TAXATION
Individual and Corporate
Income Taxpayers
Definition of Terms:
(A) The term 'person' means an individual, a trust, estate
or corporation.
(B) The term 'corporation' shall include partnerships, no
matter how created or organized, joint-stock companies,
joint accounts (cuentas en participacion), association, or
insurance companies, but does not include general
professional partnerships and a joint venture or consortium
formed for the purpose of undertaking construction
projects or engaging in petroleum, coal, geothermal and
other energy operations pursuant to an operating
consortium agreement under a service contract with the
Government. 'General professional partnerships' are
partnerships formed by persons for the sole purpose of
exercising their common profession, no part of the income
of which is derived from engaging in any trade or business.
(C) The term 'domestic,' when applied to a corporation,
means created or organized in the Philippines or under its
laws.
(D) The term 'foreign,' when applied to a corporation,
means a corporation which is not domestic.
(E) The term 'nonresident citizen' means:
(1) A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his physical
presence abroad with a definite intention to reside therein.
(2) A citizen of the Philippines who leaves the Philippines
during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis.
(3) A citizen of the Philippines who works and derives
income from abroad and whose employment thereat
requires him to be physically present abroad most of the
time during the taxable year.
(4) A citizen who has been previously considered as
nonresident citizen and who arrives in the Philippines at
any time during the taxable year to reside permanently in
the Philippines shall likewise be treated as a nonresident
citizen for the taxable year in which he arrives in the
Philippines with respect to his income derived from sources
abroad until the date of his arrival in the Philippines.
(5) The taxpayer shall submit proof to the Commissioner
to show his intention of leaving the Philippines to reside
permanently abroad or to return to and reside in the
Philippines as the case may be for purpose of this
Section.(F) The term 'resident alien' means an individual
whose residence is within the Philippines and who is not a
citizen thereof.
(G) The term 'nonresident alien' means an individual
whose residence is not within the Philippines and who is
not a citizen thereof.
(H) The term 'resident foreign corporation' applies to a
foreign corporation engaged in trade or business within the
Philippines.
ATTY. MACMOD, C.P.A.
2022
(I) The term 'nonresident foreign corporation'applies
to a foreign corporation not engaged in trade or business
within the Philippines.
(J) The term 'fiduciary' means a guardian, trustee,
executor, administrator, receiver, conservator or any
person acting in any fiduciary capacity for any person.
(K) The term 'withholding agent' means any person
required to deduct and withhold any tax under the
provisions of Section 57.
(L) The term 'shares of stock' shall include shares of
stock of a corporation, warrants and/or options to
purchase shares of stock, as well as units of participation
in a partnership (except general professional
partnerships), joint stock companies, joint accounts, joint
ventures taxable as corporations, associations and
recreation or amusement clubs (such as golf, polo or
similar clubs), and mutual fund certificates.
(M) The term 'shareholder' shall include holders of a
share/s of stock, warrant/s and/or option/s to purchase
shares of stock of a corporation, as well as a holder of a
unit of participation in a partnership (except general
professional partnerships) in a joint stock company, a joint
account, a taxable joint venture, a member of an
association, recreation or amusement club (such as golf,
polo or similar clubs) and a holder of a mutual fund
certificate, a member in an association, joint-stock
company, or insurance company.
(N) The term 'taxpayer' means any person subject to tax
imposed by this Title.
(O) The terms 'including' and 'includes', when used in a
definition contained in this Title, shall not be deemed to
exclude other things otherwise within the meaning of the
term defined.
(P) The term 'taxable year' means the calendar year, or
the fiscal year ending during such calendar year, upon the
basis of which the net income is computed under this Title.
'Taxable year' includes, in the case of a return made for a
fractional part of a year under the provisions of this Title or
under rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the commissioner, the
period for which such return is made.
(Q) The term 'fiscal year' means an accounting period of
twelve (12) months ending on the last day of any month
other than December.
(R) The terms 'paid or incurred' and 'paid or accrued'
shall be construed according to the method of accounting
upon the basis of which the net income is computed under
this Title.
(S) The term 'trade or business' includes the
performance of the functions of a public office.
(T) The term 'securities' means shares of stock in a
corporation and rights to subscribe for or to receive such
shares. The term includes bonds, debentures, notes or
certificates, or other evidence or indebtedness, issued by
any corporation, including those issued by a government
or political subdivision thereof, with interest coupons or in
registered form.
(U) The term 'dealer in securities' means a merchant of
stocks or securities, whether an individual, partnership or
