TAX Summary Lecture (15 May 2021)

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 41  May 2021 CPALE  Summary Lecture (15 May 2021)
TAXATION A. Tamayo  C. Lim  G. Caiga  K. Manuel  E. Buen
RESA BATCH 41
TAX SUMMARY LECTURE (MCQS)
1. (Principles of Taxation) Among the nature of taxation is that it is an inherent power
being an attribute of sovereignty. Which among the following is not among its
manifestation as such inherent power?
a. Courts cannot issue an injunction to enjoin the collection of taxes.
b. There should be no improper delegation of the power to tax.
c. Taxes may be imposed even without a constitutional grant.
d. The State has the right to select the subjects and objects of taxation.
2. (Principles of Taxation) The President of the Philippines and the Prime Minister of
Japan entered into an executive agreement in respect of a loan facility to the
Philippines from Japan whereby it was stipulated that interest on loans granted by
private Japanese financial institutions in the Philippines shall not be subject to
Philippine income tax laws. What basic characteristic of taxation has been violated
by this agreement?
a. Inherent limitation c. Legislative in character
b. Theoretical justice d. Administrative feasibility
3. (Principles of Taxation) A fundamental rule in taxation is that, the property of one

country may not be taxed by another country. This is known as:
a. international law. c. reciprocity.
b. international comity. d. international inhibition.
4. (Principles of Taxation) A law was passed by Congress which granted tax amnesty to
those who have not paid income taxes for a certain year without at the same time
providing for the refund of taxes to those who have already paid them. The law is:
a. valid because there is a proper classification.
b. not valid because those who did not pay their taxes are favored over those who
have paid their taxes.
c. valid because it was Congress which passed the law and it did not improperly
delegate the power to tax.
d. not valid because only the President with the approval of Congress may grant
amnesty.
Classification is allowed. It is valid when:
a) There is substantial distinction;
b) The classification is germane (relevant) to the issue;
c) The classification applies not only to existing conditions but future conditions
as well;
d) The classification is applicable to all members of the same class.
5. (Principles of Taxation) The least source of our tax laws.

a. Statutes c. Constitution
b. Court decisions d. BIR rulings
6. (Principles of Taxation) An annual tax of P1,000 was imposed upon all residents of the
Philippines, who are above 21 years of age, with a gross income of P250,000, whether or
not they send their children to public schools, for the purpose of raising funds in
order to improve public school buildings. The tax is:
a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
The best test of rightful taxation is that proceeds of the tax must be used:
a) for the support of the government, or
b) for any of the recognized objects of government, or
c) to promote the welfare of the community
Instances of public purpose
a) Financing of educational activities and programs;
b) Promotion of science;
c) Erection and maintenance of roads, bridges and piers;
d) Aid for victims of a public calamity;
e) Relief of the poor and unemployed and to provide for unemployment benefits;
f) Payment of pensions and bonuses for services rendered by public officers and
employees;
g) The construction of experimental stations to seek increases of efficiency in sugar
production and the improvement of living and working conditions in sugar mills or
plantation.
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX
15 May 2021: SUMMARY LECTURE
7. (Principles of Taxation) Public money or property may be appropriated:

a. for the use, benefit or support of any sect, church, denomination, sectarian
institution, or system of religion.
b. for the use, benefit or support of any priest, preacher, minister, or other
religious teachers, or dignitary as such.
c. for the use, benefit or support of any priest, preacher, minister or dignitary
assigned to the armed forces, or to any penal institution, or government
orphanage or leprosarium.
d. none of the choices.
No public money or property shall be appropriated, applied, paid or employed,

directly or indirectly, for the use, benefit or support of any sect, church,
denomination, sectarian institution, or system of religion, or of any priest,
preacher, minister, or other religious teachers, or dignitary as such, except when
such priest, preacher, minister or dignitary is assigned to the armed forces, or to
any penal institution, or government orphanage or leprosarium [Art. VI, Sec. 29
(2)].
8. (Principles of Taxation) A taxpayer gives the following reasons for refusing to pay a
tax. Which of his reasons is not acceptable for legally refusing to pay the tax?
a. That he has been deprived of due process of law.
b. That there is lack of territorial jurisdiction.
c. That the prescriptive period for the tax has elapsed.
d. That he will derive no benefit from the tax.
9. (Principles of Taxation) In case of ambiguity, tax laws shall be interpreted:

a. strictly against the taxpayer. c. liberally in favor of the taxpayer.
b. liberally against the government. d. liberally in favor of the government.
10. (Principles of Taxation) The City of Masbate passed an ordinance imposing a license fee
on all motor vehicles entering the city between the hours of 9:00 a.m. and 5:00 p.m.
Owners of motor vehicles assailed the validity of the law. Is the law valid?
a. Yes, because it was issued as a source of revenue.
b. Yes, because it is a legitimate exercise of police power.
c. No, because it discriminates against those who are not able to pay the license
fee, particularly, the low-salaried employees, and is, therefore, class
legislation.
d. No, because it is not imposed by any other municipality,
11. (Tax Remedies) First statement: In civil tax cases involving collection of internal
revenue taxes, prescription is construed strictly against the government and liberally
in favor of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable under the Tax
Code, prescription is construed strictly against the government.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
In criminal tax cases involving tax offenses punishable under the Tax Code,
prescription is construed strictly against the taxpayer.
12. (Tax Remedies) Which of the following prescriptive period of assessment and collection
falls under normal or regular prescriptive period?
a. Taxpayer filed a return and the return filed is not false of fraudulent
b. Taxpayer failed to file a return
c. Taxpayer filed a false return with intent to evade tax
d. Taxpayer filed a fraudulent return with intent to evade tax
The following cases fall under exceptional prescriptive period of assessment and
collection:
a. The taxpayer failed to file a return;
b. The taxpayer filed a false return with intent to evade tax;
c. The taxpayer filed a fraudulent return with intent to evade tax; or
d. The taxpayer and the Commissioner agreed in writing to waive the prescriptive
period of assessment of tax.
13. (Tax Remedies) What is the prescribed minimum percentage of compromise in case of
doubtful validity of the assessment?
a. 40% of the basic assessed tax
b. 30% of the basic assessed tax
c. 30% of the basic assessed tax
d. 10% of the basic assessed tax
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14. A written notice informing a Taxpayer that the findings of the audit conducted on his
books of accounts and accounting records indicate that additional taxes or deficiency
assessments have to be paid.
a. Notice of Informal Conference
b. Preliminary Assessment Notice
c. Letter of Authority
d. Formal Assessment Notice
In order the to expedite the processing of Letter Notice (LN) cases, the issuance
of Notice for Informal Conference may immediately commence, even without prior
issuance of Letters of Authority, as required in certain situations, as
prescribed in the existing RMOs on the LN system.
15. (Tax Remedies) An Internal Revenue Officer is allowed only how many days from the date
of receipt of an LA by the taxpayer to conduct the audit and submit the required
report of investigation?
a. 30 days c. 120 days
b. 60 days d. 180 days
If the Revenue Officer is unable to submit his final report of investigation within
120-day period, he must then submit a Progress Report to his Head of Office, and
surrender the LA for revalidation.
16. (Tax Remedies) Which tax cases need not be covered by an LA?
I – Cases involving civil or criminal tax fraud which fall under the jurisdiction of
the National Investigation Division (NID) under the Enforcement and Advocacy
Service (EAS) of the BIR
II – Policy cases under audit by the special teams in the National Office
a. Both I and II c. I only

b. Neither I nor II d. II only
17. (Tax Remedies) If the protest is denied, in whole or in part, by the Commissioner’s
duly authorized representative, the taxpayer may:
I - Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision
II - Elevate his protest through request for reconsideration to the Commissioner
within thirty (30) days from date of receipt of the said decision
a. Either I or II c. I only
If the protest is denied, in whole or in part, by the Commissioner’s duly authorized

representative, the taxpayer may either:
1) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision; or
2) elevate his protest through request for reconsideration to the Commissioner
within thirty (30) days from date of receipt of the said decision.
No request for reinvestigation shall be allowed in administrative appeal and only

issues raised in the decision of the Commissioner’s duly authorized representative
shall be entertained by the Commissioner.
18. (Tax Remedies) If the protest is not acted upon by the Commissioner’s duly authorized
representative within one hundred eighty (180) days counted from the date of filing of
the protest in case of a request for reconsideration; or from date of submission by the
taxpayer of the required documents within sixty (60) days from the date of filing of
the protest in case of a request for reinvestigation, the taxpayer may:
I - Appeal to the CTA within thirty (30) days after the expiration of the one hundred
eighty (180) -day period
II - Await the final decision of the Commissioner’s duly authorized representative on
the disputed assessment
a. Either I or II c. I only
If the protest is not acted upon by the Commissioner’s duly authorized representative
within one hundred eighty (180) days counted from the date of filing of the protest in
case of a request for reconsideration; or from date of submission by the taxpayer of
the required documents within sixty (60) days from the date of filing of the protest in
case of a request for reinvestigation, the taxpayer may either:
1) appeal to the CTA within thirty (30) days after the expiration of the one
hundred eighty (180) -day period; or
2) await the final decision of the Commissioner’s duly authorized representative on
the disputed assessment.
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If the protest or administrative appeal, as the case may be, is denied, in whole or in
part, by the Commissioner, the taxpayer may appeal to the CTA within thirty (30) days
from date of receipt of the said decision. Otherwise, the assessment shall become
final, executory and demandable.
A motion for reconsideration of the Commissioner’s denial of the protest or
administrative appeal, as the case may be, shall not toll the thirty (30)-day period to
appeal to the CTA.
It must be emphasized, however, that in case of inaction on protested assessment within

the 180-day period, the option of the taxpayer to either file a petition for review
with the CTA within 30 days after the expiration of the 180-day period; or await the
final decision of the Commissioner or his duly authorized representative on the
disputed assessment and appeal such final decision to the CTA within 30 days after the
receipt of a copy of such decision, are mutually exclusive and the resort to one bars
the application of the other.
19. For requests for reconsideration, the taxpayer shall submit all relevant supporting
documents in support of his protest within how many days from date of filing of his
letter of protest, other-wise, the assessment shall become final?
a. Sixty (60) days c. Twenty (20) days
b. Thirty (30) days d. None of the choices
The term “relevant supporting documents” refer to those documents necessary to support
the legal and factual bases in disputing a tax assessment as determined by the
taxpayer.
The sixty (60)-day period for the submission of all relevant supporting documents shall
not apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be denied.
20. (Tax Remedies) A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001,
she filed a written claim for refund. Her claim was denied by the BIR and she received
the denial on March 2002. She filed a motion for reconsideration with the BIR on
March 31, 2002. On April 18, 2002, she received the final denial of the BIR. What
will be the taxpayer’s remedy?
a. File another motion for reconsideration with the BIR within 30 days after the
receipt of the final denial
b. File an appeal with the Court of Tax Appeals within 30 days after the receipt of
the final denial
c. File an appeal with the Court of Tax Appeals within 15 days after the receipt of
the final denial
d. The taxpayer has no more remedy against the final denial
The last day to appeal to the Court of Tax Appeals is April 15, 2002 which is within
two (2) yeas from the date of payment of tax.
Claims for refund must be elevated to the CTA before the expiration of the two-year
period because the prescriptive period will not be suspended regardless of any
supervening event.
21. (Tax Remedies) First statement: Within three (3) years from the date of filing of any
return, statement or declaration, the same may be modified, changed, or amended.
Second statement: The modification, change or amendment to any return, statement of

