FINAL EXAM IN BUSINESS and TRANSFER TAXATION

True/False Questions (30%)

Indicate whether the statement is true or false. Choose A if True, B if False.
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1. The total VAT sales invoice amount is 110% of the actual sales.
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2. The maximum creditable VAT for the period is 70% of the total Input VAT.

3. Cash sales of VAT-registered to non-VAT customers is subject to 10% Output VAT.

4. Credit purchases from VAT-registered supplier is a source of creditable Input VAT.

5. In the books of a VAT-registered person, the Input VAT is an asset account.

6. The taxable base of 12% for the sales of goods is the gross selling price.

7. Importations of goods are subject to VAT, but export sales are exempt from 12% VAT.

8. Consigned goods of a VAT-registered person if remained unsold for 90 days are deemed sold and are subject
to 12% VAT.

9. The VAT on sale of real property shall be reported on installment basis, if the initial payment is 25% or less
of the total selling price.

10. The taxable gross receipts include unrestricted cash advance and receivable.

11. Transitional Input VAT of 2% of the beginning inventory of each year is allowed as tax credit of the VAT
system.

12. A non-VAT business paying Output VAT is allowed to claim Input VAT.

13. The gross receipts of common carriers from transport of passengers by land are taxed at 3%.

14. International carriers are subject to 3% tax on its gross receipts within and outside the Philippines.

15. There are franchise holders whose gross receipts are subject to 3% even if not registered as VAT.

16. All insurance premium collected by a life insurance company is subject to 5% gross receipts tax.

17. Boxing exhibition for world championships held outside is subject to Philippines business tax of 15%.

18. The most applicable method of determining the percentage tax of taxis and jeepneys would be the actual gross
receipts.

19. A franchise is a privilege to serve the public acquired by special grants from private corporations.

20. CNN is required to pay 10% percentage tax from messages originating from the Philippines by telephone or
telegraph.

21. Gross receipts of all amusement places are subject to 10% percentage tax.

22. Cost of winning tickets is not deductible from horse race winnings

23. Percentage tax is a transfer tax.

24. Generally, percentage tax is 10% of sales.

 25. Buyers from non-VAT business are required to withhold the percentage tax on their purchases from such
business.

26. The percentage tax on sale of shares of stocks outside stock exchange is 1/2 of 1%.
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27. Boxing exhibitions for World and Oriental Championships are exempted from amusement tax if one of the
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contenders is a Filipino and a Filipino Citizen promotes such exhibitions.

28. The gross receipt tax of financial institutions is to be paid to the BIR within 10 days following the end of the
taxable month.

29. A gift intended to take effect at death, or after death, or under which the donor reserved the income or the
right to designate the persons who should enjoy the income shall be subject to donor's tax and not estate tax.

30. Proceeds of life insurance received by irrevocable beneficiary are subject to estate tax.

Multiple Choice Questions (Theory & Problem Solving) - 70%

Identify the choice that best completes the statement or answers the question. Choose E if no answer is given among the
choices.

31. Donor's tax is a

a. Personal tax c. Excise tax
b. Property tax d. Business tax
32. Which one of the following is not an essential element of taxable gift?
a. Capacity of the donor c. Delivery and acceptance of the gift
b. Intent to make a gift d. Capacity of the donee
33. Donor's tax is applicable on gifts made by
a. natural person c. both a and b
b. juridical person d. government
34. Which of the following is subject to donor's tax?
a. Transfer of property for less than adequate and full financial consideration
b. Cancellation of debt in exchange for services rendered
c. All the properties of a husband given as a gift to the wife during marriage
d. Share of one of the heirs which was renounced in favor of another heir
35. Which of the following is not subject to Philippine donor's tax?
a. Donation mortis causa
b. Donation which will take upon the birth of the donee
c. A creditor who, out of his affection, cancelled the debt of the debtor
d. A parcel of land in USA donated by nonresident Filipino to a foreigner.
36. Which of the following needs to be in writing?
a. A parcel of land donated to the accredited charitable institution
b. P2,000 jewelry given as gift to stranger
c. P1,000 toy car given as birthday to a son
d. P4,000 credit written off in favor of debtor in the name of friendship.
37. Which of the following need not be in writing?
a. a parcel of land donated to a stranger
b. P2,000 jewerly given as a gift to mother-in-law
c. P50,000 old car given as birthday gift to a son
d. P5,000 credit written off by the creditor in favor of a debtor who is a friend
38. Which of the following is exempted from donor's tax?
a. Gross gift not exceeding P2,000,000 c. Net gift exceedingP250,000
b. Net gift exceeding P2,000,000 d. Net gift not exceeding P250,000
39. Which of the following is not subject to donor's tax?
a. Transfer of property for less than adequate and full financial consideration
b. Cancellation of debt for personal consideration
 c. Contribution to a political candidate
d. Gift to a stranger
40. Which of the following donations requires to be written in a public instrument?
a. Donation between spouse c. Donation of real property
b. Donation of intangile property d. Donation of personal property
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41. Which of the following statement is not correct?