corporation, with an established place of business,
regularly engaged in the purchase of securities and the
resale thereof to customers; that is, one who, as a
merchant, buys securities and re-sells them to customers
with a view to the gains and profits that may be derived
therefrom.
(V) The term 'bank' means every banking institution, as
defined in Section 2 of Republic Act No. 337, as amended,
otherwise known as the General banking Act. A bank may
either be a commercial bank, a thrift bank, a development
bank, a rural bank or specialized government bank.
(W) The term 'non-bank financial intermediary'means
a financial intermediary, as defined in Section 2(D)(C) of
Republic Act No. 337, as amended, otherwise known as
the General Banking Act, authorized by the Bangko Sentral
ng Pilipinas (BSP) to perform quasi-banking activities.
(X) The term 'quasi-banking activities' means
borrowing funds from twenty (20) or more personal or
corporate lenders at any one time, through the issuance,
endorsement, or acceptance of debt instruments of any
kind other than deposits for the borrower's own account,
or through the issuance of certificates of assignment or
similar instruments, with recourse, or of repurchase
agreements for purposes of relending or purchasing
receivables and other similar obligations: Provided,
however, That commercial, industrial and other non-
financial companies, which borrow funds through any of
these means for the limited purpose of financing their own
needs or the needs of their agents or dealers, shall not be
considered as performing quasi-banking functions.
(Y) The term 'deposit substitutes' shall mean an
alternative from of obtaining funds from the public (the
term 'public' means borrowing from twenty (20) or more
individual or corporate lenders at any one time) other than
deposits, through the issuance, endorsement, or
acceptance of debt instruments for the borrowers own
account, for the purpose of relending or purchasing of
receivables and other obligations, or financing their own
needs or the needs of their agent or dealer. These
instruments may include, but need not be limited to
bankers' acceptances, promissory notes, repurchase
agreements, including reverse repurchase agreements
entered into by and between the Bangko Sentral ng
Pilipinas (BSP) and any authorized agent bank, certificates
of assignment or participation and similar instruments with
recourse: Provided, however, That debt instruments issued
for interbank call loans with maturity of not more than five
(5) days to cover deficiency in reserves against deposit
liabilities, including those between or among banks and
quasi-banks, shall not be considered as deposit substitute
debt instruments.
(Z) The term 'ordinary income' includes any gain from
the sale or exchange of property which is not a capital
asset or property described in Section 39(A)(1). Any gain
from the sale or exchange of property which is treated or
considered, under other provisions of this Title, as
'ordinary income' shall be treated as gain from the sale or
exchange of property which is not a capital asset as
defined in Section 39(A)(1). The term 'ordinary loss'
includes any loss from the sale or exchange of property
which is not a capital asset. Any loss from the sale or
exchange of property which is treated or considered, under
other provisions of this Title, as 'ordinary loss' shall be
treated as loss from the sale or exchange of property
which is not a capital asset.
(AA) The term 'rank and file employees' shall mean all
employees who are holding neither managerial nor
supervisory position as defined under existing provisions of
the Labor Code of the Philippines, as amended.
(BB) The term 'mutual fund company' shall mean an
open-end and close-end investment company as defined
under the Investment Company Act.
(CC) The term 'trade, business or profession' shall not
include performance of services by the taxpayer as an
employee.
(DD) The term 'regional or area headquarters' shall
mean a branch established in the Philippines by
multinational companies and which headquarters do not
earn or derive income from the Philippines and which act
as supervisory, communications and coordinating center
for their affiliates, subsidiaries, or branches in the Asia-
Pacific Region and other foreign markets.
(EE) The term 'regional operating headquarters'shall
mean a branch established in the Philippines by
multinational companies which are engaged in any of the
following services: general administration and planning;
business planning and coordination; sourcing and
procurement of raw materials and components; corporate
finance advisory services; marketing control and sales
promotion; training and personnel management; logistic
services; research and development services and product
development; technical support and maintenance; data
processing and communications; and business
development.
(FF) The term 'long-term deposit or investment
certificates' shall refer to certificate of time deposit or
investment in the form of savings, common or individual
trust funds, deposit substitutes, investment management
accounts and other investments with a maturity period of
not less than five (5) years, the form of which shall be
prescribed by the Bangko Sentral ng Pilipinas (BSP) and
issued by banks only (not by nonbank financial
intermediaries and finance companies) to individuals in
denominations of Ten thousand pesos (P10,000) and other
denominations as may be prescribed by the BSP.
 Summary of New Income Tax Rules
for Individual and Corporate Income Taxpayers

