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CPA Review School of the Philippines

Local Taxes, Preferential Taxation Llamado/ Dela Cruz / De Vera

1. Where does the local tax authority emanate from?

a. Legislature c. Sanggunian
b. Executive d. Supreme Court

2. Which of the following is not a fundamental principle of local taxation?

a. It shall be uniform in each local sub-unit.
b. It shall evolve a progressive system of taxation.
c. The revenues collected under the Local Government Code shall inure solely to the
benefit of and subject to disposition by the LGU levying the tax or other imposition
(autonomy).
d. Collection of local taxes can be delegated to any private person.

3. When may a Local Government Unit adjust local taxes?

a. Every 5 years
b. Every 2 years
c. Every year
d. Anytime the Sanggunian deems it fit.

4. Where the National government elects to tax a particular area, it impliedly withholds from
the local government the delegated power to tax the same field. This doctrine is known
as
a. Preemption
b. Separatedness of Departments of Government
c. Exclusive prerogative doctrine
d. Tax Jurisdiction

5. Zion Shoes’s head office is located in Ortigas, Pasig City. However, its manufacturing
plant is in Taytay, Rizal. As the company accountant you were asked by Zion where to
pay the 2% Local Business Tax. Zion’s gross receipts is Php10 million.
a. Pay Php200,000 at Taytay, Rizal.
b. Pay Php200,000 at Ortigas, Pasig City.
c. Pay Php60,000 at Ortigas, Pasig City and Php140,000 at Taytay, Rizal.
d. Pay Php140,000 at Ortigas, Pasig City and Php60,000 at Taytay, Rizal.

6. The presentation of a community tax certificate is necessary in the following situations,

except:
A. To acknowledge execution of a document before a notary public
B. To take an oath of office in the government
C. To receive any license or permit or certificate from public authority
D. To receive private funds

7. Which is not a characteristic of the real property tax?

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a. Direct tax
b. Ad Valorem
c. Progressive
d. Indivisible

8. Which real property is subject to the real property tax?

A. Real property of religious and charitable institutions

B. Machineries actually, directly, and exclusively used by local water districts
C. Real property owned by cooperatives
D. Machineries for pollution control

9. What is considered idle land?

(i) agricultural lands more than one hectare in area, half of which remains
uncultivated except agricultural land with perennial crops with at least 50 trees
and those used for grazing;
(ii) land in the city or municipality more than one thousand square meters in area,
one half of which remains unutilized or unimproved by the owner.
a. True, True c. False, True
b. True, False d. False, False

10. For the given year 2020 the following information from business:

Gross Receipts from business P 900,000.00

Rental Income 650,000.00
Operational Expenses 400,000.00
Real Properties 17, 000,000.00

Compute Individual Community tax.

a. P1,555.00 c. P5,200.00
b. P1,155.00 d. P5,005.00

11. Compute Corporate Community Tax.

a. P7,920.00 c. P 1,120.00
b. P7,560.00 d. P10,500.00

12. Who has the authority to collect Community Tax?

a. Bureau of Internal Revenue c. Bureau of Customs
b. Cities/Municipalities d. National Treasury

13. What is the characteristic of Community Tax?

a. Tax b. Fee c. Identification Card d. License

14. Elorde, a famous boxer intends to convert his boxing gymnasium into a cockpit arena.
Elorde summons you to give him advise to go over his tax exposure. As a certified

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public accountant, you will recommend to Mr. Elorde which of following

reference/documents?
a. National Internal Revenue Code
b. Revenue Regulations of the NIRC
c. Local Government Code
d. Tariff and Customs Code

15. Your client, Mr. Aegis, is an importer who inquired what laws will have most relevance
in his daily transactions. Having several laws to take into consideration, which laws do
you recommend for Mr. Aegis to read?
a. National Internal Revenue Code.
b. Implementing Rules and Regulation of NIRC.
c. Tariff and Customs Code, as amended by the CMTA
d. Local Government Code.

16. AZEP Corporation secured an income tax holiday for 4 years as a pioneer enterprise. On
the third year of the tax holiday, AZEP Corporation declared and paid cash dividends to its
stockholders, all of whom are individuals. Are the dividends taxable?

a. The dividends are taxable; the tax exemption of AZEP does not extend to its
stockholders.
b. The dividends are tax exempt because of AZEP Corporation’s income tax holiday.
c. The dividends are taxable if they exceeded 50% of AZEP Corporation’s retained
earnings.
d. The dividends are exempt if paid before the end of AZEP Corporation’s fiscal year.

17. The following are tax incentives given to micro business enterprises, except?
A. Income tax exemption on all types of income of the enterprise.
B. Exemption from the coverage of the Minimum Wage Law (but employees will still
receive the same social security and health care benefits as other employees);
C. Priority to a special credit window set up specifically for the financing requirements
of BMBEs; and
D. Technology transfer, production and management training, and marketing assistance
programs for BMBE beneficiaries.

