Professional Documents
Culture Documents
18
PREFERENTIAL TAXATION
REX B. BANGGAWAN, CPA, MBA
PREFERENTIAL TAXATION
REX B. BANGGAWAN, CPA MBA
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a. P 60; P 948 c. P 180; P 720
b. P 180; P 828 d. P 60; P 912
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2. A senior citizen ordered to purchase a cellphone with invoice price of P33,600. Compute the senior citizen discount
and the amount to be billed?
a. P 0; P 33,600 c. P 6,000; P 24,000
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b. P 0; P 30,000 d. P 6,720; P 26,880
3. Juan Cruz, a non-VAT registered senior citizen and owner of St. Peter Drugstore, had the following sales during the
first quarter of 2019:
Sales
Cost of sales
Gross income
Interest income from deposit
R P 500,000
140,000
P 360,000
2,000
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Salaries of senior citizen employee 20,000
Salaries of PWD employees 20,000
Taxes and other expenses 50,000
Net income P 302,000
a. P 0 c. P 15,000
b. P 60 d. P 15,060
b. P 262,000 d. P 272,000
BMBE LAW
1. Mr. Juan established a meat shop business in Batac City by infusing his P2,000,000 land value to the business. He
borrowed additional P2,000,000 from the bank for a P1,500,000 for equipment and working capital. Mr. Juan reported
total sales of P 500,000 out of which it collected P480,000. Juan reported a net income of P 280,000 inclusive of P
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Which is correct?
a. The business is a BMBE exempt from final tax.
b. The business is a BMBE exempt only from regular income tax.
c. The business is not a BMBE subject to income tax and business tax.
d. The business is not a BMBE subject to business tax only.
(074) 665 6774 0916 840 0661 support@reocpareview.ph MAY 2021 CPA REVIEW SEASON
Page 2 of 7 | TAX Handouts No. 18
2. Assuming Juan registered as a BMBE, compute the percentage tax in the foregoing problem.
a. P 0 c. P 15,000
b. P 14,400 d. P 15,150
3. Assuming Batac City did not impose a lower rate for BMBEs, compute the local business tax.
a. P 0 c. P 8,800
b. P 4,400 d. P 8,850
4. Assuming Juan registered as a BMBE, compute the annual real property tax.
a. P 0 c. P 35,000
b. P 20,000 d. P 40,000
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Query: What is the community tax of Mr. Juan? What if Mr. Juan is a corporation?
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5. A BMBE-registered enterprise had the following in the second quarter:
Registered activities Unregistered activities
Sales P 400,000 P 200,000
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Cost of sales 150,000 80,000
Gross income P 250,000 P 120,000
Expenses 50,000 20,000
Net income P 200,000 P 100,000
1. A newly registered BOI corporate enterprise had the following data during the year:
2. Robotech, Inc. is a BOI-registered pioneer enterprise whose registered activity is the manufacturing of flying robot
spare parts. In 2016, ABC Company registered its manufacturing business with a P100M projected annual revenue
to the BOI. In 2017, Robotech Industries posted a P105M revenue and P30M profits.
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a. No request for adjustment in projected revenue was made
b. Prior request for adjustment of projected revenue up to P140M was made
3. If P42M sales were made to Robotech’s sister company Chorvatech, Inc.
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4. If Robotech, Inc. also accepted an offer from a client seeking consultancy services where it earned P30M
revenue and P18M in profits.
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3. Haiku Manufacturing is registered with the BOI as an expansion enterprise. Haiku posted P10M in profits and P50M in
total sales. Haiku’s expansion ITH base figure is P20M. Haiku is subject to 30% corporate income tax rate.
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c. $ 12,000,000 $13,000,000
d. $1,500,000 $1,800,000
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8. Which is qualified for a bonus year incentive?
Annual $ Earnings Annual $ Savings
a. $200,000 $250,000
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b. $600,000 ($300,000)
c. $ 0 $600,000
d. $490,000 $ 0
9. A non-pioneer BOI-registered enterprise which started commercial operations on June 30, 2015, has the following
quarterly data in 2019.
Domestic sales
1st Quarter
P 2,000,000
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2nd Quarter
P 2,500,000
3rd Quarter
P 2,000,000
4th Quarter
P 2,400,000
Export sales 2,000,000 3,000,000 2,500,000 2,400,000
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Cost of sales 2,200,000 2,500,000 2,300,000 2,300,000
Gross profit P 1,800,000 P 3,000,000 P 2,200,000 P 2,500,000
Expenses 1,500,000 1,200,000 1,400,000 1,200,000
Net income P 300,000 P 1,800,000 P 1,200,000 P 1,300,000
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1st Qtr. 2019 2nd Qtr. 2019 3rd Qtr. 2019 4th Qtr. 2019 1st Qtr. 2020
VAT due
Income tax due
Local business
tax
Real property tax
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Questions:
1. Mr. Pacalab is employed with Loogy Instruments, Inc., an ecozone locator. Mr. Pacalab is
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a. Subject to regular income tax under the NIRC
b. Exempt from community tax under the LGC
c. Subject to 5% income tax on compensation
d. All of these
4. The following relates to the income and expense of ABC Corporation, a PEZA registered manufacturing enterprise:
Direct export sales P 5,000,000
Sales to export traders 2,000,000
Domestic sales 3,000,000
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Required:
1. Compute the following during ITH period:
a. Gross income tax : _____________
b. VAT due during the year : _____________
c. Regular income tax : _____________
2. Compute the following during GIT Period:
a. Gross income tax : _____________
b. VAT due during the year : _____________
c. Regular income tax : _____________
5. A non-pioneer PEZA-registered enterprise which started commercial operations on June 30, 2013, has the following
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quarterly data in 2017.
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Sales P 4,000,000 P 5,500,000 P 4,500,000 P 4,800,000
Cost of sales 2,200,000 2,500,000 2,300,000 2,300,000
Gross profit P 1,800,000 P 3,000,000 P 2,200,000 P 2,500,000
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Expenses 1,500,000 1,200,000 1,400,000 1,200,000
Net income P 300,000 P 1,800,000 P 1,200,000 P 1,300,000
VAT due
Income tax due
1st Quarter 2nd Quarter
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Compute the following assuming it opted to the gross income tax option:
3rd Quarter 4th Quarter
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Real property tax
Local business tax
u Tax exemption
u Tax credit
u Reciprocity provision
u Tax treaty
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Questions:
1. A Vietnamese citizen who is residing in the USA made an investment in the stocks of a domestic corporation in the
Philippines. The USA and Vietnam are both treaty partners of the Philippines. The US-RP treaty provides for cross-
border tax of 5% to be imposed by the host country while the RP-Vietnam treaty provides of exemption of dividends.
The domestic corporation shall withhold what final tax rate from the dividend income?
a. 0% c. 10%
b. 5% d. 25%
2. A corporation incorporated according to the laws of Taiwan entered into a financing agreement with a domestic
corporation where the corporation shall be paid 12% in annual interest. Under the NIRC, interest on these loans are
subject to 20% final tax. The RP-Taiwan treaty provides for a 10% preferential rate. Which of the following is a
required to claim tax treaty relief?
a. Tax treaty relief application c. Tax Residency Certificate
b. A TTRA ruling from the BIR ITAD d. All of these
3. An American citizen residing in Afghanistan contracted a domestic enterprise for the latter’s use of the former’s
intellectual property. The arrangement calls for the payment of royalty. The US-RP treaty provides for exemption of
royalty by non-residents. Afghanistan is not a treaty partner of the Philippines.
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The royalty income shall be subject to tax at
a. 0% c. 20%
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b. 10% d. 25%
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