QUIZ NO.

2
CORPORATE INCOME TAX
(Regular and Minimum Corporate Income Tax,
Passive Income Tax and Capital Gains Tax on Corporations)

MULTIPLE CHOICES -
1. For the purpose of income taxation, which of the following is not considered as
a corporation?
a. General Professional Partnership
b. Business Partnership
c. Unregistered Partnership
d. Joint Stock Companies

2. Which of the following is subject to income tax?

a. Social Security System (SSS)
b. Philippine Health Insurance Corporation (PHIC)
c. Local Water Districts
d. Philippine Amusement and Gaming Corporation (PAGCOR)

3. One of the following is taxed on gross income

a. domestic corporation
b. resident foreign corporation
c. non-profit cemetery
d. non-resident foreign corporation

4. Which of the following statements is wrong on corporation?

a. Domestic corporations are taxable in the Philippines on income derived
from Japan and Philippine sources.
b. Resident foreign corporations are taxable in the Philippines on Inocme
earned in the United States
c. Non-resident foreign corporations are taxable in the Philippines on income
derived from sources in the Philippines only.
d. Domestic corporations are taxable in the Philippines on income earned from
business operation in the United States.

5. If the gross income from unrelated activity exceeds 50% of the total gross
income derived by any private educational institution, the rate shall be 30% based
on the entire taxable income. This principle is known as
a. constructive receipt
b. tax benefit rule
c. end result doctrine
d. predominance test

6. One of the following is exempt from income tax

a. Proprietary educational institutions
b. Private cemeteries
c. Government educational institutions
d. Mutual savings bank

7. Which of the following statement is false? International carriers are

a. subject to income tax on income derived from sources within the
Philippines
b. subject to an income tax based on preferential rate of 2.5% of gross
Philippine billings.
c. exempt from income tax on the basis of reciprocity such that its home
country grants income tax exemption to Philippine carriers.
d. not taxable in the Philippines even if they are engaged in business in the
Philippines

8. The taxable base for tax purposes of international carrier doing business in the
Philippine is (October 2010 CPA Board Exam)
 a. Gross Philippine Billings
b. Gross Philippine Billings minus deductible expenses
c. Regular rates of 30% of its net taxable income.
d. Allocation of income from sources within and without the Philippines, as
well as expenses.

9. The minimum corporate income tax (MCIT) is based on –

a. 2% of gross income c. 5% of gross income
b. 10% of gross income d. 15% of gross income

10. The imposition of minimum corporate income tax shall not be suspended whenever
the corporation suffers losses due to
a. Prolonged labor disputes c. Legitimate business reverses
b. Force Majeure d. Mismanagement

STRAIGHT PROBLEMS - Show your solutions in good form.

PROBLEM 1 -
Nasaktan Incorporated, commenced its business in 2000. The following data were
taken from its records:
2021 2022
Sales 1,700,000 2,300,000
Cost of Sales 1,050,000 1,425,000
Operating Expenses 615,000 480,000
Dividends from a domestic company 35,000

Total asset of the company (except land) = P70,000,000

REQUIRED: Compute for the income tax payable in 2021 and 2022.

PROBLEM 2 -
Walang Patutunguhan Medical Centre, a stock corporation, is a non-profit hospital
established in 2012. In 2022, it had the following condensed data:
Gross Income from medical services 10,000,000
Gross Rent Income 12,500,000
Interest Income on Bank Deposits 2,500,000
Total expenses of operations (as hospitals) 10,200,000
Total expenses on rental properties 2,900,000

REQUIRED:
Compute the income tax on Walang Patutunguhan Medical Centre.

PROBLEM 3 –
Lalayo Corporation, a domestic corporation, had the following cumulative data as at
the end of each of the first three quarters, and end of its eighth taxable year:

FIRST SECOND THIRD YEAR

Gross profit from sales 500,000 700,000 850,000 990,000
Operating Expenses 200,000 280,000 340,000 396,000

REQUIRED:
1. Compute the income tax due at the end the first three quarters.
2. Compute the income tax payable at the end of the eighth year.

PROBLEM 4 –
Minahal Inc. has the following records of income and expenses in 2022:
 Gross Income, net of 1% withholding tax P1,435,500
Expenses 756,000
Rent Income, net of 5% withholding tax 136,800
Expenses on rent 34,600
Dividend from domestic corporation 25,000
Royalty 80,000
Interest from bank deposit with PNB, gross of tax 15,000

REQUIRED:
1. Compute for the corporate income payable.
2. Compute for the total final income tax paid.

PROBLEM 5 –
Bawal na Pag-ibig Corporation, a 10-year old corporation engaged in business in the
Philippines and abroad, has the following data in 2022:

Gross Income, Philippines 97,500,000

Expenses, Philippines 75,000,000
Gross Income, Japan 77,000,000
Expenses, Japan 63,000,000
Interest on Bank Deposit, Philippines 25,000
Royalties, Philippines 40,000

REQUIRED: Compute the income tax due assuming the corporation is –

1. A domestic corporation
2. A resident international sea carrier
3. A non-resident lessor of aircraft.
4. A non-resident cinematographic film owner.

PROBLEM 6 –
Itinago Corporation, which started with its operations in 2010, has the following
quarterly records in 2022:

FIRST SECOND THIRD FOURTH

QUARTER QUARTER QUARTER QUARTER
Gross Profit 500,000 850,000 800,000 770,000
Expenses 400,000 777,000 640,000 575,000
Dividend – domestic company 15,000 15,000 20,000 20,000
Interest – peso bank deposit 3,000 5,000 3,750 2,250
Income tax Withheld 5,000 7,000 8,000 6,750
Rent Income(net of 5% withholding tax) 38,000 38,000 42,750 42,750
ADDITIONAL INFORMATION:
The company had an excess payment of P12,500 in 2018 from which it had decided to
claim tax credit on the excess.

REQUIRED:
1. Compute the income tax for each quarter.
2. Compute to total taxes paid in each quarter.

PROBLEM 7 -
After 2 years of operation, Binitawan Corp., a domestic corporation reported the
following income and expenses:

3rd year 4th year 5th year 6th year

Sales P1,000,000 P2,500,000 P4,000,000 P5,000,000
Cost of sales 600,000 1,200,000 2,400,000 2,700,000
Operating expenses 300,000 1,300,000 1,400,000 1,500,000
Royalty income (net) 80,000 160,000 120,000 40,000
Int. Inc on Bank dep,(net)20,000 32,000 16,000 24,000
Dividend income (Domestic)50,000 60,000 70,000 80,000
Rent income 200,000 300,000 100,000 50,000
Quarterly tax paid 10,000 20,000 30,000 40,000

Required: Compute for the following:

1. Income tax payable (still due)
2. Final taxes.