declaration filed is allowed if no notice for audit or investigation of such return,
statement or declaration has in the meantime been actually served upon the taxpayer.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
22. (Tax Remedies) First statement: The CTA may sit en banc or in three (3) Divisions,
each Division consisting of three (3) Justices.
Second statement: Five (5) Justices shall constitute a quorum for sessions en banc
and two (2) Justices for session of a Division.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
23. Tax Remedies) The seizure by the Government of personal property to be sold in a public
sale to enforce payment of taxes that are not voluntarily paid is called:
a. distraint. c. forfeiture.
b. levy. d. lien.
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24. (Income Tax) The taxpayer is a married nonresident alien engaged in business in the
Philippines with two (2) qualified dependent children. His country gives a nonresident
Filipino with income therefrom a basic personal exemption of P 40,000 and additional
exemption of P 15,000. In 2017, he is entitled to total personal exemptions of:
a. P 100,000 c. P 50,000
b. P 70,000 d. None of the choices
Basic personal exemption (lower) P 40,000

Additional exemption (lower) (P15,000 X 2) 30,000
Total personal exemptions P70,000
25. (Income Tax) Using the same data in the preceding number except that the data are for
2018, how much are the total personal exemptions?
a. P100,000 c. P50,000
Basic personal exemption and additional exemption are no longer allowed under R.A.
No. 10963 known as the Tax Reform for Acceleration and Inclusion (TRAIN).
26. (Income Tax) In 2017, Juancho procures Health Insurance policy for his married brother,
Jericho, paying a total amount of P6,000.00 for the year. Juancho’s gross business
income for the same year is P250,000. When he files his income tax return, Juancho
deducts P2,400.00 from his gross income representing the premium payment he made for the
health insurance policy of his brother.
Is the deduction for premium payment made by Juancho proper?

a. Yes, because his gross income does not exceed P250,000.00 making him qualified to
claim such deduction.
b. No, because premium on health and/or hospitalization insurance is deductible if
taken by the taxpayer for himself, including his family and paid for during the
taxable year.
c. Yes, because the amount deducted does not exceed the allowable deduction for
premium on health and/or hospitalization insurance.
d. No, because Juancho’s civil status is not mentioned.
Starting January 1, 2018, deduction from health/and or hospitalization insurance is
no longer allowed as deduction.
(Income Tax and Business Taxes) 27 to 29 are based on the following: Ms. Queenie
Matusalem signified her intention to be taxed at 8% income tax rate on gross sales in
her first quarter return. However, her gross sales during the taxable year has exceeded
the VAT threshold.
First Second Third Fourth
quarter quarter quarter quarter
Total sales P500,000 P1,000,000 P1,500,000 P4,000,000
Cost of sales 300,000 500,000 700,000 1,500,000
Operating
expenses 100,000 200,000 250,000 500,000
27. How much is income tax payable for the final return?
a. P574,000 c. P340,000
b. P560,000 d. None of the choices
Answer: A
Total gross sales P7,000,000
Less: Cost of sales 3,000,000
Gross income 4,000,000
Less: Operating expenses 1,050,000
Taxable income 2,950,000
Tax due Sec. 24 (A) 2,000,000 490,000
950,000 x 32% 304,000 P 794,000
Less: 8% income tax payments, first 3 quarters 220,000
Tax payable P 574,000
28. How much is the percentage tax under Section 116 for the third quarter?
a. P210,000 c. Not subject to Sec. 116
Gross sales, third quarter P1,500,000

Tax rate 3%
Percentage tax under Sec. 116 P 45,000
29. How much is output VAT for the fourth quarter, if any?
a. P840,000 c. P120,000
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Gross sale (7,000,000 – 3,000,000) P4,000,000

Tax rate 12%
Output VAT P 480,000
30 to 33 are based on the following: (Income Tax) Mr. Mark Tang is a partner of Tang Dayag Caiga
Company, a business partnership. He owns 25% interest. The gross sales of Tang Dayag Caiga Company amounted
to ₱10,000,000.00 for taxable year 2018. The recorded cost of aales and operating expenses of the
partnership were ₱2,750,000.00 and ₱1,500,000.00, respectively. It had also incurred an interest expense
of P200,000 in connection with asset acquisition and interest income from bank deposit amounting to
P100,000.
30. How much is the taxable income of the partnership?

a. P5,750,000 c. P5,550,000
b. P5,583,000 d. None of the choices
Gross sales P 10,000,000

Less: Interest expense 200,000
Reduction (33% x 100,000) (33,000) (167,000)
Other operating expenses (1,500,000)
Taxable income P5,583,000
31. How much is the income tax liability of the partnership?

a. P1,725,00 c. P1,665,000
Taxable income P5,583,000

Tax rate 30%
Tax due P1,674,900
32. How much is the share in the partnership income of partner Mark Tang?
a. P1,068,750 c. P978,775
Taxable income of the partnership P5,583,000

Less: Income tax 1,674,900
Net income after tax 3,908,100
Add: Interest income, net of final tax (200,000 – (200,000 x 20%) 160,000
Distributable net income 4,068,100
Mark Tang’s interest in the partnership 25%
Partner’s interest in the partnership’s distributable income P1,017,025
33. Assuming the partnership avails of the Optional Standard deduction, how much is the tax liability
of the partnership?
a. P1,725,00 c. Zero
Gross sales P10,000,000

Less: Optional standard deduction (40% x 7,250,000) 2,900,000
Taxable income 4,350,000
Tax rate 30%
Tax due and payable P1,305,000
34. (Income Tax) An international carrier doing business in the Philippines shall pay an
income tax of:
a. three percent (3%) on its gross receipts.
b. two and one-half percent (2½%) on its ‘Gross Philippine Billings.’
c. two percent (2%) on its ‘Gross Philippine Billings.’
d. one and one-half percent (1½%) on its gross receipts.
In computing for “Gross Philippine Billings” of international air carriers, there

shall be included the total amount of gross revenue derived from passage of persons,
excess baggage, cargo and/or mail, originating from the Philippines in a continuous
and uninterrupted flight, irrespective of the place of sale or issue and the place of
payment of the passage documents.
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35. (Income Tax) The following data were provided by an international air carrier:
Freight and cargo fees (cargo originating from the Philippines in a
continuous and uninterrupted flight to Japan, passage documents sold
in Japan) P5,000,000
Mail fees (mail originating from Japan in a continuous and
uninterrupted flight to the Philippines, passage documents
sold in the Philippines) 4,000,000
Advance payments for cargo originating from the Philippines in a
continuous and uninterrupted flight to Singapore (passage documents
sold in Singapore) 3,000,000
Receipts from sales of tickets to passengers originating from the
Philippines in a continuous and uninterrupted flight to Hongkong
(tickets sold in the Philippines) 2,000,000
Expenses, Philippines 1,500,000
Question 1 - How much is the income tax due from the international air carrier doing
business in the Philippines?
a. P250,000 c. P200,000

continuous and uninterrupted flight to Singapore (passage documents
sold in Singapore) 3,000,000
Receipts from sales of tickets to passengers originating from the
Philippines in a continuous and uninterrupted flight to Hongkong
(tickets sold in the Philippines) 2,000,000
Gross Philippine Billings 10,000,000
Tax rate 2.5%
Income tax P 250,000
Question 2 – How much is the common carrier’s tax due from the international air
carrier?
a. P250,000 c. P200,000

continuous and uninterrupted flight to Singapore (passage documents sold
in Singapore) 3,000,000
Gross receipts 8,000,000
Tax rate 3%
Common carrier’s tax P 240,000
36. (Income Tax) (Phil. CPA) Which of the following statements is incorrect?
a. Resident foreign corporations are subject to income tax based on net income from
sources within the Philippines.
b. Domestic corporations are subject to income tax based on net income from all
sources.
c. Nonresident foreign corporations are subject to income tax based on gross income
from sources within the Philippines.
d. Private educational corporations are subject to income tax based on the net
income from sources within the Philippines at the tax rate of 10%.
37. (Income Tax) Which of the following will constitute a taxable income?
a. Prize won in an essay contest the recipient joined
b. The Nobel Peace Prize
c. Prize won as most valuable amateur player in an international sports competition
d. Award not exceeding the amount set by law for being a model employee
38. (Income Tax) (Phil. CPA) Jose Josue qualified as head of a household for 2015 tax
purposes. Mr. Josue’s 2016 taxable income was P200,000 exclusive of capital and
losses. Mr. Josue had a net long-term loss of P8,000 in 2016. What amount of this
capital loss could Mr. Josue offset against the 2016 ordinary income?
a. Zero c. P4,000
b. P3,000 d. P8,000
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39. (Income Tax) During an unusually strong typhoon in 2012, a warehouse was destroyed.
The owner filed a claim of P1,000,000, the book value of the warehouse, against the
insurance company. The insurance company was willing to pay P600,000. Finally, the
claim was settled in 2014 for P750,000, the insurance company paying that amount in
the same year.
When would the loss of P250,000 be deductible?

a. 2012 c. 2014
b. 2013 d. None of the choices
The loss could not be deducted in 2012 inasmuch as there was still a controversy as
to the amount of the damage to be paid by the insurance company. It was only in
2014 that the transaction was closed and completed and the actual loss finally
ascertained and fixed.
40. (Income Tax) In 2018, Mr. Kenneth Lim owns a nightclub and videoke bar,
with gross sales/receipts of P2,500,000.00. His cost of sales and
operating expenses are P1.000,000.00 and P600,000.00, respectively, and
with non-operating income of P100,000.00.
Question 1 – Can Mr. Lim have an option to avail of the 8% income tax rate?
a. Yes, because his gross sales/receipts do not exceed the VAT threshold.
b. No, because his business income is subject to Other Percentage Tax
under Section 125 of the Tax Code, as amended.
c. Yes, because individual taxpayers are always given the option to be
taxed at 8% income tax rate.
d. No, because he is not VAT-registered.
Question 2 – How much is the income tax due?