TAXPAYER TAXBASE TAXRATE/(S)

1. Resident Citizens a. Taxable 0% - 35%
income, World
b. Passive income 20%; 15%
5% - 12%
20%; 10%; 6
- 8 - 10% PASSIVE RC / RA / NRA – ETB NRA NOT
c. Special Income 6%; 15% INCOME NRC ETB
Interest Income
2. Non-Resident a. Taxable same 1-a from Phil. bank
Citizens/ income, Phils. deposits
Resident Aliens b. Passive income same 1-b
c. Special income same 1-c Yields from
deposit
3. Non-Resident a. Taxable same 1-a substitutes
Alien engaged income, Phils.
in trade or b. Passive income same 1-b but Royalty Income
business without 6 – 8
10% & 15% Awards / Prizes
c. Special Income same 1-c ( over P10T )

4. Non-Resident a. Gross income, 25% final tax Winnings (

Alien not engaged Phils (including except from
passive income) PC80 )
in trade or b. Special income same 1-c
business Dividend
income from
5. Special Alien domestic corp
Employees:
a. Multinational a. Gross 15% final tax Distributive
Corporations compensation share of a
income, Phils. partner – NIAT
b. Offshore b. Other gross 25% final tax Of a taxable
banking units income, Phils. partnership
including passive
income
c. Petroleum c. Special income same 1-c Format of computation of Taxable income:
Contractors/ a. Pure business/professional income earner
subcontractors
Gross business income Pxxx
Note: Less: Deductions allowed xxx
1. The following are non-resident citizen: Taxable Net income Pxxx
a. One who establishes to the satisfaction of the Income tax due Pxxx
commissioner the fact of his physical presence Less: Creditable withholding tax at source xxx
abroad with a definite intention to reside therein; Income tax payable Pxxx
b. One who leaves Philippines during the taxable year
to reside abroad; b. Mixed income earner ( compensation from employment
c. One who works and derives income from abroad and business/professional income ).
whose job there requires him to be physically
abroad most of the time (during the taxable year). Gross business income Pxxx
Gross compensation income xxx
2. A non-resident alien individual who comes to the Total xxx
Philippines and stays therein of an aggregate period of Less: Deduction allowed xxx
more than 180 days during any calendar year shall be Taxable Net income Pxxx
deemed a non-resident alien doing business in the
Philippines. Income tax due Pxxx
Rates of Income Tax on Individual Citizen and Less: Tax withheld from compensation Pxxx
Individual Resident Alien of the Philippines Creditable withholding tax at source xxx xxx
Sec.24 (A) – The tax shall be computed on taxable income Income tax payable Pxxx
in accordance with and at the rates established in the
following schedule: Simplified Summary Rules for Corporations
KINDS TAX BASE TAX RATE
Br Taxable Income Per Year Income Tax Rate Ordinary Corporations:
1 P250K and below 0% 1. Domestic Taxable Net 25%
Corporations income, World
2 Above P250K to P400K 20% of the excess over P250,000
2. Resident Foreign Taxable Net the same
3 Above P400K to P800K P30,000 + 25% of the excess over P400K Corporations income, Phils.
4 Above P800K to P2M P130,000 + 30% of the excess over P800K 3. Non-Resident Foreign Gross Income, the same
Corporations Phils.
5 Above P2M to P8M P490,000 + 32% of the excess over P2M

6 Above P8,000,000 P2,410,000 + 35% of the excess over P8M Special Corporations:
1. Private Educational Taxable Net 10%
 Institutions & Non- income, World Domestic Resident Non-resident
Stock/Non-Profit (unless Resident Special income
Hospitals Corp.) 1. Sale of shares 15% F.T.
2. Resident International Gross Billings, 2½% of stocks of a
Carriers Phils. domestic Corp.
3. Non-Resident Gross Income, 25% held as capital
Cinematographic Film Phils. assets, not thru
Owner/Lessor Local stock
4. Non-Resident Gross income 4½% exchange.
Owner/Lessor of from rentals, 2. Sale of Real 6% of the GSP SP-Cost x
Vessels leases, charter, Property in the or FMV (higher) 30%
fees, Phils. Philippines held (included in
5. Non-Resident The same (#4) 7½% as capital asset. other income)
Owner/Lessor of
Aircrafts, Machineries Passive income
and Equipment 1. Interest income from Phil.
6. Offshore Banking Interest income 10% Bank deposits 20% 20% 30%
Units from Foreign 2. Yields, monetary benefits
Currency from deposits substitutes 20% 20% 30%
transactions 3. Royalty income 20% 20% 30%
4. Intercorporate dividends Exempt Exempt 15%
IMPORTANT NOTES TO REMEMBER: 5. Interest income from
For Private Educational Institutions and Hospitals: expanded foreign currency
If their gross income from unrelated trade or business deposit 15% 15% Exempt
exceed 50% of their gross income from all sources the rule
on ordinary corporation (25% rates) shall apply. G. The following corporations are exempted from tax on
corporations:
For Resident Corporations: 1. Labor, agricultural or horticultural organization not
Subject to additional tax of 15% for every profit organized principally for profit;
remittance made to their head office abroad. (exempt if 2. Mutual savings bank not having a capital stock
registered with EPZA). represented by share, and cooperative bank
without capital stock organized and operate for
For Non-Resident Corporations: mutual purposes and without profit;
Unless, otherwise, provided a foreign corporation not 3. A beneficiary society, order or association
engaged in trade or business in the Philippines shall pay a operating for the exclusive benefit of the members
tax equal to 25% of the gross income received during the such as fraternal organization operating under the
taxable year from all sources within the Philippines such as lodge system, or a mutual and association or a
interests, rents, salaries, premium (except reinsurance nonstick corporation organized by employees
premiums), annuities, emoluments, or other fixed or providing for the payment of life, sickness,
determinable annuities. Periodical or casual gains, profits accident, or other benefits exclusively to the
and income and capital gains, except income subject to members of such society, order, or association, or
Capital gains tax. nonstick corporation or their dependents;
4. Cemetery company owned and operated
Formula for computation: exclusively for the benefits of its members;
5. Non-stock corporation or association organized and
Gross Income ( within the Philippines ) Pxxx operated exclusively for religious, charitable,
Multiplied by: Tax rate 25% scientific, athletic or cultural purposes, or for the
Income tax due Pxxx rehabilitation of veterans, no part of its net income
or asset shall belong to or inure to the benefit of
Minimum Corporate Income tax rule ( MCIT ) – beginning any member organizer, officer or any specific
January 1, 1998 corporations which are already in their 4th person;
year of operations, shall be subject to income tax of 25% 6. Business league, chamber of commerce, or board
on their taxable net income or 2% of their gross income of trade, not organized for profit and no part of the
whichever is higher. net income of which inures to the benefit of any
private stockholder or individual;
1. With tax credit benefits for the excess of the 2% MCIT 7. Civic league or organization not organize for profit
over the normal/regular income tax (Deductible vs. but operated exclusively for the promotion of social
Normal income tax in the succeeding three years). welfare;
8. A non-stock and non-profit educational institution;
2. 2% MCIT is not applicable to the following 9. Government educational institution;
corporations. 10. Farmers’ or other mutual typhoon or fire insurance
a. company, mutual ditch or irrigation company,
b. mutual or cooperative telephone company, or like
c. organization of a purely local character, the income
d. of which consists solely of assessments, dues, and
e. fees collected from members for the sole purposes
of meeting its expenses; and
3. But corporations subject to 2% MCIT may still ask for 11. Farmers’, fruit growers’ or like association
relief or exemption under the following: organized and operated as a sales agent for the
a. purpose of marketing the products of its members
b. and turning back to them the proceeds of sales,
c. less the necessary selling expenses on the basis of
the quantity of products finished by them;

