ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 43  May 2022 CPALE  9 Feb 2022  6:00 PM – 9:00 PM
TAXATION
FIRST PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions.
Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
D
1. Which of the following is not a nonresident 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 a permanent basis.
c. A citizen of the Philippines who works and derives income from sources
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 goes on a business trip abroad and
stays therein most of the time during the year.
2. First statement:
The husband and wife shall compute their individual income tax
separately based on their respective total taxable income.
Second statement:
If any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the spouses, the same shall
be divided equally between the spouses for the purpose of determining their
respective taxable income.
A
a. Both statements are correct
b. Both statements are incorrect
c. Both statements are incorrect
d. Only the second statement is correct
D
3. Which of the following is not subject to tax as a corporation?
a. Business partnerships
b. Joint stock companies
c. Insurance companies
d. General professional partnership
4. First statement: All corporations, whether domestic or foreign, shall be taxed
at 20% effectively July, 2020 if their net tax taxable income does not exceed
P5,000,000 and their total assets do not exceed P100,000,000.
B
D
Second statement: Effective January 1, 2021, non-resident foreign corporations
shall be taxed at 25% on their net income from sources within the Philippines.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
5. One of
a.
b.
c.
d.
the following
There must be
The gain must
The gain must
The gain must
is not a requisite of a taxable income.
gain.
be realized or received.
not be excluded by law from taxation.
be that of resident or nonresident citizen.
6. A property was received as donation from Charlwin when its fair market value was
P300,000. Charlwin in turn received this property as donation from Jose when
its fair market value was P350,000. This property was purchased by Marceliano
for P200,000 and was donated to Jose. The property was sold for P500,000.
A
How much gain (loss) shall be recognized from the sale?
a. P300,000
b. P200,000
c. P150,000
d. None of the choices
7. If an individual performs services for a creditor who in consideration thereof
cancels the debt, the cancellation of indebtedness may amount to a:
D
a. gift.
b. capital contribution.
c. donation inter vivos.
d. payment of income.
Page 1 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
8. It is important to know the source of income for tax purposes (i.e., from within
and without the Philippines) because:
A
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 Philippines 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.
9. Gains,
within
A
a.
b.
c.
d.
B
profits and income from the sale of real property are from sources
the Philippines if:
the real property sold is located in the Philippines.
the real property is sold in the Philippines.
the real property sold is located outside the Philippines.
the real property sold is owned by a resident citizen.
10. The term “capital asset” includes:
a. stock in trade or other property included in the taxpayer’s inventory.
b. real property not used in the trade or business of taxpayer.
c. property primarily for sale to customers in the ordinary course of
his trade or business.
d. property used in the trade or business of the taxpayer and subject
to depreciation.
11. The widow of your best friend has just been paid P1,000,000 on account of the
life insurance policy of the deceased husband. She asks you whether she shall
declare the amount for income tax purposes or for estate tax purposes.
First advice: The proceeds of the life insurance paid to the beneficiary upon
the death of the insured are exempt from income tax and need not be declared for
income tax purposes.
Second advice: The proceeds of life insurance will have to be declared for estate
tax purposes if the designation of the beneficiary is revocable, otherwise, they
need not be declared.
A
a. Both advices are right
b. First advice right; second advice wrong
c. Both advices are wrong
d. First advice wrong; second advice right
12. Ms. Elisya Montenegro entered her short story in a literary contest. She won in
the Short Story category, and received P500,000 for her prize. What was the tax
consequence of the literary prize?
B
a. Exempt from income tax
b. Subject to final withholding tax
c. Subject to Section 24 (A)
d. Not subject to any internal revenue tax
13. Under this system, the amount of income tax withheld by the withholding agent is
constituted as a full and final payment of the income tax due from the payee on
the said income.
B
a. Creditable withholding tax
b. Final withholding tax
c. Global tax system
d. Schedular tax system
14. Which of the following passive income is not subject to 20% final withholding
tax. As a general rule, which of the following passive income of resident citizen?
D
a. Interest from any peso bank deposit
b. Yield or any other monetary benefit from deposit substitutes and
from trust funds and similar arrangements
c. Prizes (except prizes amounting to P10,000 or less)
d. Royalties on books, as well as other literary works and musical
compositions
Page 2 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
15. Which of the following fringe benefits shall be subject to the fringe benefit
tax?
D
a. Benefits given to the rank-and-file employees, whether granted under
a collective bargaining agreement or not
b. Fringe benefits required by the nature of, or necessary to the trade,
business or profession of the employer
c. Fringe benefit given for the convenience or advantage of the employer
d. Membership fees, dues and other expenses borne by the employer for
the managerial and supervisory employee in social and athletic clubs
and similar organizations
16. First statement:
corporation.
D
The fringe benefit tax is imposed only when the employer is a
Second statement:
The fringe benefit tax shall be withheld and paid by the
employer in accordance with the provision of Section 57 (A).
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
17. De minimis benefit pertaining to monetized value of vacation and sick leave
credits paid to government officials and employees is limited to:
D
a. 10 days
b. 15 days
c. 20 days
d. None of choices
18. The gross estate of this decedent shall only be comprised of properties
situated in the Philippines.
D
a. Filipino residing in the Philippines
b. American residing in the Philippines
c. Filipino residing in the USA
d. American residing in the USA
19. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance is:
A
a. included in the gross estate of Mr. Julian Cruz because when the
executor of the estate is a beneficiary the proceeds are included in
the gross estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the
designation of the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of
life insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life
insurance are generally not subject to estate tax.
20. Mr. Rigoberto Collado, a citizen and resident of Puerto Rico, dies during the
year. Puerto Rico does not impose transfer taxes on properties of decedent not
residing therein. He left the following properties among others:
Shares of stock, San Miguel Corporation, Manila
House and lot, Puerto Rico
Leasehold on a condominium unit, Philippines
Contract for public works, Philippines
B
The executor of his estate in Philippines asked you what properties are to be
included in his Philippine gross estate. What answer will you give him?
a. Include all the properties.
b. Include contract for public works and leasehold on condominium unit
only.
c. Include all properties except shares of stock and house and lot
d. Include all properties except house and lot in Puerto Rico.