a. Donation by a nonresident alien to the Philippine government is exempt from donor's tax.
b. A donation made by the husband without the consent of the wife is valid in cases of
moderate donations for charity or on the occasion of family rejoicing or distress.
c. Cash gifts shall be valued at the fair market value or face value of the currency whichever
is lower.
d. The first P250,000 of the net gift for every year is not subject to donor's tax.
42. Which of the following is subject to donor's tax?
a. Donation mortis causa
b. Transfer of inheritance to his successors
c. Gift to a stranger
d. Donation by a suitor which was not accepted by the beneficiary.
43. Donor's tax return for gifts made to a stranger is to be filed and paid
a. 30 days after the gift is made
b. 30 days after the close of the month when the gift was made
c. 30 days after the close of the quarter when the gift was made
d. On or before the 25th of the month following the close of the month when the gift was
made
44. When the property is donated, the basis of the donor's tax is
a. The cost of acquisition if acquired by purchase or the fair market value at acquisition date,
whichever is higher
b. The agreed value by the donor and the donee
c. The fair market value at the time of donation
d. Any of the above
45. This refers to a tax imposed on the transfer without consideration of property between two or more persons
who are living at the transfer is made.
a. Gift tax c. Donee's tax
b. Donor's tax d. None of the above
46. What is the value, for tax purposes, of a gift made in contemplation of death?
a. At fair market value as of the date of death
b. At fair market value as of the date of the gift
c. At fair market value as of the date of acceptance of the gift by the donee
d. At an arbitrary value given by the donor
47. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation
of indebtedness may amount to a
a. Gift c. Donation inter vivos
b. Capital contribution d. Payment of income
48. What would be the amount of gross gift for personal property donated which was acquired 3 years ago at
P500,000; with FMV at date of donation equal to P200,000 but with unpaid mortgage of P50,000 assumed by
the donee?
a. P150,000 c. P450,000
b. P200,000 d. P500,000
49. A resident alien donated his old car located in Baguio to his Filipino friend. The fair market value of the car at
date of donation is P400,000. It has unpaid mortgage of P50,000 which is agreed to be paid by the donor. The
amount of donor's tax would be
a. P24,000 c. P6,000
b. P9,000 d. P12,000
 50. During a taxable year, Jollibee Corporation donated the P10,000,000 to Bahay Kalinga, an accredited NGO.
The deed of donation states that 1/3 of the donated amount shall be used for administration purposes of Bahay
Kalinga.

The taxable net gift would be

a. P585,000 c. P10,000,000
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b. P9,750,000 d. P - 0 -
51. Which of the following is not a characteristic of VAT?

a. Tax on gross sales c. Tax on sellers

b. Tax on consumption d. Tax on buyers
52. The following item is not part of the taxable base for VAT purpoeses, except,

a. Discount that are expressly indicated in the invoice.

b. Sales return with proper credit or refund was made during the month.
c. Sales allowance with proper credit or refund was made during the month.
d. Cost of sales of the taxable goods sold.
53. Which of the sale of real property is subject to VAT?

a. Low-cost housing with sale price of P375,000 per unit.

b. Socialized housing with sale prce of P150,000 per unit.
c. Residential lot valued at P2,000,000.
d. Residential house and lot value at P2,500,000.
54. Which of the following is not requisite for the VAT taxability of a service transaction in the Philippines?

a. Services are performed in the Philippines or any part of the worl as long as the business is
registered in the Philippines.
b. Services are performed in the Philippines only.
c. Services are not be VAT-exempt under the law, or international agreement.
d. Services are rendered fro valuable consideration actually or constructively received.
55. Which of the following item is not included as part of the taxable base of imported goods?

a. Value used by the Bereau of Customs (BOC) in determining tariff and custom duties
b. Custom duties and community tax of the importer
c. Custom duties and excise taxes
d. Tax to be paid by the importer prior to the release of the goods from the BOC
56. Which of the following is not a source of creditable Input VAT?