F. Special and passive income for Corporations:

 “ Notwithstanding the provisions in the preceding
paragraphs, the income of whatever kind and
character of the foregoing organizations from any of
their properties, real or personal, or from any of their
activities conducted for profit regardless of the
disposition made of such income, shall be subject to
tax imposed under the Tax Code.”
QUARTERLY CORPORATE INCOME TAX RETURN
Corporation are required to file in duplicate a quarterly,
summary declaration of its gross income and deductions
on a cumulative basis. The tax so computed shall be
decreased by the amount with tax previously paid or
assessed during the preceding quarter.
Time of filing – Quarterly returns – shall be filed within 60
days following the close of each of the first three quarters.
Final returns – shall be filed on or before the 15th of the
fourth month following the closed of the taxable (fiscal or
calendar year).
Income Taxation
Multiple Choice: Choose the best possible answer.
1. One of them is not considered non-resident citizen.
a. A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention
to reside therein.
b. A citizen of the Philippines who leaves the
Philippines during the taxable year to reside
abroad, either as an immigrant or for employment
on permanent basis.
c. A citizen of the Philippines who works and derives
income from abroad and whose employment
thereat requires him to be physically present
abroad most of the time during the taxable year.
d. A citizen of the Philippines who went on a business
trip abroad and stayed therein most of the time
during the year.
2. DINA, nonresident citizen, arrived in the Philippines on
July 1, CY to reside here permanently after working as
nurse in the United States of America for many years.
Which of the following statements is correct with
respect to her classification for income tax purposes?
a. She shall be classified as nonresident citizen for
the year CY with respect to her income derived
from sources abroad from January 1, CY until the
date of her arrival in the Philippines.
b. She shall be classified as nonresident citizen for
the whole year of CY.
c. She shall be classified as resident citizen for the
whole year CY.
d. She shall be classified as neither resident nor
nonresident citizen for the year.
3. JESS, an expert American Physicist was hired by a
Philippine corporation to assist in its organization and
operation for which he had to stay in the Philippines for
an indefinite period. His coming to the Philippines was
for a definite purpose which in its nature would require
an extended stay and to that end makes his home
temporarily in the Philippines for around 300 days
during the calendar year. The American management
expert intends to leave the Philippines as soon as his
job is finished.
For income tax purposes, the American management
expert shall be classified as:
a. Resident alien.
b. Nonresident alien engaged in trade or business.
c. Nonresident alien not engaged in trade or
business.
d. Resident citizen.
4. ASSUNTA, an American singer, was engaged to sing
for one week at the Western Philippine Plaza after
which she returned to USA. For income tax purposes,
she shall be classified as:
a. Resident alien.
b. Nonresident alien engaged in trade or business.
c. Nonresident alien not engaged in trade or
business.
d. Resident citizen.
5. SITUS OF TAXATION IS WORLD/GLOBAL TAXATION?
a. Resident alien c. Nonresident alien
b. Nonresident citizen d. Resident citizen
6. It is important to know the source of income for
income tax purposes (i.e. from within and without the
Philippines) because:
a. Some individuals and corporate taxpayers are
taxed on their worldwide income while others are
taxable only upon income from sources within the
Philippines.
b. The Philippine imposes income tax only on income
from sources within.
c. Some individual taxpayers are citizens while others
are aliens.
d. Export sales are not subject to income tax.
7. Which of the following taxpayers whose personal
exemption is subject to the law on reciprocity under
the Tax Code?
a. Nonresident citizen with respect to his income
derived from outside the Philippines.
b. Nonresident alien who shall come to the Philippines
and stay herein for an aggregate period of more
than 180 days during any calendar year.
c. Resident alien deriving income from a foreign
country.
d. Nonresident alien not engaged in trade or business
in the Philippines whose country allows personal
exemption to Filipinos who are not residing but are
deriving income from said country.
8. One of the following is not a head of the family for
income tax purposes:
a. Unmarried taxpayer supporting his mother, 50
years old.
b. Married but legally separated taxpayer supporting
a legitimate child, 6 years old.
c. Legally separated taxpayer supporting a brother,
27 years old, physically incapacitated.
d. Widower supporting his mother in law, 55 years
old.
9. One of the following is not qualified as dependent for
income tax purposes.
a. Illegitimate child, 16 years old, living in the United
States due to his studies.
b. Legitimate child, 21 years old, with a monthly
income of P2,000, living with the taxpayer in
Manila.
c. Senior citizen, not related to the taxpayer, with a
yearly income of P80,000, living with and taken of
by the taxpayer.
d. Brother, 24 years old, incapable of self support
because of physical disability.
10. Which of the following will change the status of the
taxpayer?
a. Marriage of a dependent within the taxable year.
b. Dependent becoming 21 years old during the year.
c. Dependent gaining employment during the year.
d. Marriage of taxpayer himself during the year.
11. Filipino as well as alien employees of regional or area b. Winnings from Philippine Charity Sweepstakes are
headquarters established in the Philippines by exempt from income tax if not over P10,000.
multinational companies shall be subject to final tax of c. Royalties on books, literary works and musical
15% on the gross business income in the Philippines. composition are subject to 10% non-creditable
withholding tax.
Generally, nonresident aliens not engaged in trade or d. A prize of P10,000 is subject to 20% final tax.
business are subject to 25% creditable withholding tax
on their gross income in the Philippines. 19. Cash and/or property dividends received from
a. True, True c. True, False Domestic Corporation by a nonresident alien not
b. False, False d. False, True engaged in trade or business are subject to 25% final
tax.
12. “Global system of income taxation” means:
a. All types of income except those subject to final Share of an individual in the distributed net income
tax are aggregated to arrive at gross income. after tax of a general professional partnership is
b. Separate graduated rates are imposed on different subject to final tax.
types of income. a. True, True c. False, False
c. Capital gains are exclude in determining gross b. True, False d. False, True
income.
d. Compensation income and business/professional 20. 1st Statement – Nonresident individual taxpayer are
income are taxed at different places in the world. also subject to 7.5% final tax on their income from
expanded foreign currency deposit.
13. Which of the following income of an individual taxpayer
is subject to final tax? 2nd Statement- There can be a 6% capital gains tax on
a. P10,000 prize in Manila won by a resident citizen. sale of a real property in USA.
b. Dividend received by a resident citizen from a a. True, True c. False, False
resident corporation. b. True, False d. False, True
c. Shares in the net income of a general professional
partnership received by a resident alien. 21. Which is covered by gross income taxation?
d. Dividend received by a non-resident alien from a a. Resident alien
domestic corporation. b. Nonresident alien engaged in trade or business
without reciprocity law.
14. Interest received by nonresident individuals from a c. Nonresident alien not engaged in trade or
depository bank under the expanded foreign currency business.
deposit system is exempt from tax. d. Nonresident citizen

