PROBLEMS

Problem 1: (Shares of stocks not listed in the stock exchange)

Case 1: Par value

 Par value – PV/P200 x P1.50 or fractional part thereof

Mr. Uy sold in 20x9 his unlisted shares of stocks for P200,000. The 1,000 shares were acquired at par value P100.

Required:
1. Compute the capital gains tax
2. Compute the DST

Selling price 200,000

C ost (100,000)
Gain 100,000

Net capital gain 100,000

Rate 15%
Capital gains tax 15,000 (Seller is liable if no agreement)

DST Par value X P1.5

P200

100,000 x P1.5
P200

DST 750 (buyer is liable if no agreement)

Case 2: No Par value

 No Par value – 50% of the DST paid upon the original issue of stocks

Mr. Uy sold in 20x9 his unlisted shares of stock for P200,000. The no par 1,000 shares were subscribed and paid at
P100,000. The DST paid on subscription is P1,000.

Required:
1. Compute the capital gains tax
2. Compute the DST
Selling price 200,000
Cost (100,000)
Gain 100,000

Net capital gain 100,000

Rate 15%
Capital gains tax 15,000 (Seller is liable if no agreement)

DST No Par value X P2

P200

100,000 X P2
P200

DST 1,000 DST on subscription

DST - DST on subscription 1,000

Rate 50%
DST payable 500 (buyer is liable if no agreement)

Problem 2: (Sale of real property classified as capital or ordinary asset)

Mr. X, a resident citizen, sold a house and lot classified as capital asset:
Other Information:
Selling price P5,000,000
Zonal value of land 3,000,000
Assessed value – land 2,000,000
Assessed value – house 3,000,000

Required:
1. Compute the capital gains tax
2. Compute the DST

Gross selling price 5,000,000

Zonal value of land 3,000,000
Zonal (house) 3,000,000 (copy from assessor)
Assessed value - land 2,000,000
Assessed value - house 3,000,000

Summary (get the highest and multiply by 6%)

GSP 5,000,000
Zonal value 6,000,000
Assessed value 5,000,000

Rates: C GT is 6% whichever is higher

DST is Higher of the GSP, ZV or AV computed at P15 for ever P1,000. Fraction
of P1,000 is equal to P15

Answer:
CGT - P360,000 (6,000,000 x 6%)
DST - P90,000 (6,000,000 x P15/P1,000)

C GT - seller is liable if no agreement

DST- buyer is liable if no agreement
Problem 3: (Donation of Real Property) (TRAIN law)

Mr. X donated a new house and lot to his son who is about to get married. The following are made available:
Zonal value of land P3,000,000
Assessed value – land 2,000,000
Assessed value – house 3,000,000

Required:
1. Compute the donor’s tax
2. Compute the DST

Solution:
Zonal value of land 3,000,000
Zonal (house) 3,000,000 (C opy from Assessor)
Assessed value - land 2,000,000
Assessed value - house 3,000,000

Summary:
Zonal value 6,000,000
Assessed value 5,000,000

Higher: Gross gift (Zonal value) 6,000,000

Less: (250,000)
5,750,000
Rate 6%
Donor's tax 345,000

Gross gift (Zonal value) 6,000,000

Rate 15/1,000 (1.5% if no fraction)
Documentary stamp tax 90,000

Problem 4: (Subscription of shares of stocks)

 P2/P200 or 1%

A, B, C, D and E established XYZ Corporation. The Securities and Exchange Commission (SEC) issued the Certificate
of Registration on March 31, 20x9. XYZ Corp. has authorized capital stock of P1,000,000 divided into 10,000 shares
of stocks. 25% of the capital stock has been subscribed and paid by the stockholders.

Required:
1. Compute the DST Due.

Solution

Subscribed capital stock 250,000

Rate 2/200
DST Pay able 2,500

Problem 5: (All Debt Instrument)

 P1.50/P200
 Note: If the debt is one year or less, pro-rate the DST using 365 days.

A. ABC Corporation borrowed P1,000,000 from the bank in July 1, 20x8.

B. Mr. X obtained a loan from a corporation in the amount of P2,000,000.
C. XYZ Corporation has made advances to affiliate ABC Corporation of P10,000,000

Required: Compute the documentary stamp tax.