a. Purchases and payments of services to other VAT-registered business

b. Goods received through donation
c. Importation of Goods (for business use or for sale locally)
d. Transitional and Presumptive Input VAT
57. Which is not a penalty of a non-VAT person who issue a VAT invoice/official receipt?

a. 50% surcharge and the tax due

b. Payment of VAT and the applicable percentage tax
c. Without Input VAT benefit
d. Purchaser shall be allowed to recognize an input tax credit if the invoice/official receipt
contains the required information,
58. Statement 1: Inventory of VAT-registered business, used for business operation is taxable with 10% Output
VAT.
Statement 2: Importation of goods by non-VAT person for personal use is subject to 10% VAT.

a. Only statement 1 is correct c. Both statements are correct

b. Only statement 2 is correct d. Both statements are incorrect
59. Statement 1: The taxable base for supply of services is the gross receipts.
 Statement 2: Taxable base on services does not include receivables.

a. Only statement 1 is correct c. Both statements are correct

b. Only statement 2 is correct d. Both statements are incorrect
60. Which of the following statements is not true about percentage tax?
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a. It is a business tax. c. It is an advalorem tax.

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b. It is an excise tax. d. It is a progressive tax.

61. Which of the following business is not subject to percentage tax?
a. Carriers of passengers
b. Life insurance companies
c. Carriers of cargoes
d. Sale of shares of stock in the local stock exchange
62. Which of the following overseas call is subject to percentage tax?
a. Transmitted by the City Government of Baguio
b. Transmitted by Health Center Massage Clinic of Baguio
c. Transmitted by US embassy in the Philippines
d. Transmitted by a news services bureau
63. Admission fees received by cockpits and race tracks are subject to
a. tax on paid admission c. tax on winning
b. tax on gross receipts d. tax on amusement
64. Which of the following items is not percentage tax-exempt?
a. Business with annual gross sales of P100,000 and below
b. Overseas call made by the Philippine government
c. Overseas messages transmitted by any embassy and consular offices of a foreign
government.
d. Gross receipts of operators of auto calesa.
65. Statement 1: A sale of 33% of outstanding shares of stock in an initial public offering of shares of stock is
subject to a 2% other percentage tax.
Statement 2: In case of financial leasing, the taxable gross receipts excludes recovery of principal.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false
66. The percentage tax rate on shares of stock traded in the stock exchange is
a. 6/10 of 1% of sales.
b. 1 1/2% of capital gain from the transaction.
c. 1% of sales which is more than 25%of the outstanding stock issued.
d. 2% of sales which is more than 25% but not more than 33 1/3% of the outstanding stocks
issued.
67. Which of the following gross receipts may be subject to business tax?
a. Transport of passengers by land uing animal-drawn , two-wheeled vehicles.
b. Transport of passengers by water using bancas.
c. Compensation income of an individual taxpayer.
d. Compensation paid to professionals for services rendered.
68. Which of the following is subject to 4% percentage tax?
a. Life insurance policy premiums collected by a resident foreign insurance company.
b. Life insurance policy premiums collected by agent of resident foreign insurance company.
c. Insurance policy premium collected by agent of nonresident foreign insurance company.
d. Premium on insurance policy taken directly by the owner of the property insured
69. Which of the following statements is correct?
a. The "Gross Philippine Billing" includes total amount of gross revenue including
noncontinuous and interrupted flight.
b. A VAT-registered radio and TV broadcasting company is subject to a percentage tax of
3% if its total gross receipts during the year is P1,500,000 and below.
c. The gross receipts of gas and water franchise grantees are subject to a 3% percentage tax.
d. Overseas dispatch, message or conversation is subject to a percentage tax of 10%.
 70. Which of the following is not correct?
a. The percentage tax on stock transaction inside stock exchange is to be remitted within 5
banking days from the date withheld by the broker.
b. The percentage tax on winnings is to remitted within 20 days from the date withheld.
c. The percentage tax on IPO is to be remitted within 30 days from the date of listing in the
local stock exchange.
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d. The percentage tax on overseas dispatch is to be remitted within 20 days from the date
withheld.
71. The percentage tax return is to be filed and paid within
a. 25 days from date of the transactions.
b. 30 days from date of the transactions.
c. 25 days after the end of each taxable quarter.
d. 30 days after the close of each taxable month.
72. Manglapus invested P500,000 in the shares of stock of Cayoto Company. Cayoto's shares of stocks are listed
and traded in the local stock exchange. Manglapus sold the share for P600,000 through the local stock
exchange. How much is the amount of percentage tax?
a. None, because the sale was traded in the local stock exchange
b. 6/10 of 1% multiplied by the selling price of P600,000
c. 1/2 of 1% multiplied by the gain of P100,000
d. 5% multified by the gain of P100,000
73. How much is the tax due on gross receipts of a small business with P500,000 gross receipts for the year, but
opted to be registered as a VAT business?
a. P20,000 c. P50,000
b. P15,000 d. P60,000
74. Dok Ling sells "pasalubong' products along R. Magsaysay Blvd. His average monthly sales is P40,000 with
gross profit rate of 25%. How much is his total percentage tax in the year?
a. P 3,600
b. P12,000
c. P14,400
d. P48,000
75. Malou Guina has an annual average gross sales of P60,000 in her small sari-sari store. Her percentage tax
would be
a. Exempt c. P1,800
b. P180 d. P6,000
76. A percentage tax-registered business issued a sales invoice amounting to P28,000 inclusive of 12% VAT.
How much should be the business tax payable pertaining to this transaction?
a. P3,000 c. P28,750
b. P3,750 d. P840
77. Mrs. Diana Zubiri is the operator of Price Hotel and Restaurant. The restaurant is open to the public. The food
and soft drinks served to the hotel guest come also from the restaurant. The following data are for the first
quarter of 2023.