Passive income received by a resident citizen from 22. Mr. Valdez, resident Filipino taxpayer single supporting
sources outside the Philippines shall be generally three minor (illegitimate) children one of them living
subject to Section 24 (A) and not to final tax. abroad showed the following data for CY.
a. True, True c. False, False Salary from ABC Co. (net of P40,000
b. True, False d. False, True withholding tax) P350,000
Professional fee as Lawyer (net of 10%
15. Which of the following statements is incorrect? withholding tax) 450,000
a. To be subject to final tax passive income must be Expenses incurred-practice of profession
from Philippine sources. (Living expenses including tuition fees of
b. An income which is subject to final tax is excluded children 25% thereof) 80,000
from the computation of income subject to Section Other Income 150,000
24 (A).
c. Lotto winnings in foreign countries are exempt
from income taxation in the Philippines. The income tax due after tax credit if any is:
d. An income which is subject to non creditable a. P51,700 c. P43,300
withholding tax is excluded in the computation of b. P49,300 d. P94,000
income subject to Section 24 (A).
23. Based on the above problem, his total taxes due
16. Proceeds of sale of real property classified as capital assuming he will avail of the 8% final tax under TRAIN
asset are exempt from the 6% capital gains tax if used is:
to build a new principal residence within 18 months a. P126,600 c. P121,000
from the date of sale or of disposition. b. P129,000 d. P80,000

Gain from sale of real property classified as capital
asset to the Government may be taxed under Section
24 (A) at the option of the individual taxpayer.
a. True, True c. False, False
b. True, False d. False, True
17. One of the following is not a deposit substitute.
a. Baker’s acceptance.
b. Promissory notes.
c. Repurchase agreements.
d. Debt instruments issued for interbank call loans
with maturity of not more than 5 days to cover
deficiency in reserves against deposit liabilities.
18. Which of the following statements is not correct?
a. Interest income from long term deposit is exempt
from income tax.
24. Benjie sold his residential house to Ms. Papaya for
P5,000,000. Its FMV when he inherited it was
P6,000,000 although its presents FMV is P8,000,000.
The tax on the above transaction is:
a. P360,000 capital gains tax
b. P480,000 capital gains tax
c. 30% donor’s tax
d. Value added tax
25. But assuming that Benjie used ¼ of the proceeds of
the said house to buy a new principal residence 10
days after the above sale and he properly informed
BIR about it, the tax shall only be:
a. P120,000 capital gains tax
b. P240,000 capital gains tax
c. P360,000 capital gains tax
e. P480,000 capital gains tax
 20% of the other income is non-taxable while 15% of
26. Continuing, but assuming the residential house is the professional expenses is non-deductible. They have
located abroad, the capital gains tax is: 12 minor children.
a. P360,000 c. P120,000
b. P480,000 d. P0 The taxable income of Mr. is:
a. P173,000 c. P266,000
27 to 32 are based on the following data: b. P275,000 d. P323,000