a. P200,000 c. P120,000
Gross sales/receipts P 2,500,000

Less: Operating expenses 600,000
Net income from operation 900,000
Add: Non-operating income 100,000
Taxable business income P 1,000,000
Total taxable income
Tax due 800,000 130,000
200,000 x 30% 60,000 P 190,000
41. (Business Taxes) Using the same data in the preceding number, how much is the Other
Percentage Tax?
a. P450,000 c. P75,000
Gross sales/receipts P2,500,000
Tax rate 18%
Amusement tax P 450,000
42 to 45 (Income Tax) are based on the following: In 2018, Ms. Glai Espenilla Bangug,
a financial comptroller of EB Company, earns annual compensation of P1,500,000,
inclusive of 13th month and other benefits in the amount of P80,000 and mandatory SSS
contribution of P3,500 and Philhealth contribution of P2,000. Aside from her
employment income, she owns a convenience store, VAT-registered, with gross sales of
P3,000,000. Sales discount amounts to P300,000; sales returns and allowances amount to
P150,000. Her cost of sales and operating expenses are P1,000,000 and P600,000
respectively and with non-operating income of P100,000. Payments for the first three
(3) quarters amount to P300,000.
42. Can she avail of the 8% income tax rate?

a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT-registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the VAT
threshold.
Unless the taxpayer signifies in the 1st Quarter Return of the taxable year the intention to elect the 8%
income tax, the taxpayer shall be considered as having availed of the graduated rates under Section 24(A)
of the Tax Code, as amended, and such election shall be irrevocable. He shall also be liable to
business tax.
Page 8 of 30
The following cannot avail of the 8% income tax rate option:

a. A VAT-registered taxpayer, regardless of the gross sales/receipts
b. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended,
except those subject under Section 116 Of the same Title
c. Partners of a General Professional Partnership (GPP) by virtue of their distributive share from
GPP which is already net of cost and expenses
43. How much is her total taxable income?

a. P2,913,500 c. P2,464,500
Total compensation income P1,500,000
Less: Non-taxable 13th month and other
benefits 80,000
Mandatory SSS contribution 3,500
Mandatory Philhealth contribution 2,000 85,500
Taxable compensation income 1,414,500
Gross sales 3,000,000
Less: Sales discount ( 300,000)
Sales returns and allowances ( 150,000)
Net sales 2,550,000
Less: Cost of sales (1,000,000)
Less: Operating expenses 600,000
Net income from operation 950,000
Add: Non-operating income 100,000 1,050,000
Total taxable income P2,464,500
44. How much is her tax due when she files her final tax return?
a. P338,640 c. P482,320
Total taxable income P2,464,500

Tax due Sec. 24 (A) 2,000,000 490,000
464,500 x 32% 148,640 P 638,640
Less: Payments, first 3 quarters 300,000
Tax payable P 338,640
45. How much is the out VAT, if any?

a. P306,000 c. P360,000

Less: Sales discount ( 300,000)
Sales returns and allowances ( 150,000)
Net sales 2,550,000
Tax rate 12%
Output VAT P 306,000
46. (Income Tax) A purely self-employed individual’s gross sales/receipts and other non-
operating income do not exceed the VAT threshold.
Case 1 – He signified his intention to avail of the 8% income tax rate on his first
quarter return, he will pay:
a. income tax on gross sales/receipts and other non-operating income in excess of
P250,000 and the percentage tax under Section 116
b. income tax on gross sales/receipts and other non-operating income in excess of
P250,000 in lieu of graduated tax rates and percentage under Section 116
c. income tax on gross sales/receipts excluding non-operating income in excess of
d. percentage tax under Section 116 only in lieu of income tax.
Case 2 – He failed to signify his intention to avail of the 8% income tax rate on his
first quarter return, he will pay:
a. income tax based on graduated income tax rates and percentage tax under
Section 116 if not VAT-registered
b. income tax on based on graduated income tax rates only.
c. income tax on gross sales/receipts excluding non-operating income in excess of
d. Percentage tax under Section 116 only in lieu of income tax.
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47. (Income Tax) Under the TRAIN, the income tax due from compensation income is:
a. based on graduated income tax rates under Section 24 (A)
b. 8% income tax rate on gross sales/receipts and other non-operating income in
excess of P250,000.
c. either graduated income tax rate or 8% income tax rate on gross sales/receipts
and other non-operating income in excess of P250,000.
d. Based on taxable income after deducting expenses and exemptions.
48. (Income Tax) Under the TRAIN, Philippine Charity Sweepstakes and Lotto winnings
received by residents or citizens shall be:
a. exempt from income tax.
b. subject to 20% final tax except Ten thousand pesos (P10,000) or less from
Philippine Charity Sweepstakes and Lotto which shall be exempt.
c. subject to 20% final tax without exception.
d. subject to 20% final tax if less than Ten thousand pesos (P10,000).
49. (Income Tax) Under the TRAIN, the number of pages of Corporate Income Tax Return
(ITR)shall be:
a. six. c. four.
b. five. d. two.
50. (Income Tax) Under the TRAIN, the books of accounts shall be audited and examined
yearly by independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which shall
contain, among others, information lifted from certified balance sheets, profit and
loss statements, schedules listing income-producing properties and the corresponding
income therefrom and other relevant statements if the:
a. gross annual sales, earnings, receipts or output exceed Three million pesos
(P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three million
pesos (P3,000,000).
c. gross annual sales, earnings, receipts or output amount to Three million
pesos (P3,000,000)or more.
d. gross quarterly sales, earnings, receipts or output exceed One Hundred Fifty
Thousand (P150,000).
51. (Income Tax) First statement: On or before the end of the calendar year but prior to
the payment of the compensation for the last payroll period, the employer shall
determine the tax due from each employee on taxable compensation income for the entire
taxable year in accordance with Section 24(A).
Second statement: The difference between the tax due from the employee for the entire
year and the sum of taxes withheld from January to November shall either be withheld
from his salary in December of the current calendar year or refunded to the employee
not later than January 25 of the succeeding year.

52. (Income Tax) Which of the following statements is incorrect?

a. Considering that taxes withheld by the withholding agents are held in trust for
the government and its availability is an imperious necessity to ensure
sufficient cash inflow to the National Treasury, withholding agents shall file
BIR Monthly Remittance Form (BIR Form No. 0619E and/or 0619F) every tenth (10th)
day of the following month when the withholding is made, regardless of the amount
withheld.
b. For withholding agents using EFPS facility, the due date is on the fifteenth
(15th) day of the following month.
c. Withholding agents with zero remittance are not required to use and file the same
Monthly Remittance Form.
d. None of the choices
Withholding agents with zero remittance are still required to use and file the same
Monthly Remittance Form.
For purposes of withholding tax remittance, the quarter shall follow the calendar
quarter, e.g., for taxes withheld during the quarter ending March 31, the same shall
be remitted by the withholding agent on or before April 30.
Page 10 of 30
53. (Income Tax) The books of account are required to be audited and examined yearly by an
independent CPA if the gross quarterly sales, earnings, receipts or output exceed:
a. P5,000,000 c. P2,500,000
b. P3,000,000 d. P1,500,000
54. (Income Tax) For income tax purposes, the examination and inspection of the books of
account and records shall be made only once in a taxable year except when:
a. Fraud, irregularity or mistakes, as determined by the Commissioner
b. The taxpayer requests reinvestigation
c. Verification of compliance with withholding tax laws and regulations

d. All of the choices
55. (Income Tax) Receipt or invoice is issued, at least in duplicate, at the time the
transaction is effected for each sale or transfer of merchandise or for services
rendered valued at:
a. P 50 or more. c. P200 or more.
b. P100 or more. d. P250 or more.
56. (Income Tax) Mr. Emilio Nario contributed campaign fund money to OtsoDiretso.
OtsoDiretso duly reported to the COMELEC the campaign contributions and were fully
utilized during the campaign.
First statement: The campaign contribution of the donor is not subject to donor’s tax.
Second statement: The campaign contribution is not taxable to OtsoDiretso.

As a general rule, campaign contributions are not included in the taxable income of
the candidate to whom they were given, the reason being that such contributions were
given not for personal expenditure or enrichment of the concerned candidate b u for
the purpose of utilizing such contributions for his or her campaign.
Thus, to be considered as exempt from income tax, these campaign contributions must
have been utilized to cover a candidate’s expenditures for his/her electoral
campaign.
Unutilized or excess campaign funds, net of the candidate’s campaign expenditures,

shall be subject to income tax, and as such, must be included in the candidate’s
taxable income in his/her Income Tax Return (ITR) filed for the subject taxable year.
Any candidate, winning or losing who fails to file with the COMELEC the appropriated
Statement of Expenditures required under the Omnibus Election Code shall be
automatically precluded from claiming such expenditures as deductions from his/her
campaign contributions. As such, the entire amount of such campaign contributions
shall be considered as directly subject to income tax/
57. (Income Tax) In 2018 a stockholder of a closely held corporation owns 100,000 shares
before the IPO. The cost of the share is P1,000,000. During the IPO, the shares are
selling at P12 per share. After the IPO, the outstanding shares of the closely held
corporation are 1,000,000 shares and are now selling at P14 per share at the local
stock exchange.
Your friend asks for your advice whether to sell his shares during the IPO through the
local stock exchange or sell after the IPO not through the local stock exchange. What
advice will you give him?
a.Sell during the IPO because he will pay lesser tax.

b.Sell after the IPO but directly to a buyer so that he will pay lesser tax.
c.Sell any time because there is no advantage as far as taxes due are concerned.
d.Sell it below cost after the IPO directly to a buyer so he will not be subject
to tax on capital gain.
Sell directly to
Sell during IPO buyer after IPO
Gross selling price P1,200,000 P1,400,000
Less: Cost - 1,000,000
Gross selling price/net capital gain P1,200,000 P 400,000
Rate 4% 15%
Tax due P 48,000 P 60,000
Ratio = 100,000 shares/1,000,000 shares 10%
Page 11 of 30
58. (Transfer Taxes) Mr. Octavio Paz transferred his properties to his relatives due to
his poor health thinking that he is going to die soon. This is an example of:
a. transfer with retention or reservation of certain rights.
b. transfer passing under general power of appointment.
c. transfer for insufficient consideration.