Gross receipts - room rentals P154,000

Gross receipts - foods/softdrinks served to hotel guests 46,000
Gross receipts - foods/softdrinks from other customer 360,000

The business taxes due and payable on the gross receipts of the first quarter of 2023 is
a. P16,800 c. P56,000
b. P67,200 d. P60,000
78. Aga Lana, a jeepney operator with 5 units operating in Cebu City reported P15,000 as gross receipts for the
quarter. His monthly percentage tax is
a. P150 c. P300
b. P180 d. P450
79. Monica Vera operates a domestic carrier in Cavite City with the following receipts during the first qurater of
2023:
 Ten (10) taxi units P24,000
Five (5) bus units with 60-seater capacity 40,000
Fifteen (15) two wheeled calezas carried by horses 50,000

The common carrier tax due is

a. P1,920 c. P2,580
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b. P2,280 d. P3,420
80. Abante Craft is a common carrier by sea. during the 1st quarter its gross receipts includes the following:

Transport of passenger P1,000,000

Transport of goods and cargo 6,000,000

How much is the total business tax?

a. P210,000 c. P840,000
b. P750,000 d. P700,000
81. Ligtas Carrier, a common carrier by land, provides the following average gross annual receipts:

Transport of passengers P10,000,000

Transport of cargoes 6,000,000
Sale of goods during travels 1,000,000

How much is the estimated average business tax per quarter?

a. P285,000 c. P127,500
b. P250,000 d. P510,000
82. African International Carrier reported the following gross receipts from tickets sold to passengers:

Outside for trip - Manila to USA P1,000,000

Outside for trip - USA to Manila 1,200,000
In the Philippines for trip - USA to Manila 1,500,000
In the Philippines for trip - Manila to USA 1,100,000

The Philippine business tax to be paid is

a. P63,000 c. P144,000
b. P78,000 d. P0
83. Alpha Hydro is delivering water to its customers as franchise holder for such business. During the period, its
gross receipts amounted to P1,000,000.

The percentage of Alpha Hydro would be

a. P50,000 c. P20,000
b. P30,000 d. P10,000
84. Alta Vista Company operates a water and radio broadcasting franchise provides the following in 2008:

Gross receipts
Water franchise P2,000,000
Radio franchise 10,000,000
Operating expenses 5,000,000
Net income P7,000,000

The total percentage tax on franchise is

a. P360,000 c. P210,000
b. P340,000 d. P240,000
85. Mr. Korecto uses telephone only for nonbusiness communications. His statement of account provided by
Bayantel during the month shows the follwoing total calls:

From Philippines to Canada P5,000

Local calls 2,000

How much is Korecto's total business tax from overseas and local calls?
 a. P500 c. P840
b. P700 d. P740
86. The City of baguio called US President Bush and President Arroyo to attend the Panagbenga 2008 incurring
telephone expenses amounting to P10,000 and P2,000, respectively.
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How much is the percentage tax to be paid by the City of Baguio?