Page 3 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
21. A property was transferred mortis causa. The following data were gathered from
the transaction:
Fair market value, time of transfer – P500,000
Fair market value, time of death – P300,000
Consideration received when transferred – P350,000
D
C
How much shall be included in the gross estate?
a. P500,000
b. P300,000
c. P150,000
d. None
22. How much is the allowable standard deduction for non-resident alien decedent?
a. Five Million Pesos (P5,000,000)
b. Three Million Pesos (P3,000,000)
c. Five Hundred Thousand Pesos (P500,000)
d. None, not allowed to deduct standard deduction
23. The following selected data were taken from the Estate of Ed Sados:
Claim against an insolvent person
(fully uncollectible)
P 500,000
Claim against a person who absconded
(fully uncollectible)
300,000
Claim against an insolvent person
(20% collectible)
100,000
B
How much should be deducted from the gross estate?
a. P880,000
b. P580,000
c. P100,000
d. P 80,000
24. An unmarried decedent died leaving properties he inherited 4 ½ years ago which
had fair market value of P800,000 at the time of his death (650,000 at the time
of inheritance, and unpaid mortgage of P50,000 paid by the present decedent).
Other properties in his gross estate had fair market value of P1,000,000. The
total expenses, losses indebtedness, taxes and transfer for public purpose
amounted to P300,000.
D
How much
a. P
b. P
c. P
d. P
was the vanishing deduction?
500,000
225,000
200,000
100,000
25. For purposes of availing of a family home deduction to the extent allowable, a
person may constitute:
B
a. as many family homes as possible.
b. only one family home.
c. one family home for each spouse.
d. one family for each child.
26. One of the following is not a distinction between donation inter vivos and
donation mortis causa.
C
a. Donation inter vivos takes effect during the lifetime of the grantor
while donation mortis causa takes effect after the death of the
grantor.
b. Donation inter vivos is subject to donor’s tax while donation mortis
causa is subject to estate tax.
c. Donation inter vivos requires a public document while donation mortis
causa may not require a public document.
d. Donation inter vivos is valued at fair market value at the time the
property is given while donation mortis causa is valued at the fair
market value at the time of the death of the grantor.
Page 4 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
27. Mr. Primitivo Primero died and was survived by his wife and two (2) children,
Faye and Faith. After getting her share in the conjugal property, the surviving
spouse renounced her share in the hereditary estate in favor of Faith to the
exclusion of Faye. Was the renunciation subject to donor’s tax?
A
a. Yes, because the renunciation was made categorically in favor of
identified heir to the exclusion or disadvantage of the other coheirs.
b. No. because the renunciation was considered a general renunciation.
c. Yes, because , as a rule, renunciation of share in the hereditary
estate is always subject to donor’s tax.
d. No, because, as a rule, the surviving spouse cannot renounce her
share in the hereditary estate.
28. Mr. J. Santos donated P500,000 to AST Foundation, a philanthropic organization.
The organizations total administrative expenses amounted to P5,000,000 out of
its expenses of P20,000,000. How much was the exempt gift to the philanthropic
organization?
C
a. P6,000,000
b. P5,000,000
c. P500,000
d. None
29. First statement: For VAT purposes, a taxable person is any person liable to pay
the VAT, whether registered or registrable in accordance with the Tax Code.
A
Second statement: The status of a “VAT-registered person” as a VAT-registered
person shall continue until the cancellation of such registration.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
30. Which of the following sales of residential property, shall be subject to VAT
beginning January 1, 2021?
A
a. Sale of residential lot the value of which does not exceed P1,500,000
b. Sale of residential house and lot and other residential dwellings
with selling price of not more than P2,000,000.
c. Sale of real properties not primarily held for sale to customers or lease
in the ordinary course of trade or business
d. Sale of real property utilized for socialized housing
B
D
31. Which of the following is not included in the term “gross selling price”?
a. Total amount of money or its equivalent paid by the purchaser
b. Value-added tax passed on by the seller to the buyer
c. Excise tax
d. None of the choices
32. Which statement is incorrect? VAT on importation of goods:
a. is imposed on an importation for sale or for use in business.
b. is imposed on an importation for personal use.
c. shall be paid prior to removal from customs custody.
d. may not be available as input tax.
33. For VAT purposes, capital goods or properties, also known as depreciable
assets, refer to:
I – goods or properties with estimated useful life greater than one (1)
year
II – treated as depreciable assets under Section 34 (F) of the Tax Code
III – used directly or indirectly in the production or sale of taxable
goods or services
A
a. Yes to I, II and III
b. Yes to II and III only
c. Yes to I and II only
d. Yes to I only
Page 5 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
34. A VAT-registered person shall issue for every sale, barter or exchange of goods
or properties a:
A
a. VAT invoice.
b. VAT official receipt.
c. VAT credit certificate.
d. VAT refund.
35. Which of the following shall not be considered livestock for VAT-exempt
transactions purposes?
D
a. Cows
b. Bulls and calves
c. Sheep
d. Race horses
36. All of the following cooperatives enjoy VAT exemption on their sales or
receipts except:
D
a. agricultural cooperatives.
b. credit and multi-purpose cooperatives.
c. non-agricultural, non-electric and non-credit cooperatives.
d. electric cooperatives.
37. Effective July 1, 2020 to June 30, 2023, the percentage tax rate on persons
exempt from VAT shall be:
A
a. 1%.
b. 2%.
c. 3%.
d. 5%.
38. Mr. Jaime Rodriguez is the owner of a small variety store. His gross sales in
any one year do not exceed the VAT threshold amount. He is not VAT-registered.
The following data are taken from the books of the variety store for the quarter
ending March 31, 2020:
Merchandise inventory, December 31, 2019
P 100,000
Gross sales
450,00
Purchases from VAT-registered suppliers
350,000
B
How much is the percentage tax due and payable?
a. P22,500
b. P13,500
c. P 9,000
d. P 4,500
39. The following data were provided by an air carrier:
Freight and cargo fees (cargo originating from the
Philippines in a continuous and uninterrupted flight to
Japan, passage documents sold in Japan)
Mail fees (mail originating from Japan in a continuous and
uninterrupted flight to the Philippines, passage documents
sold in the Philippines)
Advance payments for cargo originating from the Philippines
in a continuous and uninterrupted flight to Singapore
(passage documents sold in Singapore)
Receipts from sales of tickets to passengers originating from
the Philippines in a continuous and uninterrupted flight to
Hongkong (tickets sold in the Philippines)
Expenses, Philippines
C
P5,000,000
4,000,000
3,000,000
2,000,000
1,500,000
How much is the common carrier’s tax due from the air carrier assuming it is an
international carrier doing business in the Philippines?
a. P420,000
b. P300,000
c. P240,000
d. P210,000
Page 6 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
40. Ms. N is a caterer and a videoke bar operator. In a taxable period, she had the
following data, tax not included:
Sales:
From operations of the Truluv Catering Service:
Cash sales
P400,000
Accounts receivable (catering)
250,000
Credit card sales
243,000
From operations of the Dude Videoke Bar:
Cash sales
1,360,000
Credit card sales
624,200
Payments for catering service, based on gross
receipts (80% of which are to VAT taxpayers)
60%
A
How much is the amusement tax payable?
a. P357,156
b. P297,630
c. P198,420
d. None of the choices
SITUATIONAL
Ms. Leni operates a convenience store while she offers bookkeeping services to her
clients. In 2018, her gross sales amounted to P800,000.00, in addition to her receipts
from bookkeeping services of P300,000.00. She already signified her intention to be
taxed at 8% income tax rate in her 1st quarter return. How much is the income tax
liability for the yea?
