Tarlac Agricultural University

TAXATION
Midterm Examination
March 6-7, 2022

Name:
Section:
Schedule (time & days):

Instruction: In a clean sheet of paper, write the letter of the correct answer.
For identification/question which requires a solution, present your complete solution and
encircle your final answer. Present your solution in good form (check your signs, double
rule and alignment).

Situational Problem No. 1: For items 1-3, refer to the following information.

Olivia, an American citizen, went to the different universities in the Philippines for a
lecture series on Crypto and Stocks. The following are the month/days where she
conducted her lecture series: January 1-31, 2021 in University of the Philippines; March
1-31, 2021 in Ateneo de Manila; May 4-31, 2021 in University of Santo Tomas; 2021;
June 1-30, 2021 in De La Salle University; July 3-31; and August 1-27, 2021 in Tarlac
Agricultural University. She flew back to US on August 31, 2021. The following details
pertain to Olivia’s lecture series in the Philippines:

Professional fees for lecture ₱ 50,000 in every university

Income from onsite bookselling ₱ 120,000
Travel expenses from her residence to the airport $100
Travel expenses incurred from JFK airport to the ₱ 157,491
different universities in the Philippines
Food and accommodation expenses incurred,
with receipts ₱ 134,896

The value of $1 is equivalent to ₱ 50.

1. Olivia is a: (1 POINT)
a. Resident citizen
b. Resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business

2. How much is Olivia’s Philippine income tax? (2 POINTS) 92,500

 3. Suppose Olivia extended her stay and conducted another lecture in Saint Louis
University from September 2-29, 2021. How much is her Philippine income tax?
(2 POINTS)

Situational Problem No. 2: For items 4-7, refer to the following information.

Industrious as he is known, Arthur, a non-VAT registered resident citizen, works as a

government employee at daytime and accepts clients for accounting work after office
hours. At the same time, Arthur maintains a t-shirt printing shop to earn more. For the
taxable year ending December 31, 2021, Arthur earned the following amounts:

Taxable compensation Income ₱ 850,000

Gross receipts from accounting work ₱ 1,500,000

T-shirt printing shop:

Gross sales ₱ 1,400,000
Cost of sales ₱ 800,000
Operating expenses ₱ 400,000

Upon filing his first quarter income tax return, Arthur availed of the 8% income tax
option.

4. How much is his net income? (2 POINTS)

5. Is his availment of the 8% income tax option correct? (1 POINT)

a. No, because the 8% income tax option is available only for VAT-registered
taxpayers.
b. No, because Arthur is not a purely compensation income earner.
c. No, because Arthur’s gross receipts exceeded the threshold allowed to
avail of the 8% income tax option.
d. Yes.

6. Assuming that the availment of the 8% income tax option is proper, how much is
Arthur’s income tax due? (2 POINTS)
a. ₱ 232,000
b. ₱ 300,000
c. ₱ 357,000
d. ₱ 377,000

7. How much is Arthur’s percentage tax? (1 POINT)

 a. 0
b. ₱ 29,000
c. ₱ 58,000
d. 87,000

Situational Problem No. 3: For items 8-9, refer to the following information.

Mr. Bean, a British national, stays in the Philippines with no definite intention. He
received ₱600,000 compensation income as researcher of Teddy Corporation, a
domestic corporation. He incurred travel expenses and accommodation of ₱20,000 and
₱50,000 respectively. He also received commission income from the same employer of
₱ 50,000. In the same year, he also received overtime pay of ₱ 60,000 and nightshift
differential of ₱30,000.

8. How much is his income tax due, if any? (2 points)

9. Supposed that instead of ₱600,000 compensation income, he received
₱1,000,000. How much is his income tax due? (2 points)

Situational Problem No. 4: For items 10-12, refer to the following information.

Ivana Alawi, a resident Filipina actress, earned ₱ 2,500,000 as an entertainment fee

during the taxable year, net of related 15% creditable withholding tax. In addition, she
earned the following from business:

Gross Receipts Income Tax Paid

Philippines ₱ 700,000 ₱ 40,000

Morocco 2,000,000 300,000

Ivana opted to use OSD (total gross profit x 40%).

10. How much is her annual income tax? (1 point)

11. Compute for her net taxable income; (2 points) and
12. Income tax due. (2 points)