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a. Exempt c. P1,000
b. P1,200 d. P1,240
87. Talk & Say remitted P75,000 as percentage tax from overseas calls billed to customers. How much was the
total collections from customers?
a. P700,000 c. P800,000
b. P750,000 d. P825,000
88. Pro-life Insurance collected P100,000 from Ramanac Amin, a Muslim national residing in Saudi Arabia. How
much is the percentage tax to be remitted by Pro-life to the BIR?
a. P10,000 c. P3,000
b. P5,000 d. P - 0 -
89. Lipad insured his airplane to a foreign company for a total premium of P200,000. The insurance covers a
policy of P2,000,000. If Lipad got the assistance of an authorized agent, how much is his percentage tax
obligation?
a. P - 0 - c. P10,000
b. P6,000 d. P8,000
90. A cockpit owned by Sabungero reported the following receipts and expenses for the period:

Gross receipts from cockpit entrance fee P500,000

Gross receipts from restaurant inside cockpit compound:
- Food sales 200,000
- Beverage sales 100,000
Business expenses 50,000

The total amusement tax is:

a. P24,000 c. P96,000
b. P80,000 d. P144,000
91. Boom-boom, a Filipino, promoted a boxing match featuring Bautista (Filipino). Gross receipts related to the
boxing match are as follows:

Admission fee P2,000,000

Radio and TV coverage 1,000,000

The amusement tax if the boxing match is a World Boxing Championship would be
a. P300,000 c. P90,000
b. P220,000 d. Exempt
92. After buying 100 tickets for a total amounts of P200,000, Sugarol won P1,000,000 in horseracing winnings.
How much is the percentage tax on his winnings?
a. P100,000 c. P80,000
b. P99,800 d. P29,940
93. Dina Suerte has the following winnings (losses) during the year:

Cockfighting P 90,000
Philippine Charity Sweepstakes 2,000,000
Lotto (PAGCOR) 1,000,000
Horseracing winnings 100,000
Cost of tickets, P1,000 belongs to winning tickets (30,000)
Billiard losses (400,000)
Casino losses (300,000)

The business tax on winning is

 a. P9,900 c. P249,000
b. P18,900 d. P319,000
94. Macmod sold 2,000 shares of his investment in stock of eCare. The sale is made through the Philippine Stock
Exchange (PSE) for P1,000,000. How much is the percentage tax if Macmod acquired the shares of stock for
P800,000.
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a. P25,000 c. P1,000
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b. P15,000 d. P 6,000

E 95. Jac Que sold 1,000 shares directly to the buyer for P1,000,000. How much is the percentage tax if Jac Que
acquired the shares of stock for P600,000?
a. P25,000 c. P2,000
b. P5,000 d. P60,000

A 96. A Family corporation has 750,000 of its par common stocks outstanding. Its Board of Directors decided to
issue for the first time for public ownership 400,000 of its unissued common stocks. The 400,000 shares were
sold for P12 per share.

The percentage tax is

a. P48,000 c. P95,000
b. P80,000 d. P160,000

D 97. Security Corporation, a closely held corporation, offered for the first time its own shares of stock at par of
P20 per share. The corporation's authorized capital stock is P5,000,000, with a P2,000,000 outstanding capital
stock. The gross receipts at its initial public offering was P600,000.

The percentage tax for the initail public offering was

a. P6,000 c. P18,000
b. P12,000 d. P24,000

B 98. In January 2008, Interesado Bank reported a net income of P500,000, net of debts securities trading loss of
P100,000. In February 2008, the bank reported the following gross receipts:

Interest income with maturity more than 5 year P400,000

Leasehold income 300,000

How much is the gross receipts tax on the collections of Interesado for Fbruary 2008?
a. P30,000 c. P19,000
b. P25,000 d. P14,000

D 99. In December 2022, Taguan Bank reported a net income of P900,000, net of trading loss of P50,000. In
January 2023, Taguan reported the following gross receipts:

Interest income with maturity less than 5 years P600,000

Royalty income 300,000
Gain from sale of derivatives 200,000

How much is the gross receipts tax on the collections of Taguan for January 2023?
a. P45,000 c. P55,000
b. P52,500 d. P65,000
100. Lapu-lapu City was supplied with P200,000 water from a franchise holder. How much would be the check
issued by the City Government of Dadiangas as net payment for the account?
a. P198,000 c. P194,000
b. P196,000 d. P192,000