18. Mr. Lim bought a piece of land in Manila in 2019 whereby he discovered that it has
unpaid real property taxes for years 2016 to 2018. Which of the following is correct?

A. Mr. Lim is liable to real property tax because he is the new owner.
B. Mr. Lim is liable to real property tax because he assumed responsibility carried
from previous owner.
C. Mr. Lim is not liable because realty taxes attach to the property, and are chargeable
against the person who had actual or beneficial use and possession of it regardless
of whether or not he was the owner.

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D. Mr. Lim is not liable because but realty tax attaches upon the property. It is the
property itself which is liable.

19. Idle lands are exempt from real property tax under the following circumstances, except:
A. Civil disturbance
B. Natural Calamity
C. Any cause which physically or legally prevents the owner from utilizing his land
D. Declaration by the President

20. 1st Statement: Local tax relief or exemption is granted in cases of natural calamities,
civil disturbances, general failure of crops, or adverse economic
conditions which substantially decrease prices.
2nd Statement: Local tax incentives are granted only to new investments in the locality.

A. True, False
B. True, true
C. False, True
D. False, false

21. Which of the following has no power to impose taxes?

a. Provinces b. Cities c. Barangays d. Barrios

22. Talong Company is a domestic corporation whose principal classification is for well
drilling work. It has no branches nor sales outlets, but maintains project offices in
different localities in the Philippines. It is also registered as a Specialty Contractor at the
Philippine Overseas Construction Board. As part of its business expansion plan, the
company intends to offer its well drilling and construction services to clients located
overseas.

Are cities and municipalities authorized to impose and collect local business taxes on
gross receipts realized by a specialty contractor from its overseas construction projects?

(a) No. Gross receipts must be realized from services rendered within the jurisdiction of
the LGU imposing the tax.
(b) Yes. The local business tax depends on the previous year’s sales receipts regardless
of source.
(c) It depends.
(d) None of the above.

23. The Municipal Assessor of San Francisco, Agusan del Sur assessed the National Grid
Corporation of the Philippines (“NGCP”) for deficiency real property tax (“RPT”) for the
years 2011 and 2012. In its petition with the LBAA, NGCP assailed the RPT assessment
on the ground that it is exempt from payment of the same under Section 9 of R.A. No.

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9511 and Section 234(c) of the Local Government Code. The Municipal Assessor filed a
Motion to Dismiss citing lack of jurisdiction on the part of the LBAA to rule on the
petition due to NGCP’s failure to first pay the tax under protest.

Did the LBAA acquire jurisdiction over NGCP’s petition against the RPT assessment?
(a) Yes. Since the taxpayer is questioning the very authority of the assessor to impose the
assessment, the petition is under the jurisdiction of the LBAA even without first paying
the tax under protest.
(b) No. Under Section 252 of the LGC, payment under protest is mandatory if the taxpayer
questions the reasonableness or correctness of the RPT assessment.
(c) It depends on the amount of RPT assessed.
(d) None of the above.

24. A power generation company with principal office in Cebu City acquired and operated a
power plant in Navotas City. Due to the difficulty in hiring competent administrative
personnel willing to work in flood-prone Navotas City, the company established an
administrative office in Malabon City. This administrative office does not generate sales
orders nor does it receive collections from sales.
Which of the 3 offices shall be liable for the local business tax (LBT”)?

(a) All 3 offices.

(b) Offices in Cebu City and in Malabon City.
(c) Offices in Cebu City and Navotas City.
(d) None of the above

25. James Lustre is the manager of a PEZA-registered enterprise availing of the preferential
5% GIT in lieu of all other taxes, national or local. Besides his salary, he also receives
fringe benefits which are normally subject to the fringe benefits tax (FBT).

Statement 1: The manager’s salary is also subject to the 5% GIT.

Statement 2: The PEZA-registered enterprise is exempt from remitting the CWT on the
manager’s salary, and from payment of the FBT.

a. Both statements are true.

b. Both statements are false.
c. Only Statement 1 is true.
d. Only Statement 2 is true.

26. Income payments were made by Superman Corporation (domestic) to Darna Corporation,
a PEZA-registered entity under the 5% GIT Regime. The payments made were related to
Darna’s registered activities. Superman withheld CWT from its payments. Darna claims
that no tax should have been withheld. Superman claims that withholding is proper
because Darna is not under the ITH regime. Who is correct?
(a) Superman is correct. Only those PEZA-registered entities under the ITH are exempt
from withholding on their receipt of income.

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(b) Darna is correct. Under the 5% GIT regime, it is exempt from all local and national
taxes (including withholding taxes on its income) and in lieu thereof, is only subject to
the 5% special tax on gross income.
(c) Superman loves Wonder Woman.
(d) No comment.

END

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