax payable of Cliff assuming he opted to be taxed at 8% income tax
rate?
a. P89,500 c. P 57,500
b. P90,500 d. P205,000

32. Michael Cabarles, single, has the following income and expenses for the year 2021. He is also
providing supporting to his eight-year-old illegitimate child.

Professional income, net of P60,000 withholding tax P 540,000

Rental income (net) 47,500
Rewards as BIR informer 30,000
Wagering gains 50,000
Kickbacks received from suppliers of clients 40,000
Interest income on time deposit (net) 32,000
Dividend income from domestic corporations 75,000
Professional expenses 325,000
Household expenses 24,000
Premium payment on health insurance 4,000
Facilitation fees paid to government agencies 15,000

Compute the amount of his taxable income subject to basic tax for 2021?
a. P325,000 c. P415,000
b. P340,000 d. P445,000

Use the following data for the next three (3) questions:
A resident citizen, married, with two (2) qualified dependent children has the following data for the year
2021:
Gross sales, Philippines P 5,000,000
Sales returns and allowances, Philippines 500,000
Cost of sales, Philippines 1,500,000
Gross sales, Ukraine 3,000,000
Sales returns and allowance, Ukraine 200,000
Cost of sales, Ukraine 800,000
Business expenses, Philippines 500,000
Business expenses, Ukraine 300,000
Interest income, peso bank deposit BDO-Marikina 20,000
Interest income, peso bank deposit BDO-Mandaluyong 50,000
Gain from sale of residential house and lot
(selling price, P3,000,000; FMW, time of sale, P5,000,000) 500,000
Gain from sale of shares of stock listed and traded in the local stock exchange
(selling price, P100,000) 30,000
Gain from sale of shares of stocks not traded in the local stock exchange 150,000

33. How much is the total final tax on passive income?

a. P14,000 c. P 4,000
b. P 7,750 d. P11,500

34. How much is the capital gains tax due?

a. P310,000 c. P180,000
b. P300,000 d. P322,500

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35. How much is the taxable net income?
a. P4,700,000 c. P2,900,000
b. P4,280,000 d. P4,200,000

36. Which of the following income is required to be filed in a quarterly income tax return?
a. Compensation income c. Business income
b. Passive income d. Capital gains

37. The following are the requirement for substituted filing of income tax return, except
a. He had one employer only.
b. His income was purely compensation.
c. Income tax withheld by the employer is correct.
d. He had consecutively filed his income tax return for the past five years.

38. Statement 1: If an employee had multiple employers within the year, an income tax return must
be filed at the end of the year.

Statement 2: if an employee had three employers, on succession, for each of the past three
years, substituted filing of tax return is not allowed.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

39. Who of the following individual taxpayers may avail of substituted filing of Income Tax Return
(ITR)?

 John Bo:
 Deriving compensation income from ARB Company, his only employer for the
taxable year.
 The correct amount of tax was withheld by ARB Company
 He also derived interest income from his peso bank deposit in BPI and the sale
of his share in BRA Corporation (a close-held domestic corporation) to Brian
resulted to a gain of P100,000.
 Leomar:
 Deriving purely compensation income from XYZ Corporation, his only employer
for the taxable year.
 The correct amount of tax was withheld by XYZ
 Leomar’s spouse is engaged in business.

A B C D
John Bo Yes Yes No No
Leomar Yes No Yes No

40. Statement 1: Taxable income from self-employment (business and profession) is reported on a
quarterly and annual basis.

Statement 2: The quarterly income tax return shall be filed and the tax paid as follows: 1 st
Quarter – not later than April 15; 2nd Quarter – not later than August 15; 3 rd Quarter – not later
than September 15.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

41. Pedro’s income tax due for the year amounted to P80,000. He may elect to pay the tax due on
installment as follows:

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 a. In two equal installments
b. 1st installment is payable upon filing the annual income tax return
c. 2nd installment is payable on or before October 15 following the close of the calendar year
d. All of the above

42. Statement 1: If any installment payment of income tax is not paid on or before the date fixed for
its payment, the whole amount of the unpaid tax becomes due and payable, together with the
delinquency penalties to be reckoned from on the original date when tasx is required to be paid.

Statement 2: Installment payment of income is not allowed to self-employed and/or

professional who are availing the 8% income tax rate employed and/or professional who are
availing the 8% income tax rate

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

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