d. transfer in contemplation of death.
The following are motives associated with life that preclude a transfer from the
category of one made in contemplation of death:
a. To relieve donor from the burden of management;
b. To save income or property taxes;
c. To settle family litigate and un-litigated disputes;
d. To provide independent income for dependents;
e. To see the children enjoy the property while the donor is alive;
f. To protect the family from hazards of business operations; and
g. To reward services rendered.
59. (Transfer Taxes) Mr. X died. He was survived by his wife and children. The couple
had exclusive and common properties. The gross estate of Mr. X would include:
a. common and capital properties.
b. common and paraphernal properties.
c. common, capital and paraphernal properties.
d. common properties only.
The capital of the surviving spouse of a decedent shall not, for the purpose of
estate tax, be deemed part of his or her gross estate.
60. (Transfer Taxes) In the absence of a marriage settlement, or when the regime agreed
upon is void, the property relations of the spouses who married before August 3, 1988
shall be governed by:
a. conjugal partnership of gains.
b. absolute community of properties.
c. complete separation of properties.
d. none of the choices.
61. (Transfer Taxes) (Phil. CPA Modified) The following are the requisites for vanishing
deduction to be allowable, except one.
a. The estate tax of the prior succession must have been finally determined and
paid.
b. The present decedent died within five (5) years from date of death of the prior
decedent.
c. The property with respect to which deduction is sought can be identified as
having been received by the present decedent from the prior decedent.
d. The property must have formed part of the gross estate situated outside the
Philippines of the prior decedent.
Deduction for Property Previously Taxed. - An amount equal to the value specified
below (100%, 80%, 60%, 40% and 20%) of any property forming a part of the gross
estate situated in the Philippines of any person who died within five (5) years
prior to the death of the decedent, or transferred to the decedent by gift within
five (5) years prior to his death, where such property can be identified as having
been received by the decedent from the donor by gift, or from such prior decedent by
gift, bequest, devise or inheritance, or which can be identified as having been
acquired in exchange for property so received.
62. (Transfer Taxes) A resident citizen had a family home in the Philippines. He worked
abroad and was temporarily absent from his family home when he died in 2018. The
executor of the estate inquired from you whether or not to claim family home deduction
from the gross estate for Philippine estate tax purposes. What would you tell him?
a. The estate would not be allowed family home deduction because he was abroad when
he died.
b. The estate would not be allowed family home deduction because he was a non-
resident citizen when he died.
c. The estate would be allowed family home deduction of P10,000,000 because actual
occupancy of the family home was not interrupted or abandoned because of his
temporary absence.
d. The estate would be allowed family home deduction of P1,000,000 because all
decedents were allowed family home deduction.
63. (Transfer Taxes) Under the TRAIN, the estate tax rate is:
a. 6% based on net estate with P250,000 exemption.
b. 6% based on net estate with no exempt amount.
c. 8% based on gross estate.
d. graduated tax rates with P200,000 exemption.
Page 12 of 30
64. (Transfer Taxes) The net fruits as well as the income received during the marriage from
the exclusive properties of the spouses are classified as:
I – conjugal properties under conjugal partnership of gains.
II – community properties under absolute community of properties.
a. Only I is correct c. Both I and II are correct

b. Only II is correct d. Both I and II are incorrect
Conjugal partnership Absolute community of

of gains property
Property owned before marriage
brought into the marriage Exclusive Community
Income received from exclusive
property during the marriage Exclusive Community
Properties received as gifts or Exclusive Exclusive unless
inheritance during the marriage specifically provided
by the donor, testator
or grantor that they
shall form part of the
community
65. (Transfer Taxes) Under the TRAIN Law, the estate tax return shall be supported with a
statement duly certified to by a Certified Public Account is the it shows a gross
value:
a. of P5,000,000 or more. c. exceeding P2,000,000
b. exceeding P5,000,000. d. exceeding P200,000
66. (Transfer Taxes) In case the available cash of the estate is insufficient to pay the
total estate tax due, payment by installment shall be allowed:
a. within two (2) years from the statutory date for its payment without civil
penalty and interest.
b. within two (2) years from the statutory date for its payment with civil penalty
and interest.
c. within one (1) year from the statutory date for its payment without civil
d. within six (6) months from the statutory date for its payment without civil
67. (Transfer Taxes) Under the TRAIN Law, the donor’s tax rate is:
a. six percent (6%) computed on the basis of the total gifts in excess of Two
hundred fifty thousand pesos (P250,000) exempt gift made during the calendar
year whether the donee is a relative or a stranger.
b. six percent (6%) computed on the basis of the total gifts in excess of Two
hundred fifty thousand pesos (P250,000) exempt gift made during the calendar
year where the donee is a relative.
c. six percent (6%) computed on the basis of the total gifts without exemption
made during the calendar year when the donee is a stranger
d. six percent (6%) computed on the basis of the total gifts in excess of One
hundred thousand pesos (P100,000) exempt gift made during the calendar year
whether the donee is a relative or a stranger
68. (Transfer Taxes) A sale, exchange, or other transfer of property made in the ordinary
course of business (a transaction which is a bona fide, at arm’s length, and free
from any donative intent), will be considered as made for an adequate and full
consideration in money or money’s worth and therefore:
a. subject to donor’s tax.
b. not subject to donor’s tax.
c. subject to estate tax.
d. Choice not given.
69. (Transfer Taxes) Under the TRAIN Law, dowries or gifts made on account of marriage and
before its celebration or within one year thereafter by parents to each of their
legitimate, recognized natural, or adopted children to the extent of the first Ten
thousand pesos (P10,000) shall:
a. be exempt from donor’s tax.
b. not be allowed as deduction from gross gifts when the donor is a resident or
citizen.
c. not be allowed as deduction from gross gifts when the donor is a non-resident
alien.
d. not be allowed as deduction from gross gifts whether the donor is a resident or
citizen or non-resident alien.
Page 13 of 30
70. (Transfer Taxes) When an indebtedness is cancelled without any service rendered by the
debtor in favor of the creditor, the forgiveness of debt will
result to:
a. taxable income.
b. distribution of dividend.
c. taxable indirect donation.
d. taxable estate.
71. (Transfer Taxes) A client asked you whether or not to add the gifts made in the
previous year to the gifts made in the current year. What would your answer be?
a. The gifts made in the previous year should not be added to the gifts made in the
current year because the computation of the taxable net gifts is cumulative basis
over a period of one calendar year.
b. The gifts made in the previous year should be added to the gifts made in the
current year because the computation of the taxable net gifts is cumulative basis
over several calendar years.
c. The gifts made in the previous year should not be added to the gifts made in the
current year because the BIR would have no way of knowing them anyway.
d. The gifts made in the previous year should be added to the gifts made in the
current year so that the progressive effect of donor’s tax will be felt.
72. (Transfer Taxes) Mr. Gerardo Ireneo transfers inter vivos a personal property to his
son on March 15, 2016. His son who lives in another province let his father know that
he is accepting the gift on March 31, 2016. The personal property was delivered and
received on April 15, 2016. When shall be the last day to file the donor’s tax return
and pay the donor’s tax?
a. April 14, 2016 c. May 15, 2016
b. April 30, 2016 d. None of the choices
The donor’s tax shall not apply unless and until there is a completed gift. The
transfer of property by gift is perfected from the moment the donor knows of the
acceptance by the donee; it is completed by the delivery, either actually or
constructively, of the donated property to the donee. Thus, the law in force at the
time of the perfection or completion of the donation shall govern the imposition of
the donor’s tax.
73. (Transfer Taxes) A resident citizen has a property situated in Quezon City. His legal
residence is in Masbate City. While in Cebu City on a business trip, he donated his
property situated in Quezon City to a relative who is long-time resident of Cebu City.
Where will the donor file the donor’s tax return?
a. Quezon City c. Masbate City
b. Cebu City d. Any of the three cities
Except in cases where the Commissioner otherwise permits, the return shall be filed
and the tax paid to an authorized agent bank, the Revenue District Officer, Revenue
Collection Officer or duly authorized Treasurer of the city or municipality where the
donor was domiciled at the time of the transfer, or if there be no legal residence in
the Philippines, with the Office of the Commissioner.
74. (Transfer Taxes) The decedent is a married man with a surviving spouse with the
following data dies on January 1, 2018:
Conjugal real and personal properties P 14,000,000
Conjugal family home 9,000,000
Exclusive properties 5,000,000
Conjugal ordinary deductions (including P200,000 funeral
expenses and P100,000 judicial expenses) 2,300,000
Medical expenses 500,000
The taxable net estate is:
a. P26,000,000. c. P 6,000,000.
b. P16,500,000. d. P 500,000.
Exclusive Common Total

Gross estate P5,000,000 P23,000,000 P28,000,000
Less: Deductions - (2,000,000) (2,000,000)
Net estate before special deductions 5,000,000 21,000,000* 26,000,000
Less: Special deductions
Family home (1/2) 4,500,000
Maximum 10,000,000 (4,500,000)
Standard deduction (5,000,000)
Net estate after special deductions 16,500,000
Less: Share of surviving spouse
(1/2 x 21,000,000*) (10,500,000)
Net taxable estate P 6,000,000
Page 14 of 30
75. (Transfer Taxes) (Phil. CPA Modified) Jose made the following gifts:
a. On June 1, 2017, P150,000 to Anton, his son, on account of his marriage
celebrated May 1, 2017;
b. On July 10, 2017, a parcel of land worth P180,000 to his father, subject to the
condition that his father would assume the mortgage indebtedness of Jose in the
amount of P40,000;
c. On September 30, 2018, P250,000 dowry to his daughter Dana, on account of her
scheduled marriage on October 25, 2018, and another wedding gift worth P120,000
on November 23, 2018.
How much were the total net gifts as of November 23, 2018?
a. P370,000 c. P 350,000
Gross gift, November 23, 2018 P 120,000
Add: Prior gift, September 30, 2018 250,000
Total taxable gifts, November 23, 2018 P 370,000
76. (Business Taxes) This refers to any person who is required to register under the
provisions of the Tax Code but failed to register.
a. VAT-registered person c. VAT-exempt person
b. VAT-registrable person d. None of the choices
77. (Business Taxes) In which of the following cases shall the selling price be deemed
inclusive of VAT?
I - If the gross selling price is based on the zonal value or market value of the
property
II - If the VAT is not billed separately
a. I only c. Both I and II

b. II only d. Neither I nor II
If the gross selling price is based on the zonal value or market value of the
property, the zonal or market value shall be deemed exclusive of VAT. If the VAT is
not billed separately, the selling price stated in the sales document shall be
deemed to be inclusive of VAT.
It is now mandatory that the amount of VAT shall be shown as a separate item in the
invoice or receipt.
78. (Business Taxes) Kris Company, service provider, presented to you the following income
statement in line with the same company’s audit of the financial statements:
KRIS COMPANY
INCOME STATEMENT
For the Year Ended December 31, 2018
Sales P10,350,000
Cost of Goods Sold 7,050,000
Gross profit P3,300,000
Operating expenses:
Selling P675,000
Administrative 1,050,000 1,725,000
Net income P1,575,000
Your audit disclosed the following information:

 Accounts receivable decreased P540,000 during the year.
 Prepaid expenses increased P255,000 during the year.
 Accounts payable to suppliers of merchandise decreased P412,500 during the year.
 Accrued expenses payable decreased P150,000 during the year.
 Administrative expenses include depreciation expense of P90,000.
 Inventories decreased by P450,000.
Question 1 - What is the total amount of cash received from customers during the year?
a. P10,980,000 c. P10,350,000
Sales, accrual basis P10,350,000.00