Mr. Pogi, married supporting 10 minor children 7 of which 34. The taxable income of Mrs. is:
are gainfully employed had the following data for the CY: a. P371,000 c. P419,000
($1-P50). b. P357,000 d. P713,000
Philippines Abroad
Business income P1,000,000 $20,000 35. Mr. Dimple Pastrana had the following data for CY:
Professional (Exchange rate $1-P40)
income 400,000 10,000
Salaries (net of Philippines Abroad
P18,500 Salaries P165,000 $2,000
withholding Income from merchandise 450,000 6,000
Tax) 181,500 Business expenses 120,000 1,500
Business and Interest income:
professional Personal receivable 10,000
expenses 250,000 8,000 From expanded FCDS $2,500
Income tax paid On bank deposits (20%
abroad: 4,000 long-term) 25,000 3,000
Royalty income (20% from
books) 22,000 1,000
27. If Mr. Pogi is a resident citizen, his income tax due Prize won in contest 10,000
after tax credit is: Dividend income:
a. P789,000 c. P589,000 From domestic
b. P570,500 d. P415,500 corporation 7,000
28. If he is a resident alien, his income tax due after tax From resident corporation 5,000
credit, if any is: From non-resient 8,000
a. P360,580 c. P384,380 Winnings from Charity
b. P358,020 d. P276,500 sweepstakes 80,000
Shares of stocks of
29. If he is a non-resident citizen, his income tax due after domestic corp. sold to a
tax credit, if any is: buyer (cost P10,000) 30,000
a. P360,580 c. P384,380
b. P358,020 d. P276,500 He also sold a condominium unit in Manila (residential)
for P2,000,000 although its FMV is P3,000,000 but
30. If he is a non-resident alien engaged in trade or with a zonal value of P4,000,000.
business in the Philippines but without the benefit of
Reciprocity Law, the income tax due after tax credit, if The taxable income of Mr. Dimple is:
any is: a. P798,000 c. P724,000
a. P397,000 c. P405,500 b. P892,000 d. P948,000
b. P378,500 d. P276,500
36. Mr. Dimple’s total final taxes on his passive income is:
31. If he is a Non-resident alien not engaged in trade or a. P16,160 c. P15,460
business, disregarding professional & business data, b. P16,020 d. P39,660
the income tax still due is:
a. P50,000 c. P31,500 37. His total capital gain’s taxes is:
b. P18,500 d. P11,250 a. P241,000 c. P240,000
b. P251,720 d. P243,000
32. And if he is a Special Alien Employee, disregarding
professional and business data the income tax that 38. If he is a Non-resident citizen his total final tax on
should be withheld from his income is: (Before TRAIN passive income is:
Law) a. P16,020 c. P16,160
a. P18,500 c. P11,500 b. P15,460 d. P34,660
b. P30,000 d. P31,500
39. If he is a Non-resident alien not engaged in trade or
33. Mr. and Mrs. Robino, both CPA’s and residents of the business his total combined taxes on all income from
Philippines had the following data for CY: Philippines is: (excluding business income)
Salaries, Mrs. P450,000 a. P83,000 c. P324,000
Bonus (13th month pay), Mrs. 94,000 b. P241,000 d. P326,000
Income from practice of Profession,
Mr. and Mrs. (net of 10% withholding 40. Mr. de Vega, married, left Philippines in the middle of
tax) 450,000 the year on July 1, CY to go abroad and work there as
Expenses – professional practice 120,000 a contract worker for two years, the following data
Rental income (net of 5% withholding were provided as of December 31, CY: (Assume all
tax 190,000 data from abroad only)
Rental expenses 80,000 Gross Income Deductions
Other income, Mr. 80,000 January 1 to June 30 P300,000 P100,000
July 1 to December 31 P1,000,000 P125,000

His taxable income is: ($1-P50)

 a. P150,000 c. P843,000 54. If it is a resident corporation and it remitted 60% of its
b. P1,403,000 d. P200,000 net profit to its head office abroad, it total tax liability
is: (ORIGINAL DATA)
41. If, assuming he arrived from abroad on July 1, CY to a. P544,500 c. P196,000
permanently resettle in the Philippines, after working b. P571,800 d. P476,250
abroad for 2 years, his taxable income as of December
31, CY is: 55. If it is a private educational institution but P3,500,000
a. P168,000 c. P843,000 of its total gross income is from lease & restaurant
b. P1,043,000 d. P875,000 business, its income tax is:
a. P730,000 c. P150,000
42. If he did not leave Philippines at all, his taxable income b. P675,000 d. P537,500
is:
a. P168,000 c. P843,000 56. If it is a domestic corporation but its total expenses is
b. P1,043,000 d. P1,075,000 P5,800,000 (disregard original data on expenses), its
income tax is:
The Rainbow Corporation provided the following data a. P730,000 c. P120,000
for calendar year ending December 31, CY: ($1-50) b. P64,000 d. P85,000
Philippines Abroad
Gross Income P4,000,000 $40,000 57. If under # 56, but the domestic corporation is a non-
Deductions P2,500,000 $15,000 profit hospital, (disregard tax paid abroad) its income
Income tax paid 3,000 tax is:
a. P20,000 c. P10,909
43. If it is a domestic corporation, its income tax after tax b. P64,000 d. P120,000
credit is:
a. P675,000 c. P880,000 58. If the corporation is a non-stock educational institution
b. P832,000 d. P537,500 which uses all its revenues or income for educational &
charitable purpose, its income tax is:
44. If is a resident corporation, its income tax is: a. P0 c. P120,000
a. P450,000 c. P880,000 b. P730,000 d. P64,000
b. P1,280,000 d. P375,000
59. For purposes of computing the MCIT, which will not
45. If it is a non-resident corporation, its income tax is: form part of cost of goods sold for traders:
a. P1,200,000 c. P880,000 a. Invoice cost c. Freight
b. P1,280,000 d. P1,000,000 b. Import duties d. Wharfage

