PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE

RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.

SAMPALOC, MANILA
TEL # (02) 244 6342

TAXATION E.J. GARCIA/J. CO

TAX 301-A-OTHER PERCENTAGE TAXES

Exercises
A. Determine which of the following transactions are subject to VAT, 3% percentage tax on VAT-exempt persons or neither VAT nor 3% percentage tax
on VAT-exempt persons.
1. Sale of VAT-subject goods by a not VAT-registered seller and whose gross annual sales do not exceed P1,919,500. 3%
2. Services rendered. Service provider is VAT-registered and whose gross annual receipts exceed P1,919,500. VAT
3. Sale of VAT-subject goods by a VAT-registered seller and whose gross annual sales do not exceed P1,919,500. VAT
4. Sale of dried fish (VAT exempt transaction) by a not VAT-registered seller, gross annual sales exceed P1,919,500. NEITHER
5. Sale of fresh tomatoes(VAT exempt transaction) by a VAT-registered seller, gross annual sales exceed P1,919,500. NEITHER
6. Sale of fresh tomatoes(VAT exempt transaction) by a not VAT-registered seller, gross annual sales do not exceed P1,919,500. NEITHER
7. VAT-registered seller of both VAT-subject goods and VAT-exempt goods (optionally registered VAT-exempt sales). VAT

B. Determine which of the following transactions are subject to VAT, 3% common carrier’s tax or neither VAT nor 3% common carrier’s tax.
1. Transport of passengers by land by a VAT-registered domestic common carrier. 3%
2. Transport of passengers by land by a not VAT-registered domestic common carrier. 3%
3. Transport of passengers by land by a not VAT-registered domestic common carrier, whose gross annual sales exceed P1,919,500. 3%
4. Transport of goods and cargoes by land by a VAT-registered domestic common carrier. VAT
5. Transport of goods and cargoes by land by a not VAT-registered domestic common carrier. NEITHER
6. Transport of passengers, goods and cargoes by sea by a VAT-registered domestic common carrier. VAT
7. Transport of passengers, goods and cargoes by air by a VAT-registered domestic common carrier. VAT
8. Transport of passengers, goods and cargoes by calesa (two wheeled animal drawn vehicle). NEITHER
9. Transport of passengers, goods and cargoes by banca. NEITHER

C. Determine which of the following shall be subject to the common carrier’s tax on international carriers.
1. Fees received by Cathay Pacific on freight and cargo originating from the Philippines. Passage documents were sold in
Singapore. Cathay Pacific is an airline maintaining flight operations to and from the Philippines, Y
2. Fees received by Malaysian Airlines on freight and cargo originating from Japan. Passage documents were sold in the
Philippines. Malaysian Airlines is an airline maintaining flight operations to and from the Philippines. N
3. Gross receipts received by Singapore Airlines from the sale of tickets to passengers originating from the Philippines. Passage
documents were sold in the Philippines. Singapore Airlines is an airline maintaining flight operations to and from the N
Philippines.
4. Gross receipts from sale of tickets by an agent of British Airways, an airline with no flight operations to and from the
Philippines, for transport of passenger from Singapore to London. N
5. Gross receipts from sale of passage documents by an agent of British Airways, an airline with no flight operations to and from N
the Philippines, for transport of goods and cargo from Singapore to London.