Add: Decrease in accounts receivable 540,000.00
Amount of cash received P10,890,000.00
Question 2 – How much is output tax?

a. P1,306,800 c. P1,242,000
b. P1,257,300 d. P1,177,200
Page 15 of 30
Amount of cash received P10,890,000.00

Tax rate 12%
Output tax P 1,306,800.00
Question 3 - What is the total basis of input tax on supplies and operating expenses
(purchase of services) during the year?
a. P9,052,500 c. P7,012,500
Cost of sales P7,050,000.00

Less: Decrease in inventory 450,000.00
Purchases of goods, accrual basis P6,600,000.00
Total operating expenses, accrual basis P1,725,000.00

Add (Deduct):
Increase in prepaid expenses 255,000.00
Decrease in accrued expense 150,000.00
Depreciation expense (non-cash expense) ( 90,000.00)
Cash payments for purchase of services 2,040,000.00
Total P8,640,000.00
Question 4 - What is the input tax during the year?

a. P1,086,300 c. P841,500
Total P8,640,000.00
Tax rate 12%
Input taxes P1,036,800.00
Question 5 – Assuming the taxpayer is seller of goods, how much is the output tax for
the year?
a. P1,306,800 c. P1,242,000
Sales, accrual basis P10,350,000

Tax rate 12%
Output tax P 1,242,000
79. (Business Taxes) Ms. Consuelo Dimagulo receives a package of goods from her sister who
lives in California, United States of America. Ms. Consuelo will use the goods for
personal purposes. She is not VAT-registered. Which of the following statements is
correct in connection with the receipt of a package?
a. Ms. Consuelo shall be subject to VAT on importation.
b. Ms. Consuelo shall not be subject to VAT on importation because she is not VAT-
registered.
c. Ms. Consuelo shall not be subject to VAT on importation but shall be subject to
VAT on sales.
d. None of the choices.
80. (Business Taxes) Marine food products which include fish and crustaceans are exempt
from VAT. Which of the following is not exempt from VAT?
a. Eels c. Prawns
b. Trout d. Aquarium fish
Marine food products shall include fish and crustaceans, such as, but not limited
to, eels, trout, lobster, shrimps, prawns, oysters, mussels and clams [Section
4.109-1 (B) (1) (a), Revenue Regulations No. 16-2005].
81. (Business Taxes) Any person who elects to optionally register under the VAT system,
other than franchise grantees of radio and/or television broadcasting, shall not be
allowed to cancel his registration for the next:
a. 5 years. c. 2 years.
b. 3 years. d. 1 year.
82. (Business Taxes) Which of the following transactions in the course of trade or business
requires actual payment of VAT before an input tax is allowed as tax credit from the
output tax?
a. Purchase of services
b. Transactions deemed sale
c. Domestic purchase of goods for use as raw materials supplied in the sale of
services
d. Domestic purchase of goods for use in trade or business for which deduction for
depreciation or amortization is allowed under the Tax Code
Page 16 of 30
83. (Business Taxes) A VAT-registered domestic carrier operating air, land and sea
transport equipment acquired vehicles for use in its operation to transport goods and
cargoes. The domestic carrier:
a. can claim input taxes on the said acquisitions.
b. cannot claim input taxes on the said acquisitions.
c. can claim input taxes only on the acquisitions of air and sea transport vehicles.
d. can claim input taxes only on the acquisition of land transport vehicles.
No depreciation (and input taxes) shall be allowed for yachts, helicopters, airplanes
and/or aircrafts, and land vehicles which exceed P2,400,000, unless the taxpayer’s
main line of business is transport operations or lease of transportation equipment
and the vehicles purchased are used in said operations. (Sec. 3 C, Revenue
Regulations No. 12-2012)
84. (Business Taxes) Starting January 1, 2018, in proper cases, the Commissioner of
Internal Revenue shall grant a tax credit certificate or refund for creditable input
taxes within how many days from the date of submission of complete documents in
support of the application filed?
85. (Business Taxes) Which of the following sale of goods shall be subject to 12% VAT when
certain conditions are met?
I - Sale of gold to the Bangko Sentral ng Pilipinas (BSP)
II- Sale of raw materials or packaging materials to a nonresident buyer for
delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the said
buyer’s goods and paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP)
III- Sale of raw materials or packaging materials to export-oriented enterprise
whose export sales exceed seventy percent (70%) of total annual production
IV -Those considered export sales under Executive Order No. 226, otherwise known
as the Omnibus Investment Code of 1987, and other special laws
a. All of the above c. II and III only

b. II, III and IV only d. III and IV only
86. (Business Taxes) Which of the following sale of services shall be subject to 12% VAT
when certain conditions are met?
I- Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the services are
paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP)
II - Services performed by subcontractors and/or contractors in processing, converting, of
manufacturing goods for an enterprise whose export sales exceed seventy percent (70%)
of total annual production
a. I and II c. II only
b. I only d. Neither I nor II
87. (Business Taxes) If the input tax inclusive of input tax carried over from the
previous quarter exceeds the output tax, the excess input tax shall be:
a. credited in every quarter but not to exceed seventy percent (70%) of the output
tax.
b. carried over to the succeeding quarter or quarters.
c. disregarded because carry over is no longer allowed under the new regulations.
d. deducted from income tax due.
Section 2. VAT PAYABLE. - Sec. 4.110-7 of RR No. 16-2005 is hereby amended to read
as follows:
“SEC. 4.110-7. VAT Payable (Excess Output) or Excess Input Tax.
Xxx xxx xxx.
(b) If the input tax inclusive of input tax carried over from the previous quarter
exceeds the output tax, the excess input tax shall be carried over to the
succeeding quarter or quarters; Provided, however, that any input tax attributable
to zero-rated sales by a VAT-registered person may at his option be refunded or
applied for a tax credit certificate which may be used in the payment of internal
revenue taxes, subject to the limitations as may be provided for by law, as well
as, other implementing rules.”
88. (Business Taxes) An export sale of orchids and other ornamental plants of a VAT-
registered person is:
a. subject to 12% VAT. c. exempt from VAT.
b. subject to 0% VAT. d. none of the choices
Page 17 of 30
Orchids and other ornamental plants are agricultural non-food products and
therefore subject to 12% VAT, hence, exports shall be zero-rated.
89. (Business Taxes) Ihaw-Ihaw sa Kanto sells roasted chicken to customers who eat inside
its restaurant and to those who take out the roasted chicken.
Fist statement: The sale of roasted chicken to customers who eat in its restaurant is
subject to VAT.
Second statement: The sale of roasted chicken to customers who take them out is exempt
from VAT.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are incorrect.
d. Both statements are correct.
90 and 91 are based on the following: (Business Taxes) VAT and Percentage Taxes ABC
Corporation, VAT-registered real estate dealer, sold a residential lot on July 2, 2018 for
P1,500,000. The down payment was P200,000. The zonal value of the subject property at the
time of sale amounted to P2,000,000.
90. Would the sale qualify under installment plan?

a. Yes, because the initial payment did not exceed 25% of the selling price.
b. No, because the amount of the initial payments were not known.
c. Yes, because the sale had initial payments and, therefore, qualified under
installment plan.
d. No, because, as a rule, sale of real property would always be considered sale
under cash basis.
Initial payment/selling price (300,000/1,500,000 = 20%) does not exceed 25%.
91. How much was the output tax on the installment payment?
a. P3,600 c. P2,000
b. P2,400 d. None
Sale of residential lot valued at P1,500,000 and below is exempt from VAT under the
TRAIN.
92. (Business Taxes) Who of the following is not subject to tax on winnings under
Section 126?
a. Person who wins in horse races
b. Winners from double, forecast/quinella and trifecta bets
c. Winners in cockfighting
d. Owners of winning race horses
93. (Business Taxes) Stinging Bee Tony is a Filipino world boxing champion. He will
defend his crown in Manila against the Thai challenger, Fermin Buntonghininga. The
boxing exhibition is promoted by Nginateng Promotions wholly owned by Filipinos. You
are asked by the promoters whether or not the boxing exhibition shall be subject to
amusement tax in the Philippines. What will your answer be?
a. The boxing exhibition is subject to Philippine amusement tax because only one of
the contenders is a Filipino.
b. The boxing exhibition is subject to Philippine VAT because boxing involves
professional boxers rendering service using physical faculty.
c. The boxing exhibition is not subject to Philippine amusement tax because one of
the contenders is a Filipino, involves world championship and is promoted by a
corporation wholly owned by Filipinos.
d. The boxing exhibition is not subject to Philippine amusement tax if a special law
is passed exempting such exhibition from the tax.
Boxing exhibitions wherein World or Oriental Championships in any division is at
stake shall be exempt from amusement tax provided that at least one of the contenders
is a citizen of Philippines, and said exhibitions are promoted by citizen/s of the
Philippines or by a corporation or association at least 60% of the capital is owned
by such citizens.
94. (Business Taxes) An individual taxpayer holds shares of stock as investment which he
bought from a publicly-listed company for P500,000. The shares are listed and traded
in the local stock exchange but the corporation is not compliant with the mandatory
minimum public ownership. He sold them for P750,000. To what tax shall the gain be
subject?
a. ½ of 1% percentage tax
b. Capital gains tax
c. Value-added tax
d. Not subject to any tax
Page 18 of 30
95. (Business Taxes) Which of the following is incorrect? The percentage tax is:
a. a tax on a sale of sale of services.
b. imposed on a sale of goods.
c. imposed together with the value-added tax.
d. imposed together with the excise tax.
96. (Business Taxes) It shall be the duty of every stock broker who effected the sale
subject to the tax imposed under Section 127 (A) to collect the tax and remit the same
within:
a. twenty (20) days after the end of the quarter.
b. ten (10) working days after the end of the month.
c. five (5) days from the date of collection.
d. five (5) banking days from the date of collection.
97 to 99 (Business Taxes) A domestic common carrier with Certificate of Public Convenience

(CPC) has the following data for the year 2018:
Gross receipts P3,000,000
Cost of services 1,000,000
Operating expenses 500,000
97. Assuming the domestic common carrier is by land, how much is the common carrier’s tax?
a. P90,000 c. P45,000
Tax rate 3%
98. Assuming the domestic common carrier is by air, VAT-registered, how much is the Value-
Added Tax?
a. P360,000 c. Not subject to VAT
Tax rate 12%
Value-added tax P 360,000
99. Assuming the entity is allowed to transport passenger but does not have a CPC, how
much is the percentage tax, if any?
a. P90,000 c. P45,000