A
B
B
41. Will she qualify to be taxed at 8%?
a. Yes, because her total gross sales and/or gross receipts and other
non-operating income do not exceed the VAT threshold and she
signifies her intention to be taxed at 8% income tax rate in her
first quarter return.
b. No, because while her total gross sales and/or gross receipts and other
non-operating income do not exceed the VAT threshold and she
signifies her intention to be taxed at 8% income tax rate in her
first quarter return, her income comes from different sources.
c. Yes, because individual taxpayers are always given the option to be
taxed at 8% income tax rate regardless of their total gross sales
and/or gross receipts and other non-operating income.
d. No, because individual taxpayers whose total gross sales and/or
gross receipts and other non-operating income are always subject
to tax under Section 24 (A).
42. How much is her taxable income for the year?
a. P1,100,000
b. P 850,000
c. P 800,000
d. P 300,000
43. How much is the income tax due?
a. P88,000
b. P68,000
c. P64,000
d. P10,000
44. Assuming Ms. Leni above, failed to signify her intention to be taxed at 8% income
tax rate on gross sales in her 1st Quarter Income Tax Return, and she incurred
cost of sales and operating expenses amounting to P600,000.00 and P200,000.00,
respectively, or a total of P800,000.00. How much is the income tax?
D
a. P88,000
b. P68,000
c. P64,000
d. P10,000
Page 7 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
45. Using the same information in the immediately preceding number, to what
business tax will she be liable if Ms. Leni failed to signify her intention to
be taxed at 8% income tax rate on gross sales in her 1st Quarter Income Tax
Return?
B
a. Value-Added Tax
b. Percentage Tax on Person Exempt From VAT
c. Amusement Tax
d. Excise Tax
SITUATIONAL
A proprietary educational institution has the following data for the calendar year
2021:
Gross receipts, related activities
P 15,000,000.00
Cost of services, related activities
6,000,000.00
Allowable deductions from related activities
3,250,000.00
Gross receipts, unrelated activities
18,000,000.00
Cost of services, unrelated activities
5,000,000.00
Allowable deductions from unrelated activities
2,000,000.00
Payments, first three (3) quarters
2,000,000.00
D
C
A
B
D
46. How much is net taxable income from related activities?
a. P16,750,000.00
b. P15,750,000.00
c. P11,000,000.00
d. P 5,750,000.00
47. How much is the net taxable income from unrelated activities?
a. P16,750,000.00
b. P15,750,000.00
c. P11,000,000.00
d. P 5,750,000.00
48. What corporate tax rate will it be subject to?
a. 25%
b. 20%
c. 10%
d. 1%
49. How much is the income tax payable?
a. P4,187,500.00
b. P2,187,500.00
c. P1,675,000.00
d. P1,350,000,00
50. How much is the output VAT, if any?
a. P3,960,000.00
b. P2,160,000.00
c. P2,160,000.00
d. None, VAT-Exempt
SITUATIONAL
The decedent is a married man with a surviving spouse with the following raw data:
Conjugal real and personal properties (including an automobile
purchased during the marriage using common fund for the
exclusive use of the surviving spouse)
P 14,000,000
Conjugal family house
9,000,000
Exclusive family lot
1,000,000
Exclusive properties (including the P3,000,000 exclusive
properties of the surviving spouse)
8,000,000
Conjugal ordinary deductions (including funeral expenses of
P100,000 and judicial expenses of P200,000)
2,300,000
Exclusive ordinary deductions (excluding the P500,000 unpaid
mortgage on the exclusive property of the surviving spouse)
1,000,000
Medical expenses
200,000
Page 8 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
51. Using BIR Form No. 1801, what value shall be reflected in Schedule 1A (Details
of Family Home)?
A
a. P10,000,000
b. P 5,500,000
c. P9,000,000
d. P1,000,000
52. Using BIR Form No. 1801, how much shall be reflected in Line 35 (ordinary
deductions)?
C
a. P3,800,000
b. P3,300,000
c. P3,000,000
d. P2,300,000
53. Using BIR Form No. 1801, how much shall be reflected in Line 37D (total special
deductions)?
B
a. P15,000,000
b. P10,500,000
c. P10,000,000
d. P 6,000,000
54. Using BIR Form No. 1801, how much shall be reflected in Line 40/16 (net taxable
estate)?
B
a. P4,300,000
b. P5,000,000
c. P7,300,000
d. P8,500,000
B
55. Using BIR Form No. 1801, how much shall be reflected in Line 18 (estate tax due)?
a. P256,000
b. P300,000
c. P440,000
d. P515,200
SITUATIONAL
Excellent Products, Inc. processes canned fruits and canned sardines. The following
VAT-exclusive selected data for the first quarter of the 2021 calendar year are taken
from its books:
Sale of canned fruits
P2,000,000
Sale of canned sardines
3,000,000
Purchase of tomatoes and onions from farmers
(for canned sardines)
500,000
Purchase of corn oil from a supplier
(for canned sardines)
300,000
Purchase of fresh fish from fishermen
(for canned sardines)
400,000
Purchase of fresh fruits from farmers
(for canned fruits)
200,000
Purchase of refined sugar from an agricultural
cooperative that manufactures refined sugar
(for canned fruits)
100,000
Purchase of refined sugar from a refined sugar
refinery (for canned fruits)
50,000
Purchase of packaging materials for the both products
800,000
Purchase of labels (for both products)
150,000
Total bills for trucking services in bringing
canned products to warehouse only P50,000 was paid)
100,000
Monthly VAT payments, previous two months
300,000
56. Using BIR Form No. 2550Q,
Sales/Receipts)?
A
a. P5,000,000
b. P3,000,000
c. P2,000,000
d. None of the choices
Page 9 of 14
what
shall
be
reflected
in
Line
19A
(Total
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
57. Using BIR Form No. 2550Q, what shall be reflected in Line 19B (output tax due)
using 12% rate?
A
a. P600,000
b. P500,000
c. P360,000
d. P240,000
58. Using BIR Form No. 2550Q, what shall be reflected in Line 20D (presumptive
input tax), if any?
C
a. P56,000
b. P32,000
c. P20,000
d. None. Not allowed
59. Using BIR Form No. 2550Q, what shall be reflected in Line 24 (total allowable
input tax)?