D. Determine whether the following transactions are subject to franchise tax, VAT or neither franchise tax nor VAT.
1. Gross receipts on sale of air time by franchise grantee of radio and/or television broadcasting, not VAT-registered. Gross FRANCHISE
receipts for the past twelve months were P10,000,000. TAX
2. Gross receipts on sale of air time by franchise grantee of radio and/or television broadcasting, VAT-registered. Gross receipts
for the past twelve months were P10,000,000. VAT
3. Gross receipts on sale of air time by franchise grantee of radio and/or television broadcasting, not VAT-registered. Gross
receipts for the past twelve months were P12,000,000. VAT
4. Gross receipts on sale of air time by franchise grantee of radio and/or television broadcasting, VAT-registered. Gross receipts
for the past twelve months were P12,000,000.
5. Rental fees received by a franchise grantee of radio and/or television broadcasting, not VAT- registered, on lease of a 3% ON VAX-
commercial space, P1,919,500. EXEMPT
6. Rental fees received by a franchise grantee of radio and/or television broadcasting, VAT- registered, on lease of a commercial
space, P1,900,000. VAT
7. Rental fees received by a franchise grantee of radio and/or television broadcasting, not VAT- registered, on lease of a
commercial space, P3,000,000. VAT
8. Gross receipts from sale of gas and water by a franchise grantee of gas and water utilities, not VAT-registered, P1,919,500. FRANCHISE
TAX
9. Gross receipts from sale of gas and water by a franchise grantee of gas and water utilities, not VAT-registered, P5,000,000. FRANCHISE
TAX
10. Gross receipts from sale of gas and water by a franchise grantee of gas and water utilities, VAT-registered, P1,000,000. FRANCHISE
TAX
11. Rental fees received by a franchise grantee of gas and water utilities, not VAT-registered, on lease of a commercial space, 3% ON VAT-
P1,919,500. EXEMPT
12. Rental fees received by a franchise grantee of gas and water utilities, not VAT-registered, on lease of a commercial space, VAT
P3,919,500.
13. Rental fees received by a franchise grantee of gas and water utilities, VAT-registered, on lease of a commercial space, VAT
P1,919,500.
PAReX TAX 301-A-OPT(ANS) Page 1 of 4
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 PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE PAReX

E. Determine which of the following transactions shall be subject to the overseas communication tax
1. Calls originating from the Philippines paid by the subscriber in the Philippines Y
2. Calls originating from the Philippines paid by the receiver of the call outside the Philippines N
3. Calls coming into the Philippines paid by the receiver of the call in the Philippines N
4. Calls coming into the Philippines paid by the caller outside the Philippines N
5. Long distance call from Manila to Bicol N-VAT
6. Local call from Manila to San Pedro, Laguna N-VAT

F. Determine to which business taxes will the following be subject to

1. Premium on Health and Accident Insurance received by a life insurance company that is not VAT-registered. 2% PREMIUMS
2. Premium on Health and Accident Insurance received by a non-life insurance company that is VAT-registered. 2% PREMIUMS X
3. Life Insurance and reinsurance commissions, received by a life insurance company, not VAT registered and its annual 3% TAX ON VAT-
gross receipts do not exceed P1,919,500. EXEMPT
4. Non-life Insurance and reinsurance commissions, received by a life insurance company, not VAT registered its and annual 3% TAX ON VAT-
gross receipts do not exceed P1,919,500. EXEMPT
5. Life insurance and reinsurance commissions, received by a life insurance company, VAT registered, annual gross receipts VAT
do not exceed P1,919,500.
6. Life Insurance and reinsurance commissions, received by a life insurance company, not VAT registered, annual gross
receipts exceed P1,919,500. VAT
7. Interest income earned by a life insurance company from investing the premiums received in marketable securities, bonds EXEMPT FROM
and other financial instruments. BUSINESS TAX
8. Non-life insurance premiums received by a non-life insurance company that is VAT-registered and gross receipts do not
exceed P1,919,500. VAT
9. Non-life insurance premiums received by a non-life insurance company, not VAT-registered, gross receipts exceed
P1,919,500. VAT
10. Non-life insurance premiums received by a non-life insurance company, not VAT-registered, gross receipts do not exceed 3% TAX ON VAT-
P1,919,500. EXEMPT
11. Management fees received by a life insurance company, not VAT registered but its annual gross receipts exceed VAT
P1,919,500.
12. Rental fees received by a life insurance company, not VAT registered and its annual gross receipts do not exceed 3% TAX ON VAT-
P1,919,500. EXEMPT

Additional Notes:

1. Other items subject to the premium tax (RMC No. 49-2010)

a. Premium on Health and Accident Insurance, whether received by a life or non-life insurance company
b. Re-issuance fees, reinstatement fees, renewal fees as well as penalties paid to the life insurance company which are incidental to or in connection
with the insurance policy contracts issued
c Investment income realized from the investment of funds obtained from others allowed and approved by the Insurance Commission.