Tax rate 3%
100. (Additions to Tax) Mr. A has been assessed deficiency income tax of P1,000,000,
exclusive of interest and surcharge, for taxable year 2018. The tax liability has
remained unpaid despite the lapse of June 30, 2020, the deadline for payment stated in
the notice and demand issued by the Commissioner. Payment was made by the taxpayer on
February 10, 2021. How much is the total amount due on February 10, 2021?
a. P1,498,530.15 c. P1,103,215.08
b. P1,395,315.07 d. None of the choices
Basic tax due (income tax) P1,000,000.00
Add: 25% surcharge for late payment
(25% x 1,000,000) 250,000.00
Interest on deficiency from April 16, 2019 to June 30,
2020 (1,000,000 x 12% x 442/365 days) 145,315.07 395,315.07
Total amount due, June 30, 2020 1,395,315.07
Add: Interest on delinquency from July 1, 2020 to February
10, 2021 (1,395,315.07 x 12% x 225/365 days)
103,215.08
Total amount due, February 10, 2021 P1,498,530.15
Upon the effectivity of the TRAIN Law, in no case shall the deficiency and delinquency
interest prescribed be imposed simultaneously.
Page 19 of 30
DOCUMENTARY STAMP TAXES

1. A tax on documents, instruments, loan agreements, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident
thereto.
a. Documentary stamp tax c. Local tax
b. Excise tax d. Some other taxes
2. Documentary stamp tax is:

a. An excise tax.
b. An Ad valorem tax
c. A Local tax
d. A percentage tax.
DST is in nature of an excise tax levied on the exercise by person of certain

privileges conferred by law for the creation, revision, or termination of specific
legal relationship through the execution of specific instruments
DSTs are levied independently of the legal status of the transactions giving rise
thereto.
They must be paid upon the issuance of the instruments, without regard to whether
the contracts which gave rise to them are rescissible, void, voidable, or
unenforceable.
Whenever one of the parties to the taxable transaction is exempt from the DST, the
other party who is not exempt shall be the one directly liable for the tax.
3. Except as provided by rules and regulations promulgated by the Secretary of Finance,

upon recommendation of the Commissioner, the tax return prescribed in this Section
shall be filed within how many days after the close of the month when the taxable
document was made, signed, issued, accepted, or transferred, and the tax thereon
shall be paid at the same time the aforesaid return is filed?
4. Which of the following is not an effect of failure to stamp taxable documents?

a. An instrument, document or paper which is required by law to be stamped and which
has been signed, issued, accepted or transferred without being duly stamped,
shall not be recorded.
b. An instrument, document or paper or any copy thereof or any record of transfer of
the same which is required by law to be stamped shall not be admitted or used in
evidence in any court until the requisite stamp or stamps are affixed thereto and
cancelled.
c. No notary public or other office authorized to administer oaths shall add his
jurat or acknowledgment to any document subject to documentary stamp tax unless
the proper documentary stamps are affixed thereto and cancelled.
5. On every original issue, whether on organization, reorganization or for any lawful

purpose, of shares of stock by any association, company or corporation, the
documentary stamp tax is:
a. One peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or
fractional part thereof, of the par value of such stock.
b. Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part thereof,
of the par value, of such shares of stock
c. Three pesos (P3.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
d. Fifteen pesos (P15.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
6. AST Corporation originally issued shares of stock with par value of P5,000,000. How
much is the documentary stamp tax, if any?
a. P75,000 c. P37,500
Documentary stamp tax (P5,000,000/200 x P2) = P50,000
7. LAB Corporation originally issued stock dividends valued at P2,000,000. How much is
the documentary stamp tax, if any?
a. P30,000 c. P15,000
Documentary stamp tax (P2,000,000/200 x P2) = P20,000
Page 20 of 30
8. A stockholder in JMI Corporation sold his shares of stock for P500,000. How much is
the documentary stamp tax, if any?
a. P7,500 c. P3,750
Documentary stamp tax (500,000/200 x P1.50) = P3,750
9. The DST on each bank check, draft, or certificate of deposit not drawing interest, or
order for the payment of any sum of money drawn upon or issued by any bank, trust
company, or any person or persons, companies or corporations, at sight or on demand
is:
a. P3.00 c. P1.00
b. P2.00 d. None of the choices
10. During the current year, a debt instrument with face value of P500,000 was issued
with maturity of 100 days. How much is the documentary stamp tax, if any?
a. P3,750 c. P1,027
Documentary stamp tax (P500,000/200 x P1.50 = P3,750 x 100/365 – P1,027
For such debt instruments with terms of less than one (1) year - proportional
amount in accordance with the ratio of its term in number of days to three
hundred sixty-five (365) days.
11. A real property was sold for P3,495,700. How much is the documentary stamp tax, if
any?
a. P52,440.00 c. P52,420.50
b. P52,425.00 d. None of the choices
On P1,000 P 15
3,494,700/1,000 = 3,494.70 or 3,495 x 15 52,425
Total P52,440
For each additional One thousand pesos (P1,000), or fractional part thereof in
excess of One thousand pesos (P1,000) of such consideration or value, Fifteen
pesos (P15.00).
12. Mr. Florence Binaluyo donates a piece of land to the City of Masbate. The fair
market value per BIR of the piece of land is P2,000,000 and its value per Tax
Declaration is P1,800,000. How much is the documentary stamp tax, if any?
a. P30,000 c. None, exempt from DST
Transfers exempt from donor’s tax under Section 101(a) and (b) of the Tax Code
shall be exempt from the tax imposed under this Section.
EXCISE TAXES
1. These are taxes on goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition and to things imported
as well as services performed in the Philippine, which tax shall be in addition to
the value-added tax.
a. Excise tax c. Documentary stamp tax
b. Percentage tax d. Local taxes
'Specific tax' - an excise tax imposed and based on weight or volume capacity or
any other physical unit of measurement.
'Ad valorem tax - an excise tax imposed and based on selling price or other
specified value of the good.'
2. Which of the following articles shall not be subject to specific excise tax?
a. Excise tax on cigarette packed by hand
b. Excise tax on processed gas
c. Excise tax on automobiles
d. Excise tax on domestic or imported coal and coke notwithstanding any
incentives granted in any law or special law
These are examples of specific excise tax:
1) Excise tax on Cigarettes Packed by Hand
2) Excise tax on Cigarettes Packed by Machine
3) Excise tax on petroleum products
4) Excise tax on mineral products
5) Excise tax on sweetened beverages
3. Which of the following articles shall not be subject to ad valorem excise tax?
a. Excise tax on cigarette packed by hand
b. Excise tax on non-essential services
c. Excise tax on automobiles
d. Excise tax on alcoholic products
These are examples of ad valorem tax:

1) Excise tax on alcoholic products c. Excise tax on automobiles
2) Excise tax on cigars d. Excise tax on non-essential services
Page 21 of 30
4. Which of the following non-essential services shall be subject to excise tax?

a. Performance of services, net of excise tax and value-added tax, on invasive
cosmetic procedures, surgeries, and body enhancements directed solely towards
improving, altering, or enhancing the patient’s appearance and do not
meaningfully promote the proper function of the body or prevent or treat
illness or disease
b. Procedures necessary to ameliorate a deformity arising from, or directly
related to, a congenital or developmental defect or abnormality, a personal
injury resulting from an accident or trauma, or disfiguring disease, tumor,
virus or infection
c. Cases or treatments covered by the National Health Insurance Program
Non-essential services are also subject to VAT aside from excise tax. The tax rate
is five percent (5%) based on the gross receipts derived from the performance of
services, net of excise tax and value-added tax.
5. The tax on sweetened beverages shall not apply to:
a. Sweetened juice drinks;
b. Energy and sports drinks
c. Energy and sports drinks
d. Meal replacement and medically indicated beverages
“(1) A tax of Six pesos (P6.00) per liter of volume capacity shall be
levied, assessed, and collected on sweetened beverages using purely caloric
sweeteners, and purely non-caloric sweeteners, or a mix of caloric and non-
caloric sweeteners: Provided, That this tax rate shall not apply to
sweetened beverages using high fructose corn syrup: Provided, further, That
sweetened beverages using purely coconut sap sugar and purely steviol
glycosides shall be exempt from this tax; and
“(2) A tax of Twelve pesos (P12.00) per liter of volume capacity shall be
levied, assessed, and collected on sweetened beverages using purely high
fructose corn syrup or in combination with any caloric or non-caloric
sweetener.
6. To improve her body shape Paz Seksi decided to undergo procedure and sought the
services of Body Beautiful, a clinic operated outside the hospital and owned by Bello
Medical Group, Inc. Body Beautiful charged Ms. Pax Seksi the amount of P50,000
(inclusive of 12% VAT but exclusive of 5% excise tax) for the service rendered.
Question 1 – How much is the excise tax?
a. P4,464.42 c. P1,339.28
Gross receipts, net of VAT (50,000/1.12) P44,642.85

Tax rate 5%
Excise tax P2,232.14
Unless otherwise provided, the price, excluding the value-added tax, at which the
goods are sold at wholesale in the place of production or through their sales
agents to the public shall constitute the gross selling price
Question 2 – How much is the VAT?
a. P5,625.00 c. P4,687.50
Gross receipts, net of VAT P44,642.85

Add: Excise tax 2,232.14
Total 46,874.99
Tax rate 12%
VAT P5,625.00
Question 3 - How much is the total amount to be collected from Ms. Paz Seksi?
a. P52,500.00 c. P46,877.99
Gross receipts, net of VAT P44,642.85

VAT 5,625.00
Total P52,500,00
The journal entry to record the above in the books of Bello Medical Group, Inc.?
Debit Credit
Cash 52,500.00
Excise tax expense 2,232.14
Excise tax payable 2,232.14
Service income 48,875.00
Output tax 5,625.00
Page 22 of 30
7. Using the same data in no. 6, assuming that the amount of P50,000 is inclusive of 12%
VAT and 5% excise tax
a. P2,500.00 c. P2,125.85
Gross receipts, net of VAT (50,000/1.12) P44,642.85

Gross receipts, net of excise tax (44,642.85/1.05) P42,517.01
Tax rate 5%
Excise tax P 2,125.85

a. P6,000.00 c. P5,102.04
Gross receipts, net of VAT inclusive of excise tax P44,642.85

Tax rate 12%
VAT P 5,357.14
a. P50,000.00 c. P44,642.86
Gross receipts, net of VAT and excise tax P42,517.01

VAT 5,357.14
Total P50,000.00
8. Same facts in no. 6, except this time Ms. Paz Seksi had another invasive cosmetic
procedure done by Dr. Anne Calay, an individual practitioner operating a clinic
inside of hospital whose gross annual receipts exceed the VAT threshold. The
hospital bills of Ms. Paz Seksi other fees (e.g. supplies and fees for use of
operating room and hospital facilities) in the amount of P20,000, in addition to the
fees charged by Dr. Anne Calay of P50,000 (inclusive of 12% VAT, excluding 5% excise
tax) for the service performed.
Question 1 – How much is the VAT-exempt service, if any?