46. Under # 43 but it opts to claim the tax paid abroad as 60. Under # 59, but the taxpayer is a manufacturer:
deductions from gross income,its income tax is: a. Raw materials used
a. P780,000 c. P880,000 b. Direct labor and overhead
b. P832,000 d. P650,000 c. Freight and insurance
d. Import duties
47. If it is a private educational institution, its income tax
after tax credit: 61. Under # 59, but the taxpayer is a seller of services:
a. P730,000 c. P275,000 a. Salaries and supplies
b. P832,000 d. P150,000 b. Employee benefits
c. Depreciation and rental expenses
48. If it is non profit hospital, its income tax after tax d. Interest expense
credit is:
a. P730,000 c. P275,000 62. The MCIT is only effective in the 5th year following the
b. P832,000 d. P150,000 year in which the corporation commenced its business.

49. If it is a resident international carrier, its income tax Non-resident corporation are also covered by MCIT.
is: a. True, True c. False, True
a. P100,000 c. P37,000 b. False, False d. True, False
b. P10,000 d. P125,000
63. Non-resident corporations need not file any income tax
50. If it is a non-resident cinematographic film returns.
owner/lessor, its income tax is: Tax-exempt corporations are also required to file an
a. P1,000,000 c. P300,000 ITR for administrative purposes only.
b. P100,000 d. P128,000 a. True, True c. False, True
b. False, False d. True, False
51. If it is non-resident lessor of vessel, its income is:
a. P100,000 c. P300,000 64. To record MCIT, the account deferred charges MCIT is:
b. P180,000 d. P128,000 a. Debited c. Memo entry only
b. Credited d. No entry required
52. If it is a non-resident lessor of aircrafts, machineries
and equipment, its income tax is: 65. To record application of excess MCIT vs. NORMAL
a. P100,000 c. P300,000 income tax, what account is credited?
b. P180,000 d. P128,000 a. Income tax payable c. Retained earnings
b. Cash in bank d. Deferred charges MCIT
53. If it is a resident corporation but its expenses within
and without is P3,000,000, unallocated (disregard 66. To record expired portion of MCIT, what account is
original data on expenses), its income tax is: debited:
a. P600,000 c. P480,000 a. Retained earnings c. Deferred charges MCIT
b. P320,000 d. P500,000 b. Income tax payable d. Provision for income tax
67. One of the following is not accepted basic relief from Rental income (net of 5% withholding
the MCIT: tax) 190,000
a. Prolonged labor dispute Dividend Income:
b. Force majeure problems From domestic corporation 60,000
c. Legitimate business reverse From foreign corporation 50,000
d. Law suits filed by the company Winnings from charity sweepstakes 2,000,000
Capital gains from sale of domestic
68. Which is not a characteristics of corporate income tax: shares of stocks sold Directly to
a. Progressive tax c. General tax buyer 75,000
b. Direct tax d. National tax Dividend declared and paid during the
year 500,000
69. 1st Statement: Non-stock/non-profit corporations are
Retained earnings, beginning of the
tax-exempt from their income from all operations.
year (subjected to Improperly
2nd Statement: Intercorporate dividends are tax-
accumulated earnings tax last year) 1,000,000
exempt if the recipient is a foreign corporation.
Paid up capital 1,000,000
a. True, True c. False, True
b. False, False d. True, False
Note: The board of directors approved a resolution
70. Which is governed by gross income taxation. reserving P1,500,000 of its net profit for the year for
a. Domestic corporation plant expansion.
b. Resident corporation
c. Non-resident corporation The income tax due after tax credit if any is:
d. Educational institutions a. P825,000 c. P899,200
b. P815,000 d. P677,500
71. One of the following corporations cannot claim tax
credit for foreign taxes paid abroad. 78. Based on the foregoing problem, the Improperly
a. Private educational institutions accumulated earnings tax is:
b. Resident International Carriers a. P208,125 c. P113,625
c. Investment companies b. P108,125 d. P72,875
d. Domestic Hospitals
79. 2
72. 1st Statement: Foreign income tax may be treated by a
taxpayer as tax credit but not as deduction from gross 80. MEDINA corporation, a resident corporation provided
income under the new law. the following data for the current year:
Philippines USA
2nd Statement: Being a holding company is conclusive Gross income P40,000,000 P20,000,000
evidence of improper accumulation of profit. Dividends from:
a. True, True c. True, False Domestic corporation 5,000,000
b. False, False d. False, True Foreign corporation 4,000,000
Business expenses 12,000,000 8,000,000
73. The improperly accumulated earnings tax shall not
apply to the following, except: The corporation remitted to its head office the
a. Insurance companies P5,000,000 dividend income and 40% of its net profit
b. Corporations formerly registered with PEZA to its head office in USA.
c. Publicly held corporations