2. Items earned by life insurance company subject to VAT or percentage tax as the case may be (RMC No. 49-2010)
a. Insurance and reinsurance commissions, whether life or non-life
b. Management fees
c. Rental income
d. Other income earned which can be pursued independently of the insurance business activities

3. Investment income realized from the investment of premiums earned

The interest income earned by the life insurance companies from investing the premiums received in marketable securities, bonds and other
financial instruments is considered exempt from further imposition of business tax since the premiums which have been the source of the funds
invested had already been subject to the premium tax (RMC No. 49-2010).

PROBLEMS
A. Mr. Bam ” lover boy” Apepe, single, owns a store specializing on beauty products. His gross sales in the previous calendar year did not exceed
the VAT threshold amount of P1,919,500. He is not VAT-registered. The following data for last month were as follows:
Gross sales 500,000
Purchases from VAT-registered suppliers 450,000
Purchases from not VAT-registered suppliers 150,000

How much is the percentage tax due and payable? P15,000 (P500,000 x 3%)

B. World Transportation Company, a domestic common carrier that transport passenger and cargoes by land, sea and air within the Philippines and
abroad. It had the following data for last month:
On land carriers:
Gross receipts from cargoes (Manila to Quezon) P500,000
Gross receipts from passengers (Manila to Bataan) 700,000
On sea carriers:

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 PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE PAReX
Gross receipts from cargoes (Cebu to Samar) 900,000
Gross receipts from passengers (Bohol to Dumaguete) 1,000,000
Gross receipts from cargoes (Zamboanga to Malaysia) 2,000,000
On air carriers:
Gross receipts from cargoes (Ilocos to China) 3,000,000
Gross receipts from passengers (Cagayan toBatanes) 400,000

Operating expenses for last month were P 5,600,000 and are allocated as follows: land carriers,
20%; sea carriers 35% and air carriers, 45%.

Question #1 – How much is the percentage tax? P21,000 ( P700,000 x 3%)

Question #2 – How much is the output value-added tax? P336,000 (P500,000+900,000+1,000,000+400,000)x(12%)

C. Fly and Fly, an air carrier had the following data:

Cargo fees for cargo originating from the Philippines to Australia, passage documents were
sold, issued and paid in Australia) P5,000,000 0%
Deposits applied as payments for freight fees, for goods originating from the Philippines to Australia 6,000,000 0%
Mail fees for mails originating from India in a continuous and uninterrupted flight to
the Philippines. Passage documents were sold, issued and paid in the Philippines) 4,000,000
Advance payments for cargo originating from the Philippines in a continuous and
uninterrupted flight to Malaysia (passage documents sold in Malaysia) 3,000,000 0%
Other service charges and fees for cargo originating from the Philippines in a continuous and
uninterrupted flight to Malaysia (passage documents sold in Malaysia) 3,000,000 0%
Receipts from sales of tickets to passengers originating from the Philippines in a
continuous and uninterrupted flight to Japan (tickets sold in the Philippines) 3,000,000
Amounts deposited in the bank account of Fly and Fly Air carrier from sales of passage documents for cargo
originating from the Philippines in a continuous and uninterrupted flight to Japan (tickets sold in Japan) 4,000,000 0%

Expenses incurred in the Philippines 7,500,000

Expenses incurred in other countries 9,500,000

Questions:
 How much is the common carrier’s tax due from the air carrier assuming it is an international carrier doing business in the Philippines?
P630,000 (5,000,000+6,000,000+3,000,000+3,000,000+4,000,000) x 3%)
 How much is the VAT due from the air carrier assuming it is a domestic air carrier? ZERO (Philippines to Foreign Country is Zero Rated)

D. Luke Daniel a franchisee, VAT registered had the following data on revenues and receivables, taxes not included:

Cash revenues from operations granted by the franchise P300,000

Total revenues from operations granted by the franchise not including the cash revenues of P300,000 500,000
Total cash receipts (includes collections of receivables from operations granted by the franchise but not
including the cash revenues of P300,000) 500,000

Cash revenues from operations not granted by the franchise P200,000

Total revenues from operations not granted by the franchise not including the cash revenues of P200,000 500,000
Total cash receipts (includes collections of receivables from operations not granted by the franchise
including the cash revenues of P200,000) 700,000