a. P50,000.00 c. P20,000.00
Hospital bills of Ms. Paz Seksi for other fees (hospital P20,000.00
services)

a. P3,232.14 c. P1,000.00
Excise tax hospital bills (20,000 x 5%) P1,000.00

Excise tax on doctor’s fees (50,000/1.12 = 44,642.85 x 5%) 2,232.14
Total P3,232.14
a. P6,000.00 c. P5,357.14
Doctor’s fees, net of VAT P44,642.85

Total 46,874.99
Tax rate 12%
VAT P 5,625.00
a. P73,500.00 c. P67,875.00
Billings by hospital (VAT-exempt) P20,000.00

Excise tax on hospital billings (20,000 x 5%) 1,000.00
Doctor’s fees, net of VAT 44,642.85
Excise tax on doctor’s fees 2,232.14
VAT 5,625.00
Total P73,500.00
Page 23 of 30
The entry that shall be recorded in the books of Dr. Anne Calay is:
Debit Credit
Accounts receivable -hospital 45,803.58
Prepaid tax 4,464.28
Service fee 46,875.00
Output VAT 5,625.00
Debit Credit
Cash 45,803.58
Accounts receivable-hospital 45,803.58
Computation of accounts receivable-hospital
VAT 5,625.00
Total 50,267.85
Less: Prepaid tax (44,642.86 x 10%) 4,464.28
Accounts receivable - hospital P45,803.57
Computation of service fee

Excise tax on doctor’s fees 2,232.14
Service fee P46,875.00
The entries that shall be recorded in the books of the hospital are:
Debit Credit
Cash 21,000.00
Service income – Non-VAT 21,000.00
Excise tax payable 1,000.00
Debit Credit
Cash 52,500.00
Accounts payable – Dr. Anne Calay 45,803.58
Excise tax payable for Dr. Anne Calay 2,232.14
Expanded withholding tax payable- 4,464.28
professional income
TAXATION UNDER LOCAL GOVERNMENT CODE (4 ITEMS UNDER TOS)

1. Which of the following statements is incorrect in connection with Taxation under the
Local Government?
a. The business taxes imposed by LGUs shall be payable for every separate or
distinct establishment or place where business subject to the tax is conducted
and one line of business becomes exempt by being conducted with some other
business for which such tax has been paid.
b. The tax on a business must be paid by the person conducting the same.
c. In cases where a person conducts or operates two (2) or more of the businesses
which are subject to the same rate of tax, the tax shall be computed on the
combined total gross sales or receipts of the said two (2) or more related
businesses.
d. In cases where a person conducts or operates two (2) or more businesses which are
subject to different rates of tax, the gross sales or receipts of each business
shall be separately reported for the purpose of computing the tax due from each
business.
The business taxes imposed under Section 143 shall be payable for every separate or
distinct establishment or place where business subject to the tax is conducted and
one line of business does not become exempt by being conducted with some other
business for which such tax has been paid. The tax on a business must be paid by the
person conducting the same.
2. (Local Business Tax) The following data are taken from the books of a VAT-registered
manufacturer of cigarettes:
Sales returns 500,000
Sales discount, determinable at the time of sale 100,000
Excise tax 150,000
Value-Added Tax 540,000
Local tax passed-on to customers 100,00
For local business tax purposes, the taxable amount is:
a. P5,000,000 c. P3,710,000
Gross sales (4,900,000 + 100,000) P5,000,000
Less: Sales returns 500,000
Sales discount 100,000
Excise tax 150,000
Value-Added Tax 540,000 1,290,000
Taxable amount P3,710,000
Page 24 of 30
3. (Local Transfer Tax) An individual taxpayer sold his residential house and lot for
P5,000,000 (fair market value was P4,000,000).
Question 1 – How much is the capital gains tax?
a. P300,000 c. P75,000
Selling price (higher) P5,000,000

Tax rate 6%
Capital gains tax P300,000
Question 2 – How much is the documentary stamp tax?

a. P300,000 c. P75,000

Tax rate 1.5%
Question 3 – How much is the local transfer tax?

a. P75,000 c. P25,000

Tax rate (50% of 1%) .005
4. (Real Property Tax) A residential land is located in Metro Manila. Its fair market
value is P5,000,000.
Question 1 – How much is the basic real property tax, if any?
a. P30,000 c. P10,000
Fair market value P5,000,000
Multiplied by assessment level 20%
Assessed Value 1,000,000
Tax rate 2%
Basic real property tax P 20,000
The assessment level of residential land and timber land is 20%. The basic RPT
in Metro Manila is not exceeding 2%. SEF is 1%.
Question 2 – How much is the Special Educational Fund (SEF), if any?
a. P30,000 c. P10,000

Tax rate 1%
Special Educational Fund (SEF) P 10,000
5. (Real Property Tax) An agricultural land is located in the province. Its fair market
value is P2,000,000.
c. P16,000 c. P4,000
Assessed Value 800,000
Tax rate 1%
The assessment level of agricultural land is 40%. The basic RPT in the province
is not exceeding 1%. SEF is 1%.

a. P16,000 c. P4,000

Assessed Value 800,000
Tax rate 1%
Page 25 of 30
6. (Real Property Tax) A commercial land located is located in one of the cities in
Metro Manila. Its fair market value is P10,000,000.
a.P150,000 c. P50,000
b.P100,000 d. None of the choices

Tax rate 2%
The assessment level of commercial land, industrial land and mineral land is
50%. The basic RPT in Metro Manila is not exceeding 2%. SEF is 1%.
c. P150,000 c. P50,000
d. P100,000 d. None of the choices

Tax rate 1%
7. (Real Property Tax) A residential building located in one of the cities in Metro
Manila has a fair market value of P10,000,000. The city ordinance fixed the actual
assessment level at 60%. How much is the basic real property tax, excluding the
Special Educational Fund (SEF)?
a. P120,000 c. P60,000
Tax rate 2%
Assessment Levels of Building
Class Fair Market Value Rate*
Residential P175,000 to P10,000,000 plus 0% to 60%
Agricultural P300,000 to P2,000,000 plus 25% to 50%
Commercial or industrial 300,000 to P10,000,000 plus 30% to 80%
Timberland P300,000 to P2,000,000 plus 45% to 70%
*Actual assessment level fixed by ordinance
8. (Real Property Tax) An agricultural machinery located in the province has fair market
value of P3,000,000. How much is the basic real property tax, excluding Special
Educational Fund (SEF)?
a. P12,000 c. P4,000

Tax rate 1%
Assessment Levels of Machinery

Class Maximum Assessment Level
Residential 50%
Agricultural 40%
Commercial 80%
Industrial 80%
9. Which of the following statements is incorrect?

a. All local taxes, fees, and charges shall be collected by the provincial, city,
municipal, or Barangay treasurer, or their duly authorized deputies.
b. Unless otherwise provided in this Code, all local taxes, fees, and charges shall be
paid within the first twenty (20) days of January or of each subsequent quarter, as
the case may be.
c. The Sanggunian concerned may, for a justifiable reason or cause, extend the time of
payment of such taxes, fees, or charges without surcharges or penalties, but only
for a period not exceeding six (6) months.
d. Unless otherwise provided in this Code, the tax period of all local taxes, fees and
charges shall be the fiscal year.
Unless otherwise provided in Local Government Code, the tax period of all local taxes,
fees and charges shall be the calendar year. Such taxes, fees and charges may be paid
in quarterly installments.
Page 26 of 30
Unless otherwise provided in Local Government Code, all local taxes, fees, and charges
shall accrue on the first (1st) day of January of each year.
However, new taxes, fees or charges, or changes in the rates thereof, shall accrue on
the first (1st) day of the quarter next following the effectivity of the ordinance
imposing such new levies or rates.
Unless otherwise provided in Local Government Code, all local taxes, fees, and charges
shall be paid within the first twenty (20) days of January or of each subsequent
quarter, as the case may be.
10. The Sanggunian concerned may, for a justifiable reason or cause, extend the time of
payment of such taxes, fees, or charges without surcharges or penalties, but only for
a period not exceeding:
a. two (2) months. c. one year.
b. six (6) months. d. two yea
PREFERENTIAL TAXATION
1. (Senior Citizens) Who of the following shall not qualify as senior citizen?
a. Resident Filipino citizen, 60 years old
b. Filipino citizen with dual citizenship, 60 years old, 6 months residency in the
Philippines
c. Resident alien, 65 years old
2. (Senior Citizen/PWD) A senior citizen/PWD shall be exempt from the following taxes
except:
a. income tax if the returnable income of a Senior Citizen is in the nature of
compensation income and he qualifies as a minimum wage earner.
b. income tax if his taxable income does not exceed P250,000 during the year.
c. Value-added tax.
d. Donor’s tax.
The monthly utilization of water and electricity by the Senior Citizen supplied by
public utilities will be subject to a 5% discount.
1) Provided, That the individual meters for the foregoing utilities are registered
in the name of the senior citizen residing therein:
2) Provided, further, That the monthly consumption does not exceed one hundred
kilowatt hours (100 kWh) of electricity and thirty cubic meters (30 m3) of water:
3) Provided, furthermore, That the privilege is granted per household regardless of
the number of senior citizens residing therein.
Senior
citizens and PWDs shall not exempt from the following taxes:
1) 1)20% final withholding tax on certain passive income
2)7.5% final withholding tax on interest from a depository bank under EFCDS
3)10% final withholding on dividends, share in the net income, etc.
4)Capital gains tax from sale of shares of stock not traded in the stock
exchange
5) 6% capital gains tax on presumed capital gain on sale of real property
classified as capital asset
6) VAT or other Percentage Taxes, if he is self-employed or engaged in business
or practice of profession
7) Donor’s Tax
8) Estate Tax
9) Excise Tax on certain goods
10) Documentary Stamp Tax
3. (Senior Citizen/PWD) In the purchase of goods and services which have promotional
discount, the senior citizen or PWD can avail of:
a. the promotional discount or the senior citizen/PWD discount, whichever is:
higher.
b. the promotional discount or the senior citizen/PWD discount, whichever is:
lower.
c. the promotional discount only.
d. both the promotional discount and the senior citizen/PWD discount.
4. (Senior Citizen) A Company that hires senior citizen shall be allowed subject to
certain conditions:
a. Ten percent (10%) of the total amount paid as salaries and wages to senior
citizens as additional deduction.
b. Fifteen percent (15%) of the total amount paid as salaries and wages to senior
c. Twenty-five percent (25%) of the total amount paid as salaries and wages to
senior citizens as additional deduction.
d. Thirty percent (30%) of the total amount paid as salaries and wages to senior
Page 27 of 30
Conditions for the allowance of additional deduction:

a. The employment shall have to continue for a period of at least six (6) months
b. The annual taxable income of the senior citizen does not exceed the poverty
level
5. (Senior Citizen/PWD) An establishment that grants 20% discount on sale of goods and
services to senior citizens of PWD shall deduct from the gross income:
a. only the actual amount of the discount granted or a sales discount not less
than the statutory rate, whichever is higher, based on the gross selling
price, net of VAT.
b. only the actual amount of the discount granted or a sales discount not less
than the statutory rate, whichever is lower, based on the gross selling price,
net of VAT.
c. only the actual amount of the discount granted or a sales discount not less
than the statutory rate, whichever is higher, based on the gross selling
price, net of VAT.
d. only the actual amount of the discount granted or a sales discount more than
the statutory rate, whichever is higher, based on the gross selling price,
gross of VAT.
6. (Person With Disability) First statement: In the purchase of goods and services which
are on promotional discount, persons with disability can avail of the establishment’s
offered discount or the 20% discount, whichever is higher and more favorable.
Second statement: In cases where the person with disability is also a senior citizen
entitled to a 20% discount under his valid senior citizen identification card, the
person with disability shall use either his PWD ID Card of Senior Citizen Card to
avail of the 20% discount.
7. (Person With Disability) A Company that hires a PWD shall be allowed subject to
certain conditions:
a. Ten percent (10%) of the total amount paid as salaries and wages to senior
b. Fifteen percent (15%) of the total amount paid as salaries and wages to senior
c. Twenty-five percent (25%) of the total amount paid as salaries and wages to
senior citizens as additional deduction.
d. Thirty percent (30%) of the total amount paid as salaries and wages to senior
Conditions:
a. That such entities present proof as certified by the Department of Labor and
Employment that disabled persons are under their employ:
b. The disabled employee is accredited with the Department of Labor and
Employment and the Department of Health as to his disability, skills and
qualifications.
8. (PEZA-Registered Enterprises) The JD Company is a PEZA-registered manufacturer
entitled to Income Tax Holiday (ITH) incentive for CY 2018. It is the company’s
fourth year of operations.
The following information pertain to the CY 2018 activities of the company:

Registered Unregistered
activities activities
Gross sales P121,700,000 P10,425,000
Cost of sales 103,400,000 7,297,500
Other income (net gain of disposal of office PPE) 550,500
Operating expenses of P9,890,100 (use 90%-10%
allocation between registered and unregistered
activities
Creditable withholding taxes (CWTs) from the first three (3) quarters amounted to
P98,000 (including P10,000 CWTs dated 2019) while CWTs for the fourth quarter totaled
P33,600 (excluding CWTs not in the name of JD Company)
Question 1 – How much is the 2% Minimum Corporate Income Tax (MCIT)?
a. P439,560 c. P62,550
JD Corporation will be subject to MCIT starting 2019. It registered in 2014, count 4

years starting 2015 which is the year following its registration.
Question 2 – How much is the 30% Regular Corporate Income Tax (RCIT)?
a. P1,103,400 c. Zero
Page 28 of 30
Unregistered
activities
Less: Operating expenses (10% x P9,890,100) 989,010
Operating income 2,138,490
Add: Other income 550,500
Taxable net income 2,688,990
Rate 30%
Regular Corporate Income Tax (RCIT) P 806,697
Question 3 – How much is the income tax still due?
a. P685,097 c. Zero
Regular Corporate Income Tax (RCIT) P 806,697
Less: Creditable withholding taxes, first 3 quarters (98,000 – 10,000) (88,000)
Creditable withholding taxes, fourth quarter (33,600)
Income tax still due P 685,097
Question 4 – Assuming the company is entitled to the 5% gross income tax (GIT), how
much is the tax due?
a. P915,000 c. Zero
Registered Unregistered
activities activities
Gross sales P121,700,000 P10,425,000
Less: Cost of sales 103,400,000 7,297,500
Gross income 18,300,000 3,127,500
Less: Operating expenses - 989,010
Operating income - 2,138,490
Add: Other income (net gain of disposal of office
PPE) 550,500
Gross income/Taxable net income 18,300,000 2,688,990
Rate 5% 30%
Tax due P 915,000 P 806,697
Question 5 – Using the information in question no. 4, determine the income tax still
due to the BIR?
a. P1,721,697 c. P1,234,097
Total income tax due (P915,000 + 806,697) P1,721,697
Less: Share of local government (2/5 x 915,000) 366,000
Tax due to BIR [P806,697 + (3/5 x 915,000)] 1,355,697
Less: Creditable withholding taxes, first 3 quarters ( 88,000)
Creditable withholding taxes, fourth quarter ( 33,600)
Income tax still due P1,234,097
9. (BMBE) One of the following is not qualified to register as Barangay Micro Business
Enterprise (BMBE).
a. Bakery with total assets not exceeding P3,000,000
b. Motor shop with total assets not exceeding P3,000,000
c. A CPA practitioner with total assets not exceeding P3,000,000
d. Farm producing agricultural products with total assets not exceeding
P3,000,000
BMBE refers to any business entity or enterprise engaged in the production,
processing or manufacturing of products or commodities, including agro-processing,
trading and services, whose total assets including those arising from loans but
exclusive of the land on which the particular business entity's office, plant and
equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00).
“Services" shall exclude those rendered by any one, who is duly licensed by the
government after having passed a government licensure examination, in connection
with the exercise of one's profession.
10. (BMBE) BMBEs shall be exempt from:

a. Income tax.
b. SSS contribution.
c. Philhealth contribution.
The BMBEs shall be exempt from the coverage of the Minimum Wage Law: Provided, That
all employees covered under the Act shall be entitled to the same benefits given to
any regular employee such as social security and healthcare benefits.
Page 29 of 30
11. Which of the following is not among the incentives of a registered Barangay Micro
Business Enterprise (BMBE)?
a. Exemption from income tax for income arising from the operations of the
enterprise.
b. Reduction of or exemption from local taxes, fees and charges
c. Exemption from the coverage of the Minimum Wage Law
d. Exemption from SSS, Philhealth and Pag-IBIG contributions
The following are incentives given to BMBEs:

1) Exemption from Taxes and Fees
2) Exemption from the Coverage of the Minimum Wage Law.
3) Credit Delivery
4) Technology Transfer, Production and Management Training, and Marketing
Assistance
5) BMBE Development Fund
6) Trade and Investment Promotion
7) One-Stop Business Registration Center
8) Information Dissemination
12. In computing the P3,000,000 threshold for BMBE, which of the following is not
included?
a. Cash in bank arising from loans
b. Equipment used in entity’s business
c. Land where the business entity's office is situated
BMBE refers to any business entity or enterprise engaged in the production,
processing or manufacturing of products or commodities, including agro-processing,
trading and services, whose total assets including those arising from loans but
exclusive of the land on which the particular business entity's office, plant and
equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00).
13. Which of the following is not a relief from double taxation?
a. Tax credit
b. Allowance of deduction for foreign taxes
c. Tax treaties
d. Not reporting income or transactions in foreign countries
The taxpayer must secure a ruling from the Bureau of Internal Revenue (BIR) through
the International Tax Affairs Division (ITAD) that he may avail himself of
preferential rates under existing tax treaties.
THOT: “When seeking God’s best for us becomes our focus – contentment, joy and peace replace
anxiety.” -Tamthewise
PRAYER: Lord we offer all our labor for Your greater glory alone. May You grant special
favor to the hard work our CPA Licensure examinees put into their review. Help
them remember the things we taught them. Please keep them composed during the
examinations. WE pray for our very fair examinations. Amen
Page 30 of 30

TAX Summary Lecture (15 May 2021)

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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

TAXATION A. Tamayo  C. Lim  G. Caiga  K. Manuel  E. Buen

3. (Principles of Taxation) A fundamental rule in taxation is that, the property of one

5. (Principles of Taxation) The least source of our tax laws.

7. (Principles of Taxation) Public money or property may be appropriated:

No public money or property shall be appropriated, applied, paid or employed,

9. (Principles of Taxation) In case of ambiguity, tax laws shall be interpreted:

a. Both I and II c. I only

If the protest is denied, in whole or in part, by the Commissioner’s duly authorized

No request for reinvestigation shall be allowed in administrative appeal and only

It must be emphasized, however, that in case of inaction on protested assessment within

Second statement: The modification, change or amendment to any return, statement of

Basic personal exemption (lower) P 40,000

Is the deduction for premium payment made by Juancho proper?

Gross sales, third quarter P1,500,000

Gross sale (7,000,000 – 3,000,000) P4,000,000

30. How much is the taxable income of the partnership?

Gross sales P 10,000,000

31. How much is the income tax liability of the partnership?

Taxable income P5,583,000

Taxable income of the partnership P5,583,000

Gross sales P10,000,000

In computing for “Gross Philippine Billings” of international air carriers, there

Freight and cargo fees (cargo originating from the Philippines in a

Freight and cargo fees (cargo originating from the Philippines in a

When would the loss of P250,000 be deductible?

Question 2 – How much is the income tax due?

Gross sales/receipts P 2,500,000

42. Can she avail of the 8% income tax rate?

The following cannot avail of the 8% income tax rate option:

43. How much is her total taxable income?

Total taxable income P2,464,500

45. How much is the out VAT, if any?

Gross sales P3,000,000

a. Both statements are correct

52. (Income Tax) Which of the following statements is incorrect?

c. Verification of compliance with withholding tax laws and regulations

Second statement: The campaign contribution is not taxable to OtsoDiretso.

Unutilized or excess campaign funds, net of the candidate’s campaign expenditures,

a.Sell during the IPO because he will pay lesser tax.

Ratio = 100,000 shares/1,000,000 shares 10%

c. transfer for insufficient consideration.

a. Only I is correct c. Both I and II are correct

Conjugal partnership Absolute community of

Exclusive Common Total

a. I only c. Both I and II

Your audit disclosed the following information:

Sales, accrual basis P10,350,000.00

Question 2 – How much is output tax?

Amount of cash received P10,890,000.00

Cost of sales P7,050,000.00

Total operating expenses, accrual basis P1,725,000.00

Question 4 - What is the input tax during the year?

Sales, accrual basis P10,350,000

a. All of the above c. II and III only

90. Would the sale qualify under installment plan?

97 to 99 (Business Taxes) A domestic common carrier with Certificate of Public Convenience

Gross receipts P3,000,000

DOCUMENTARY STAMP TAXES

2. Documentary stamp tax is:

DST is in nature of an excise tax levied on the exercise by person of certain

3. Except as provided by rules and regulations promulgated by the Secretary of Finance,

4. Which of the following is not an effect of failure to stamp taxable documents?