A
a. P182,000
b. P176,000
c. P162,000
d. P156,000
60. Using BIR Form No. 2550Q, what shall be reflected in Line 27 (Tax Still
Payable) using 12% rate?
D
a. P418,000
b. P370,000
c. P346,000
d. P118,000
SITUATIONAL
Mr. Nguyen Gandaipen, a non-resident Thai, during the current year donates on January
15, 2022 a brand-new car in the Philippines valued at P1,200,000 and house and lot in
Thailand valued at P2,500,000 to his legitimate son who is getting married in the
Philippines.
The son agrees to pay the unpaid tax of P120,000 on the car and the
unpaid mortgage of P500,000 on the house and lot.
61. Using BIR Form No. 1800, what shall be reflected in line 27 (Total Gifts In This
Return)?
C
a. P3,700,000
b. P2,500,000
c. P1,200,000
d. None of the choices
62. Using BIR Form No. 1800, what shall be reflected in line 33 (total deductions
allowed)?
B
a. P130,000.
b. P120,000.
c. P10,000.
d. none.
63. Using BIR Form No. 1800, what shall be reflected in line 38/14 (total net gift
subject to tax)?
D
a. P2,830,000
b. P1,200,000
c. P1,080,000
d. P 830,000
D
64. Using BIR Form No. 1800, what shall be reflected in line 18 (tax payable)?
a. P214,200
b. P142,800
c. P64,800
d. P49,800
Page 10 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
C
TAX First Pre-Board Exam
65. Where shall the donor file the donor’s tax return?
a. Revenue District Office having jurisdiction over the place in the
Philippines where the son is getting married
b. Revenue District Office having the jurisdiction over the place in the
Philippines where the son’s wife resides
c. Philippine Embassy or Philippine Consulate in Thailand
d. None of the choices
SITUATIONAL
The following items (66 – 70) are considered BONUS ITEMS for purposes of determining the score of the
TAX First Pre-Board Exam. The given information for these items were uploaded only around 7:35 PM of
February 9. Some examinees have already submitted the Google Quiz form before 7:35 PM of February 9
while some examinees were able to learn about the uploaded information only AFTER submitting the form.
Ube Paspas Bus is a common carrier by land. It is VAT-registered. During quarter
ending March 31, 2021, it has the following gross receipts:
Transport of passengers
P1,000,000
Transport of goods
1,500,000
Transport of cargoes
500,000
D
A
B
A
66. How much
a. P
b. P
c. P
d. P
is the common carrier’s tax payable?
120,000
90,000
60,000
30,000
67. When shall the Percentage Tax Return be filed?
a. April 25, 2021
b. April 24, 2021
c. April 21, 2021
d. April 15, 2021
68. How much is the Value-Added Tax?
a. P 360,000
b. P 240,000
c. P 120,000
d. None. VAT threshold not exceeded
69. When shall the Quarterly VAT be filed?
a. April 25, 2021
b. April 24, 2021
c. April 21, 2021
d. April 15, 2021
70. Assuming it is not VAT-registered, how much shall be the total percentage
taxes?
C
a. P90,000
b. P60,000
c. P50,000
d. P30,000
- END –
Page 11 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
ANSWERS & SOLUTIONS/CLARIFICATIONS
6.
Selling price
Less: Basis (basis to the last owner who did not acquire the
property by donation)
Gain from sale
P500,000
200,000*
P300,000
23.
Claim against an insolvent person (fully uncollectible
Claim against an insolvent person (80% x 100,000)
Total
24.
Value to take
Less: Mortgage paid
Initial basis
Less: Proportional deduction (P600,000/P1,800,000 X P300,000)
Final basis
Rate
Vanishing deduction
28.
38.
39.
P500,000
80,000
P580,000
P
P
650,000
50,000
600,000
100,000
500,000
20%
100,000
The gift was exempted because the administrative expenses of the donee-institution did not
exceed 30% of the total expenses (5,000,000/P20,000,000 = 25%).
Gross sales
Tax rate
Percentage tax
Effective July 1, 2020 until June 30, 2023, the rate shall be 1%.
P450,000
3%
13,500
Freight and cargo fees (cargo originating from the Philippines in a continuous
and uninterrupted flight to Japan, passage documents sold in Japan)
Advance payments for cargo originating from the Philippines in a continuous
and uninterrupted flight to Singapore (passage documents sold in Singapore)
Gross receipts
Tax rate
Common carrier’s tax
P5,000,000
3,000,000
8,000,000
3%
P 240,000
40.
Cash sales
Credit card sales
Gross receipts (Dude Videoke Bar)
Tax rate
Amusement tax
P1,360,000
624,200
P1,984,200
18%
P 357,156
42.
Gross sales – Convenience store
Gross receipts - Bookkeeping
Total gross sales/receipts
Less: Amount allowed as deduction
Taxable income
P800,000.00
300,000.00
1,100,000.00
250,000.00
P850,000.00
43.
Taxable income
Tax rate
Tax due
44.
Gross sales – Convenience store
Gross receipts - Bookkeeping
Total gross sales/receipts
Less: Cost of sales
Gross income
Less: Operating expenses
Taxable income
Tax due
250,000.00
50,000.00 x 20%
P850,000.00
8%
P 68,000.00
P 800,000.00
300,000.00
1,100,000.00
600,000.00
500,000.00
200,000.00
P 300,000.00
Exempt
10,000.00
P 10,000.00
Aside from income tax, Ms. Leni is likewise liable to pay business tax.
Page 12 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
45. Effective January 1, 2018 to December 31, 2022
If the taxable income is:
Over
But not over
The tax shall be
P 250,000
0%
P 250,000
400,000
20%
400,000
800,000
P 30,000
800,000
2,000,000
130,000
2,000,000
8,000,000
490,000
8,000,000
2,419,000
Gross receipts
Less: Cost of services
Gross income
Less: Allowable deductions
Net taxable income
Tax rate*
Income tax due
Less: Payments, first 3 quarters
Income tax payable
Related activities
P15,000,000.00
6,000,000.00
9,000,000.00
3,250,000.00
(46)P 5,750,000.00
Plus
Of excess over
P 250,000
400,000
800,000
2,000,000
8,000,000
25%
30%
32%
35%
Unrelated activities
P18,000,000.00
5,000,000.00
13,000,000.00
2,000,000.00
(47) P11,000,000.00
Total
P33,000,000.00
11,000,000.00
22,000,000.00
5,250,000.00
16,750,000.00
(48)
25%
4,187,500.00
2,000,000.00
(49)P2,187,500.00
51.
Conjugal family house
Exclusive family lot
Total
P9,000,000
1,000,000
P10,000,000
52.
Conjugal ordinary deductions (2,300,000 – 300,000)
Exclusive deductions
Total
P2,000,000
1,000,000
P3,000,000
53.