A P3,781 (P1M x 1.5/200 x 184/365)

 B P15,000 (P2M x 1.5/200)
C P75,000 (P10M x 1.5/200)

Problem 6: (Mortgages)

 Amount does not exceed P5,000 –P40

 On each P5,000 or fraction thereof in excess of P5,000, an additional tax of P20

A. Mortgage of P1,000,000
B. Mortgage P12,000
C. Mortgage P5,000

Required: Compute the documentary stamp tax

1 Mortage 1,000,000

DST 1,000,000
(5,000) 40
995,000
Divided by 5,000
Multiply by 20 3,980
DST 4,020

2 Mortage 12,000

DST 12,000
(5,000) 40
7,000
Divided by 5,000
Multiply by 20 28
DST 68

3 Mortage 5,000

DST 5,000
(5,000) 40
-
Divided by 5,000
Multiply by 20 -
DST 40

JAI-ALAI AND HORSE RACE TICKETS, LOTTO AND OTHER

AUTHORIZED NUMBER GAMES
 Jai-alai and horse race tickets, lotto and other authorized number games

On each jai-alai, horse race ticket, lotto or other authorized number games, there shall be collected a documentary
tax as follows:

Ticket cost DST Rate

≤P1.00 P0.20
>P1.00 P0.20/P1.00 or fractional thereof

REVIEW QUESTIONS

Problem 1: (Jai-alai) AAA sold the following tickets during the month:
Price Ticket sold Total receipts
Straight bet P73.00 1,200 P87,000
Double bet P80.00 1,500 120,000
Trifecta P40.00 1,100 48,000

Required: Compute the DST.

Straight bet (73 x P0.20) x 1,200 17,520

Double bet (80 x P0.20 ) x 1,500 24,000
Trifecta bet (40 x P0.20) x 1,100 8,800
Total documentary statmp tax 50,320

EXCISE TAX ON COSMETIC SURGERY

Cosmetic Surgery – It refers to a type of plastic surgery that aims
to improve a person’s appearance, through invasive cosmetic
procedures, surgeries, and body enhancements directed solely on
improving, altering, or enhancing the person’s appearance and do
not necessarily promote the proper functions of the body or prevent or
treat illness or disease.

Invasive Cosmetic Surgery – It refers to a cosmetic surgery that is

carried out by entering the body through the skin or through a body
cavity or anatomical opening, but with the smallest damage possible
to these structures.

Note: Only invasive cosmetic surgery is subject to excise tax. Non-invasive procedures are exempt.

Invasive Cosmetic Surgery Non-invasive Cosmetic Surgery

Facelift Air Dissector
Necklift Laser/Light Treatment
Injectables

A tax of 5% on gross receipts derived from the performance of services, net of excise tax and VAT, on invasive
cosmetic procedure, surgeries, and body enhancement 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

Invasive Cosmetic Procedure shall refer to a cosmetic surgery that is

carried out by entering the body through the skin or through a body cavity or
anatomical opening, but with the smallest damage possible to these structures.
Invasive Cosmetic Procedures shall include, but not be limited to the following:
1. Liposuction
2. Mammoplasty
3. Breastlift
4. Buccal Fat Removal
5. Buttocks Augmentation
 6. Chin Augmentation
7. Facelift/Necklift
8. Thread Lift
9. Embedded Protein Threads
10. Hair Restoration/Transplantation
11. Eyelid Surgery
12. Vaginal Plastic Surgery
13. Abdominoplasty or Tummy Tuck
14. Auto Grafting
15. Rhinoplasty/Alar Trimming
16. Otoplasty

Non-Invasive Cosmetic Procedure shall refer to a conservative treatment that

does not require incision into the body or the removal of tissue, or when no break
in the skin is created and there is no contact with mucosa, or skin break, or internal
body cavity beyond a natural or artificial body orifice. Non- Invasive Cosmetic
Procedures shall include, but not be limited to the following:
1. Acupuncture Rejuvenation Therapy
2. Air Dissector
3. Botulinum Toxin Injection/ Treatment
4. Collagen Induction Therapy
5. Dermal Fillers (Crosslinked and non-crosslinked)
6. Non-surgical facelifting and skin tightening using radio frequency,
ultrasound, infrared
7. Carbon dioxide (CO2) fractional laser resurfacing
8. Laser and light treatments
9. Body Treatments and Contouring Procedures
10. Cleanings and Facials
11. Peelings (Face and Body)
12. Injectables and Weight Management Treatment (e.g. botox)

Exemptions
 1. Procedures necessary to ameliorate
 1.1 a deformity arising from or directly related to a congenital or developmental defect or abnormality
 1.2 a personal injury resulting from an accident or trauma, or
 1.3 disfiguring disease, tumor, virus or infection.
 2. Cases and treatments covered by the National Health Insurance Program
 3. Non-Invasive Cosmetic Procedures are excluded from the coverage.