d. Bank and Non-bank Financial Intermediaries The corporation’s total tax liability including the tax on
the profit remitted is:
74. 1st Statement: Domestic corporation not falling a. P10,944,000 c. P15,960,000
under the definition of closely held corporations are b. P11,545,600 d. P9,440,000
considered publicly held corporations.
2nd Statement: A closely held corporation under the 81. In the foregoing problem, if it is registered with EPZA,
Tax Code and a close corporation under the its BPRT:
Corporation Code are the same. a. P10,240,000 c. P11,545,600
a. True, True c. True, False b. P 9,600,000 d. P 0
b. False, False d. False, True
82. The following data were taken from the financial
75. It is a test used in determining the reasonable needs of statement of Topnotcher Kah corporation for the
a business to justify the accumulation of earnings current year:
which will exempt the corporation from paying Philippines Abroad
Improperly accumulated earnings tax: Gross sales P950,000 P2,000,000
a. Urgency test c. Immediacy test Sales returns 25,000
b. Reasonable needs test d. Control test Cost of goods sold 425,000 300,000
Interest income from
76. The improperly accumulated earnings tax is essentially trade receivable 10,000 50,000
a: Interest income from
a. General tax c. Regulatory or Penalty tax bank deposits, Phil. 20,000
b. Property tax d. Excise tax Dividend income from
domestic corporation 15,000
77. Zaidia Corporation, a domestic corporation had the Dividend income from
following data for the current year: foreign corporation 25,000
Sales P5,000,000 Royalty income 20,000
Cost of goods sold 2,000,000 Sale of shares of stocks of
General selling and administrative domestic corp. held as
expenses 500,000 capital asset thru local
Interest income from Philippine bank stock exchange 70,000
deposit 100,000 Operating expenses 250,000 300,000
 Income from money
market placement 35,000 100,000 89. STAR Corporation, a domestic corporation, had the
Sale of real property in following data:
the Phil. not used in 5,000,000 YEAR GROSS INCOME DEDUCTIONS
business, cost P4,000,000 2011 P1,000,000 P1,200,000
30% of the operating 2012 2,000,000 1,900,000
expenses is non- 2013 3,000,000 2,950,000
deductible 2014 1,000,000 1,100,000
2015 980,000 500,000
The FMV of the real property sold was P8,000,000 at
the time of the sale. The taxable income in 2018 is:
a. P380,000 c. P100,000
Its income tax on ordinary taxable income is:
b. P0 d. P50,000
a. P640,000 c. P680,000
b. P600,000 d. P500,000
A taxpayer provided the following data for taxable year
2018:
83. Its total tax on passive income is:
Salaries P1.5M
a. P15,000 c. P4,000
(with P120,000 13th mo. Pay but net of SSS, union dues,
b. P8,000 d. P11,000
etc. amounting to P20,000).
84. Its capital gains tax is:
Income from Grocery:
a. P480,000 c. P300,000
Gross Sales P2.4M
b. P495,000 d. P60,000
Cost of Sales P1M
Operating Exp. 600,000
85. Based on the above problem, its total combined tax
Other income/Non-operating
liability if it is a resident corporation:
Income 100,000
a. P435,200 c. P403,000
b. P450,000 d. P423,420
90. The total income tax due is (TP availed of 8% GIT)
a. P320,000 c. P200,000
86. And if it is a non-resident corporation, its total
b. P313,000 d. P513,000
combined taxes is:
a. P485,450 c. P517,450
91. His Business tax due is
b. P515,200 d. P487,670
a. P75,000 OPT c. P300,000 VAT
b. P72,000 OPT d. None
87. A domestic corporation has the following data for the
year 2018 (fourth year of operation):
92. If the taxpayer did not avail of the 8% GIT, the total
Sales P5,000,000
Income tax due:
Cost of sales 1,500,000
a. P513,000 c. P580,000
Business expenses 800,000
b. P313,000 d. P589,200
Dividend from domestic corporation 50,000
Selling price of land classified as
93. His Business tax due is
capital asset(cost, P3,500,000) 4,000,000
a. P300,000 VAT c. P75,000 OPT
Interest on Philippine currency bank
b. P288,000 VAT d. P72,000 OPT
deposit 40,000
Dividend declared and paid 500,000
94. Assuming he has no salaries and he availed of the 8%
Tax paid for the first three quarters 550,000
GIT, the income tax is:
Lotto winnings 2,000,000
a. P200,000 c. P192,000
Paid up Capital 1,000,000
b. P300,000 d. P180,000
The BIR, upon investigation, found out that there is
95. Back to the original data, but his Gross Sales reached
improper accumulation of earnings.
P4M his new total taxable income is:
a. P2,500,000 c. P3,910,000
The Improperly accumulated earnings tax is:
b. P3,000,000 d. P3,000,000
a. P167,800 c. P517,800
b. P187,000 d. P233,200
96. His business tax due is
a. VAT c. Excise tax on certain goods
88. The income tax still due in the final return is:
b. OPT d. None
a. P260,000 c. P410,000
b. P433,200 d. P510,000

“The things that come most quickly into your life are the things that you BELIEVE in the most.
You can bring to you only what you BELIEVE, so you must BELIEVE to receive what you want.”
- The Secrets by Rhonda Byrne