Standard deduction
family home
Family house (1/2 x 9,000,000)
Family lot (full)
Total
Maximum
Lower
Total
34
35
36
37
Gross estate
Less: Ordinary deductions
Estate after ordinary deductions
Less: Special deductions
37A Standard deduction
37B Family home
37C Others (specify)
37D Total special deductions
38 Net estate
39 Less: Share of surviving spouse (1/2 x
21,000,000*)
40/16 Net taxable estate
17 Applicable tax rate
18 Estate tax due
56.
57.
58.
Sale of canned fruits
Sale of canned sardines
Total
Gross sales
Tax rate
Output tax
P5,000,000
4,500,000
1,000,000
5,500,000
10,000,000
5,500,000
P10,500,000
Exclusive
P6,000,000
1,000,000
5,000,000
Common
P23,000,000
2,000,000
21,000,000
Total
P29,000,000
3,000,000
26,000,000
5,000,000
5,500,000
10,500,000
15,500,000
10,500,000
5,000,000
6%
P 300,000
(54)
(55)
P2,000,000
3,000,000
P5,000,000
P5,000,000
12%
P600,000
Presumptive input tax on purchase of tomatoes and onions (500,000 x 4% = P20,000))
Page 13 of 14
0915-2303213  resacpareview@gmail.com
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM
TAX First Pre-Board Exam
59.
Presumptive input tax on purchase of tomatoes and onions (500,000 x 4%)
Passed-on VAT on purchase of corn oil (300,000 x 12%)
Passed-on VAT on purchase of refined sugar from sugar refinery (50,000 x 12%)
Passed-on VAT on purchase of packaging materials (800,000 x 12%)
Passed-on VAT on purchase of labels (150,000 x 12%)
Passed-on VAT on trucking services (50,000 x 12%)
Total
P20,000
36,000
6,000
96,000
18,000
6,000
P182,000
60.
19B Output tax
24 Total allowable input tax
25 Net VAT payable
Less: 26A Monthly VAT payments, previous two months
27 Tax Still Payable
P600,000
182,000
418,000
300,000
P118,000
61.
Car, Philippines
62.
Unpaid tax on car assumed by the donee
63.
27 Total Gifts In This Return
Less: Deductions
Unpaid tax on car assumed by the donee
33 Total Deductions Allowed
34 Total net gifts in this return
Add: 35 Total prior net gifts during the calendar year
36 Total net gifts
37 Less: Exempt gift
38/14 Total net gift subject to tax
64.
38/14 Total net gift subject to tax
15 Applicable donor’s tax rate
16 Total donor’s tax due
Less: 17Tax credit/payments
18 Tax payable
Add:19 Penalties
20 Total amount payable
65.
27 Total Gifts In This Return
Less: Deductions
Unpaid tax on car assumed by the donee
33 Total Deductions Allowed
34 Total net gifts in this return
Add: 35 Total prior net gifts during the calendar year
36 Total net gifts
37 Less: Exempt gift
38/14 Total net gift subject to tax
15 Applicable donor’s tax rate
16 Total donor’s tax due
Less: 17Tax credit/payments
18 Tax payable
Add:19 Penalties
20 Total amount payable
P1,200,000
P120,000
P1,200,000
120,000
1,080,000
1,080,000
250,000
P 830,000
830,000
6%
49,800
P49,800
P49,800
P1,200,000
120,000
1,080,000
1,080,000
250,000
830,000
6%
49,800
P49,800
P49,800
66.
Gross receipts (transport of passengers)
Tax rate
Common carrier’s tax
68.
Gross receipts (transport of goods)
Gross receipts (transport of cargoes
Total
Tax rate
Value-added tax
70.
Common carrier’s tax (transport of passengers)
(1,000,000 x 3%)
Percentage on Persons Exempt from VAT (transport of goods and cargoes)
(2,000,000 x 1%)
Total
Page 14 of 14
P1,000,000
3%
P 30,000
P1,500,000
500,000
2,000,000
12%
P 240,000
P30,000
20,000
P50,000
0915-2303213  resacpareview@gmail.com
lOMoARcPSD|4784205
Re SA B43 TAX Final PB Exam - Questions, Answers &
Solutions
Accounting (Zamboanga State College of Marine Sciences and Technology)
StuDocu is not sponsored or endorsed by any college or university
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 43  May 2022 CPALE  23 April 2022  8:00 – 11:00 AM
TAXATION
FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions.
Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. 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:
a. income derived from sources abroad until the date of his arrival in
the Philippines.
b. income derived from sources within the Philippines.
c. income derived from sources abroad until the last day of the calendar
year.
d. income derived from sources within and outside the Philippines.
2. First statement:
The husband and wife shall compute their individual income tax
separately based on their respective total taxable income.
Second statement:
If any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the spouses, the same shall
be divided equally between the spouses for the purpose of determining their
respective taxable income.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
3. There shall be levied, collected and paid for each taxable year upon the income
received by every alien individual employed by regional or area headquarters and
regional operating headquarters established in the Philippines by multinational
companies from such regional or area headquarters and regional operating
headquarters, a tax equal to:
a. Twenty-five percent (25%) of such gross income.
b. Twenty percent (20%) of such gross income.
c. Fifteen percent (15%) of such gross income.
d. Regular income tax rate under Section 24 (A) (2) (a) of the Tax Code.
4. Ms. Cora Fiel, an alien employed in PetrolEx Corporation that is a Petroleum Service
Contractor, received compensation income of P 5,000,000.00 for 2018. She is
married and has four (4) minor children. How much is the tax due?
a. P 1,450,000
b. P 1,402,000
c. P 750,000
d. None of the choices
5. The MCIT shall be imposed upon a domestic corporation or a resident foreign
corporation:
I - whenever such corporation has a zero or negative taxable income;
II - when the amount of minimum corporate income tax is greater than the normal
income tax due from such corporation.
a. Both I and II are correct
b. Neither I nor II is correct
c. Only I is correct
d. Only II is correct
6. Aliw Service Corporation, registered with BIR in 2018, has the following data for
the year 2021:
Gross receipts
P1,000,000
Discounts given
100,000
Returns and allowances
150,000
Salaries of personnel directly involved in
the supply of services
300,000
Fees of consultants directly involved in
the supply of services
50,000
Rental of equipment directly used in the
supply of services
70,000
Operating expenses
420,000
Page 1 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
How much
a.
b.
c.
d.
TAX Final Pre-Board Exam
is the income tax due and payable?