Timing of ET for CPs

 10 days following the close of the month (Section 5.2, RR No. 2-2019)
 The tax return (BIR Form 2200-C)

Compliance Requirements
 1. Submission of Monthly Summary of Cosmetic Procedures Performed
 2. Separate OR may be issued if professional performed both invasive or non-invasive cosmetic procedure

REVIEW QUESTIONS

Problem 1: Dr. Bec Bec Belo conducted several operational procedures and treatment on Betay Zander, an interest
sensation idol.

The following amounts were agreed before any VAT and Excise Taxes:
Orthognathic surgery P800,000
Breastlift 200,000
Cataract surgery 100,000
Liposuction 140,000
Ultraviolet skin tanning 60,000
Teeth brace for underbites correction 40,000

The orthognathic surgery was intended to correct her facial deformity. The skin tanning procedure was intended to
give her the hot “Morena” looks.
Required: Compute the excise tax

Breastlift 200,000
Liposuction 140,000
Total 340,000
Multiply by: 5%
Total excise tax 17,000

Problem 2: Ms. A decided to undergo a liposuction procedure and sought the services of Doc V. charges Ms. A
P50,000 for the services rendered.

Scenario 1: The procedure is conducted in a clinic outside a hospital

Required:
1. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
2. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of both VAT and excise tax.

Case 1: The P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Add: 5% Excise tax (P44,642.85 x 5%) 2,232.14
12% VAT (P44,642.86 + P2,232.14) x 12% 5,625.00
Total amount to be collected from Miss A 52,500.00

Doc V shall record the following in his book:

Cash 52,500.00
Excise tax expense 2,232.14
Excise tax payable 2,232.14
Output VAT 5,625.00
Service income 46,875.00

Note: The service income is inclusive of the excise tax

Case 2: The P50,000 fee is agreed inclusive of both VAT and excise tax
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Divide by: 105%
Gross receipts, net of VAT and excise tax 42,517.01
Add: 5% Excise tax (P42,517.01 x 5%) 2,125.85
12% VAT (P42,517 + P2,125.85) x 12% 5,357.14
Total amount to be collected from Miss A 50,000.00

Doc V shall record the following in his book:

Cash 50,000.00
Excise tax expense 2,125.85
Excise tax payable 2,125.85
Output VAT 5,357.14
Service income 44,642.86

Scenario 2: The procedure is conducted in a hospital.

Assume that the liposuction procedure is done by Doc V, an individual practitioner operating a clinic inside a hospital.
Assume that the hospital charged P20,000 for hospital supplies, and the use of the facilities and operating room aside
from the P50,000 professional fee of Doc V which is agreed to be inclusive of VAT but exclusive of excise tax.

Required:
1. Journal entry of the hospital.
2. Journal entry of Doc V.
 The total billing for Miss A shall be computed as follows:

Hospital fees:
Billings by hospital 20,000.00
Add: 5% excise tax 20,000 5% 1,000.00
Total 21,000.00

Professional fees:
Gross receipts 50,000.00 112% 44,642.86
Excise tax 44,642.86 5% 2,232.14
12% VAT 46,875.00 12% 5,625.00
Total charges of Doc V 52,500.00

Total amount to be collected from Miss A 73,500.00

Remember that hospital services are exempt from VAT, except those rendered by professionals.

The hospital shall record the following in its books:

Cash 21,000.00
Excise tax expense 1,000.00
Excise tax payable 1,000.00
Service income - non-VAT 21,000.00

Cash 52,500.00
Payable to Doc V 45,803.58
Excise tax payable for Doc V 2,232.14
Expanded withholding tax payable (44,642.86 x 10%) 4,464.28

The amount to be released from Doc V is computed as:

Doc V shall record the same in his books:

Accounts receivable 45,803.58

Excise tax expense 2,232.14
Prepaid tax expense 4,464.28
Service fee 46,875.00
Output VAT 5,625.00