What business tax is due and how much, if he is a franchise grantee of :

1) water and gas utilities.
Granted by Franchise (P300,000+P500,000=P800,000x.02) = P16,000 Franchise Tax
Not granted by the franchise (700,000 x.12) = P84,000 VAT

2) electric utility.
Granted by Franchise (P800,000x.12) =P24,000 VAT
Not granted by the franchise (700,000 x.12)= P84,000 VAT
*** RECEIPTS OF ELECTRIC UTILITIES ARE SUBJECT TO VAT
3) PAGCOR.
Granted by Franchise (P800,000x.05) = P40,000 Franchise Tax
Not granted by the franchise (700,000 x.12) = P84,000 VAT

E. Earl Gavrie made local and overseas calls last month:

Overseas calls:
Originating from the Philippines:
Paid by the Earl Gavrie in the Philippines P85,000
Paid by the receiver of the call outside the Philippines 24,000

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 PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE PAReX
For calls coming into the Philippines:
Paid by Earl Gavrie 25,000
Paid by callers from abroad 35,000

Local calls, paid by Earl Gavrie:

Long distance 10,000

Question 1 - How much is the value-added tax billed to Earl Gavrie, a person engaged in business? P1,200 (P10,000 x 12%)
Question 2 – How much is the percentage tax billed to Earl Gavrie, a person engaged in business? P8,500 (85,000 x 10%)
Question 3 - How much is the value-added tax billed to Earl Gavrie, a field reporter of CNN? Exempt
Question 4 – How much is the percentage tax billed to Earl Gavrie, an Ambassador of the USA? Exempt

F. Pilipino Bank, a domestic bank had the following data for the previous month. Compute the percentage tax for the month.

Rentals from personal and real and property, gross of applicable tax P500,000(7%)
Royalties, net of applicable tax 372,000(7%)
Dividend income from investments in stocks, gross of applicable tax 500,000(0%)
Equity shares in the net income of subsidiaries, gross of applicable tax 600,000(0%)
Net trading gains within the taxable year on foreign currency, debt securities, derivatives and other similar financial
instruments, gross of applicable tax 500,000(7%)
Gross receipts on interest, commissions and discounts from lending activities net of applicable tax, on instruments
with maturities of:
Four years and less 450,000(5%)
Seven years 990,000(1%)

Answer: P128,440
(P500,000x7%) +(P372,000x7%)+(P500,000x0%)+(P600,000x0%)+(P500,000x7%)+(P450,000x5%)+
(P990,000x1%)

G. PareX Corporation, a closely-held corporation, has an authorized capital stock of 1,000,000 shares and with par value of Php1.00/share as of
January 15, 2016. Of the 1,000,000 authorized shares, 250,000 shares were subscribed and fully paid up by the following stockholders: Mr.Earl
Garcia, 50,000; Mr. Bam Apepe, 50,000; Mr. Gor Macariola, 50,000; Mr.Ivan Bagayao, 50,000; Ms.Mirasol, 50,000.

PareX Corporation finally decides to conduct an IPO and initially offers 250,000 of its unissued shares to the investing public at P2.00 per share.
After the IPO in September 2016, PAReX Corporation’s total issued shares increased from 250,000 to 500,000 shares. At the IPO, one of the
existing stockholders, Ms.Mirasol, decided to sell her entire 50,000 shares to the public at P2.00 per share. Thus, 250,000 shares have been offered
in the primary offering and 50,000 shares in the secondary offering.

Question 1: How much is the percentage tax on the primary offering?

Ratio of shares sold over outstanding shares: 250,000shares /500,000shares =50%
250,000 x P2 x 1% = P5,000

Question 2: How much is the percentage tax on the secondary offering of Ms.Mirasol’s shares?
Ratio of shares sold over outstanding shares: 50,000shares /500,000shares =10%
50,000 x P2 x 4% = P4,000

Question 3: How much is the percentage tax due assuming Ms. Mirasol sells her shares at P3.00 per share after the IPO?
Stock transaction tax: P750 (50,000 x P3 x .005)

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