P 27,000
P 6,600
Zero
None of the choices
7. The recovery of the account previously written off would constitute taxable income
only if in the year of recognition of being worthless, the write-off resulted in a
reduction of a taxable income.
a. Reciprocity rule
b. Equity of the incumbent rule
c. Tax benefit rule
d. Materiality rule
8. One of the following is considered an income for income taxation.
a. Advance in the value of the person or a corporation
b. Increase in book value of real property and other fixed assets of a
corporation as a result of their re-appraisal
c. Net increase in the value of livestock or increase of its inventory
d. Items of gross income which have been credited or set apart for the
taxpayer without restriction
9. Excise tax on certain articles is an example of:
a. An indirect tax.
b. A direct tax.
c. A local tax.
d. A transfer tax.
10. An annual tax of P1,000 was imposed upon all residents of the Philippines, who are
above 21 years of age, with a gross income of P250,000, whether or not they send
their children to public schools, for the purpose of raising funds in order to
improve public school buildings. The tax is:
a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
11. A law was passed by Congress which granted tax amnesty to those who have not paid
income taxes for a certain year without at the same time providing for the refund
of taxes to those who have already paid them. The law is:
a. valid because there is a valid classification.
b. not valid because those who did not pay their taxes are favored over
those who have paid their taxes.
c. valid because it was Congress which passed the law and it did not
improperly delegate the power to tax.
d. not valid because only the President with the approval of Congress
may grant amnesty.
12. In case of conflict between tax laws and generally accepted accounting principles
(GAAP):
a. both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. tax laws shall prevail over GAAP.
d. the issue shall be resolved by the court.
13. The fair market value of real properties located in each zone or area, shall be subject
to automatic adjustment once every how many years through rules and regulations
issued by the Secretary of Finance based on the current Philippine valuation
standards?
a. 3 years
b. 5 years
c. 7 years
d. 10 years
Page 2 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
14. Which of the following cases may not be compromised?
a. Delinquent accounts
b. Cases under administrative protest after issuance of the Final
Notice of Assessment to the taxpayer still pending in the BIR
c. Civil tax cases being disputed before the courts
d. Criminal violations involving criminal tax fraud.
15. The following are instances when penalties and/or interest imposed on the taxpayer
may be abated or cancelled on the ground that the imposition thereof is unjust and
excessive, except when the:
a. Filing of the return or payment of the tax is made at the wrong
venue.
b. Taxpayer’s mistake in payment of his tax is due to erroneous
written official advice of a revenue officer.
c. Assessment is brought about or a result of the taxpayer’s noncompliance with the law due to a difficult interpretation of the
said law.
d. Taxpayer is declared insolvent or bankrupt.
16. First statement: In civil tax cases involving collection of internal revenue taxes,
prescription is construed strictly against the government and liberally in favor
of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable under
the Tax Code, prescription is construed strictly against the government.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
17. If at any time prior to the consummation of the sale all proper charges are paid
to the officer conducting the sale, the goods or effects distrained:
a. shall be restored to the owner.
b. shall no longer be restored to the owner.
c. shall be brought to the Revenue District Officer.
d. shall be brought to the Regional District Officer.
18. If after review and evaluation by the Commissioner or his duly authorized
representative, it is determined that there exists sufficient basis to assess the
taxpayer for any deficiency tax or taxes, the said Office shall issue to the
taxpayer the:
a. Notice of informal conference
b. Notice of discrepancies
c. Preliminary Assessment Notice
d. Formal Assessment Notice
19. For requests for reinvestigation, the taxpayer shall submit all relevant supporting
documents in support of his protest within how many days from date of filing of
his letter of protest, other-wise, the assessment shall become final?
a. Sixty (60) days
b. Thirty (30) days
c. Twenty (20) days
d. None of the choices
20. In 2018, Ms. Glai Espenilla Bangug, a financial comptroller of EB Company,
earns annual compensation of P1,500,000, inclusive of 13th month and other
benefits in the amount of P80,000 and mandatory SSS contribution of P3,500 and
Philhealth contribution of P2,000. Aside from her employment income, she owns
a convenience store, VAT-registered, with gross sales of P3,000,000. Sales
discount amounts to P300,000; sales returns and allowances amount to P150,000.
Her cost of sales and operating expenses are P1,000,000 and P600,000
respectively and with non-operating income of P100,000. Payments for the first
three (3) quarters amount to P300,000.
Page 3 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
Can she avail of the 8% income tax rate?
a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT- registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the
VAT threshold.
21. Under the TRAIN, the books of accounts shall be audited and examined yearly by
independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which shall
contain, among others, information lifted from certified balance sheets, profit
and loss statements, schedules listing income-producing properties and the
corresponding income therefrom and other relevant statements if the:
a. gross annual sales, earnings, receipts or output exceed Three
million pesos (P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three
million pesos (P3,000,000).
c. gross annual sales, earnings, receipts or output amount to Three
million pesos (P3,000,000)or more.
d. gross quarterly sales, earnings, receipts or output exceed One
Hundred Fifty Thousand (P150,000).
22. Your client dies on July 14, 2018. You are appointed as administrator. You
withdraw from his bank deposit P100,000 because the estate needs cash to
settle some obligations. What is the consequence of your withdrawal from
the decedent’s bank deposit?
a. subject to final withholding tax of 6%
b. subject to creditable withholding tax of 6%
c. Not subject to withholding tax
d. Subject to penalty and interest because such withdrawal is not
allowed.
23 and 24 are based on the following: A resident decedent left the following
properties:
Real properties
P 10,000,000
Personal properties excluding bank deposit
15,000,000
Bank deposit (P 940,000 net of final tax, was withdrawn
from the account of the decedent after the decedent
3,000,000
died)
23. The gross estate of the decedent was:
a. P 28,000,000
b. P 27,000,000
c. P 26,000,000
d. P 25,000,000
24. The final withholding tax on amount withdrawn was:
a. P 200,000
b. P 100,000
c. P 60,000
d. None of the choices
An unmarried decedent died leaving properties he inherited 4 ½ years ago which
had fair market value of P800,000 at the time of his death (P650,000 at the time
of inheritance). The present decedent mortgaged the property for P50,000 and
paid P20,000 before he died). Other properties in his gross estate had fair
market value of P1,000,000. The total expenses, losses, indebtedness, taxes and
transfer for public purpose amounted to P300,000.
25. How much
a.
b.
c.
d.
Page 4 of 17
was the vanishing deduction?
P 225,000
P 108,333
P 102,900
P 100,000
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
26 and 27 are based on the following: Transfer Taxes The decedent is a resident
unmarried head of family who died on March 1, 2019. He left the following properties,
obligations and expenses:
Real and personal properties P14,000,000
Family home
30,000,000
Ordinary deductions
Unpaid real estate tax
2,000,000
Medical expenses
600,000
26. The taxable net estate is:
a. P42,000,000.
b. P32,000,000.
c. P27,000,000.
d. P23,000,000.
27. Continuing the preceding number, the estate tax return shall be filed and the
estate tax paid on or before to avoid penalties:
a. March 1, 2020
b. March 1, 2021
c. September 1, 2018
d. None of the choices
28 and 29 are based on the following: During the current year, Jose Tugas who resides
in 158 R. Papa Street, Sampaloc Manila and with TIN 135-567-890-006 made the following
gifts:
Date
Donee
Amount of donation
June 1, 2018
Anton, his son, on
P150,000 cash
account of his
marriage celebrated
June 1, 2018
July 10, 2018
His friend Carlos
P400,000 a second hand motor
vehicle
September 30, 2018 His daughter Dana
P450,000 cash dowry, on account
of her scheduled marriage on
October 25, 2018
November 23, 2018
His father
A parcel of land worth P180,000,
subject to the condition that
his father would assume the
mortgage indebtedness of Jose
in the amount of P40,000;
28. Using Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on line
38 (Total net gifts subject to tax) for the return to be filed on November 23,
2018?
a. P1,140,000
b. P 890,000
c. P 140,000
d. None of the choices
29. Using the Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on
line 18?
a. P53,400
b. P 8,400
c. (P6,600)
d. None of the choices
30 to 33 are based on the following: Your client, Antonio Manuel, is engaged in various
transactions that are subject to percentage taxes.
His address is 143 S. Loyola
Street, Sampaloc, Manila. The TIN is 143-678-910-005. He is under RDO 032. Email ad
is Antoman@gamil.com.
The following data for the first quarter of the current year are presented for your
perusal. Answer the questions by filling up the line in the actual Quarterly
Percentage Tax Return (2551Q).
Page 5 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
Gross receipts, sale of gas and water
Expenses, sale of gas and water
Gross receipts, rentals of office spaces, net of 1%
withholding tax
Expenses, rental of office spaces
Gross receipts, life insurance premiums
Expenses, life insurance business
P1,500,000
200,000
742,500
150,000
800,000
100,000
30. Using line 14 of BIR Form 2551 Q, how much is total tax due?
a. P91,500
b. P68,500
c. P53,500
d. P30,000
31. Assuming
out that
a.
b.
c.
d.
your client filed the return and paid the tax on July 25 and it was found
it was due to willful neglect, using line 20, how much is the surcharge?
P36,305
P34,250
P26,750
P17,125
32. Using the same information in the preceding number, using line 21, how much is the
interest?
a. P8,220
b. P3,425
c. P1,605
d. P1,600
33. Using line 24, how much is the total amount payable excluding compromise penalty?
a. P104,805
b. P 85,730
c. P 74,355
d. P 74,350
34 and 35 are based on the following: In the year 2021, Mr. Nicko Macariola has the
following transactions:
Gross receipts, trucking business
Gross receipts, lease of residential units
(monthly rental is P20,000 per unit)
Gross receipts, practice of accountancy
Sale of four (4) residential lots at P1,500,000 each to
four (4) individual buyers for socialized housing
Sale of three (3) parking spaces at P500,000 each
P1,500,000
2,500,000
1,000,000
6,000,000
1,500,000
34. How much
a.
b.
c.
d.
is the VAT-exempt gross receipts, assuming the taxpayer is VAT-registered?
P8,500,000
P6,000,000
P3,500,000
None of the choices
35. How much
a.
b.
c.
d.
is total VAT-subject amount, assuming the taxpayer is not VAT-registered?
P8,500,000
P7,500,000
P6,500,000
None of the choices
36. In 2018 a stockholder of a closely held corporation owns 100,000 shares before the
IPO. The cost of the share is P1,000,000. During the IPO, the shares are selling
at P12 per share. After the IPO, the outstanding shares of the closely held
corporation are 1,000,000 shares and are now selling at P14 per share at the local
stock exchange.
Your friend asks for your advice whether to sell his shares during the IPO through
the local stock exchange or sell after the IPO not through the local stock exchange.
Page 6 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
What advice will you give him to minimize income tax?
a. Sell during the IPO because he will pay lesser tax.
b. Sell after the IPO but directly to a buyer so that he will pay lesser
tax.
c. Sell any time because there is no advantage as far as taxes due are
concerned.
d. Sell it below cost after the IPO directly to a buyer so he will not
be subject to tax on capital gain.
37 and 38 are based on the following: ABC Corporation, VAT-registered real estate
dealer, sold a residential lot on July 2, 2021 for P1,500,000. The down payment was
P200,000. The first installment of P100,000 was made on the year of sale. The zonal
value of the subject property at the time of sale amounted to P2,000,000.
37. Would the sale qualify under installment plan?
a. Yes, because the initial payment did not exceed 25% of the selling
price.
b. No, because the amount of the initial payments were not known.
c. Yes, because the sale had initial payments and, therefore, qualified
under installment plan.
d. No, because, as a rule, sale of real property would always be
considered sale under cash basis.
38. How much
a.
b.
c.
d.
was the output tax on the installment payment?
P48,000
P36,000
P32,000
Exempt from VAT
39. Mr. Florence Binaluyo donates a piece of land to the City of Masbate. The fair
market value per BIR of the piece of land is P2,000,000 and its value per Tax
Declaration is P1,800,000. How much is the documentary stamp tax, if any?
a. P30,000
b. P30,000
c. None, exempt from DST
d. None of the choices
40. On every original issue, whether on organization, reorganization or for any lawful
purpose, of shares of stock by any association, company or corporation, the
documentary stamp tax is:
a. One peso and fifty centavos (P1.50) on each Two hundred pesos
(P200), or fractional part thereof, of the par value of such stock.
b. Two pesos (P2.00) on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of stock
c. Three pesos (P3.00) on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of stock
d. Fifteen pesos (P15.00)on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of stock
41. These are taxes on goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition and to things imported
as well as services performed in the Philippine, which tax shall be in addition
to the value-added tax.
a. Percentage Taxes
b. Income Tax
c. Documentary Stamp Taxes
d. Excise Taxes
42. Which of
a.
b.
c.
d.
Page 7 of 17
the following articles shall be subject to specific excise tax?
Excise tax on alcoholic products
Excise tax on automobiles
Excise tax on non-essential services
Excise tax on sweetened beverages
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
43. A residential building located in one of the cities in Metro Manila has a fair
market value of P10,000,000. The city ordinance fixed the actual assessment level
at 60%. How much is the basic real property tax, excluding the Special Educational
Fund (SEF)?
a. P120,000
b. P 60,000
c. P30,000
d. None of the choices
44. Unless otherwise provided in the Local Government Code, the tax period of all
local taxes, fees and charges shall be:
a. calendar year.
b. fiscal year.
c. either calendar year or fiscal year at the option of the taxpayer.
d. neither calendar year nor fiscal year at the option of the LGU.
45. Who of the following shall not qualify as senior citizen?
a. Resident Filipino citizen, 60 years old
b. Filipino citizen with dual citizenship, 60 years old, 6 months
residency in the Philippines
c. Resident alien, 65 years old
d. None of the choices
46. A Company that hires a PWD shall be allowed subject to certain conditions:
a. Ten percent (10%) of the total amount paid as salaries and wages to
senior citizens as additional deduction.
b. Fifteen percent (15%) of the total amount paid as salaries and wages
to senior citizens as additional deduction.
c. Twenty-five percent (25%) of the total amount paid as salaries and
wages to senior citizens as additional deduction.
d. Thirty percent (30%) of the total amount paid as salaries and wages
to senior citizens as additional deduction.
47. One of the following is not qualified to register as Barangay Micro Business
Enterprise (BMBE).
a. Bakery with total assets not exceeding P3,000,000
b. Motor shop with total assets not exceeding P3,000,000
c. A CPA practitioner with total assets not exceeding P3,000,000
d. Farm producing agricultural products with total assets not exceeding
P3,000,000
48. Which of
a.
b.
c.
d.
the following is not a relief from double taxation?
Tax credit
Allowance of deduction for foreign taxes
Tax treaties
Not reporting income or transactions in foreign countries
49. LAB Corporation originally issued stock dividends valued at P2,000,000.
is the documentary stamp tax, if any?
a. P30,000
b. P20,000
c. P15,000
d. None of the choices
50.
How much
The final income tax return for the taxable year 2018 which was due on April 15,
2019 was filed earlier on March 15, 2019.
A substantially amended return was
filed on May 31, 2019. When is the last day to make a valid assessment?
a. March 15, 2022
b. April 15, 2022
c. May 31, 2022
d. May 31, 2025
Page 8 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
SITUATIONAL
During the year 2018, ABC Corporation paid for the monthly rental of a residential
house of its branch manager, Mr. J. de la Cruz, amounting to P 68,000.
51. How much
a.
b.
c.
d.
is the value of the fringe benefit?
P68,000
P34,000
P16,000
P11,333
52. How much is the monetary value of the fringe benefit?
a. P68,000
b. P34,000
c. P16,000
d. P11,333
53. How much is the fringe benefit tax?
a. P18,308
b. P16,000
c. P 6,000
d. None of the choices
SITUATIONAL
An individual taxpayer holds shares of stock as investment which he bought from a
publicly-listed company for P500,000 (P500,000 par value). The shares are listed
and traded in the local stock exchange. He sells them for P750,000. How much is the
capital gains tax on the sale, if any?
54. How much
a.
b.
c.
d.
is the capital gains tax, if any?
P112,500
P 37,500
P 4,500
None, not subject to capital gains tax
55. How much is the capital gains tax on the sale assuming the corporation from which
the shares are bought is not compliant with the mandatory minimum public ownership?
a. P112,500
b. P 37,500
c. P 4,500
d. None, not subject to capital gains tax
SITUATIONAL
A resident citizen, 50 years old, married, with three (3) qualified dependent
children asks you to assist him in computing his taxable net income for the year
2018:
Gross professional income, net of 15% withholding tax
Professional expenses
Retirement
benefits
received
from
his
previous
employer that maintained a reasonable private
pension plan (he served the company for 12 years)
Lump sum benefits received from SSS
Prize in a sports tournament sponsored by a group
of businessmen promoting health products
Gain from sale of bonds (maturity period is 4 years)
Interest income from bonds with a maturity period
of 7 years
Interest on long term deposits with maturity period
of 5 years
Philippine Lotto winnings
Share in the net income of a business partnership
Page 9 of 17
P680,000
300,000
250,000
200,000
50,000
10,000
20,000
30,000
500,000
100,000
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
56. How much
a.
b.
c.
d.
is the total amount of excluded or exempted income?
P1,150,000
P1,000,000
P 500,000
P 480,000
57. How much
a.
b.
c.
d.
is the final withholding tax on certain income?
P130,000
P120,000
P110,000
P 20,000
58. How much
a.
b.
c.
d.
is the taxable net income?
P651,176
P510,000
P385,000
P375,000
59. How much
a.
b.
c.
d.
is the tax due and payable?
81,544
61,544
57,500
(62,500)
60. How much
a.
b.
c.
d.
is the total income tax expenses for the year?
P177,500
P167,500
P 77,500
P 57,500
SITUATIONAL
The decedent was a resident unmarried head of family died on January 6, 2022. The
following data were provided from his estate:
Real and personal properties (excluding a piece of land valued
at P2,000,000 transferred mortis causa to his son, and car
valued at P500,000 which was revocably transferred to a nephew,
decedent waived his right to revoke before he died)
P14,000,000
Family home
30,000,000
The following items were claimed as deductions from the gross estate
Funeral expenses
P 100,000
Judicial expenses
200,000
Unpaid real estate tax
2,000,000
Loss of a personal property due to theft (500,000 recovered
1,000,000
from Insurance)
Transfer for public use
500,000
Medical expenses
300,000
61. How much is to be reflected in line 34 of BIR Form No. 1801 (gross estate)?
a. P46,500,000
b. P46,000,000
c. P42,500,000
d. P42,000,000
62. How much is to be reflected in line 35 of BIR Form 1801 (the total ordinary
deductions)?
a. P3,800,000
b. P3,500,000
c. P3,200,000
d. P3,000,000
63. How much is to be reflected in line 37D of BIR Form 1801 (the total special
deductions)?
B
a. P15,000,000
b. P11,000,000
c. P 2,000,000
d. P 1,500,000
Page 10 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
64. How much is to be reflected in line 40 of BIR Form 1801 (net taxable estate)?
a. P42,000,000.
b. P32,000,000.
c. P28,000,000.
d. P23,500,000.
65. How much is to be reflected in line 16 of BIR Form No. 1800 (the donor’s tax), if
any, on certain transfer mentioned in the information given above?
a. P30,000
b. P15,000
c. P10,000
d. None, not subject to donor’s tax
SITUATIONAL
A VAT-registered corporation has the following data taken from the books of accounts
for the first calendar quarter of 2018:
Gross sales
P150,000,000
Sales returns and allowances
10,000,000
Sales discount (given at the time of sale including P500,000
4,500,000
discount given to senior citizens)
Cost of sales
90,500,000
Office equipment purchased January 1, 2018
1,100,000
Vehicle for land transport imported January 1, 2018
2,500,000
Pre-owned helicopter acquired January 1, 2018
10,000,000
Maintenance expenses, vehicle for land transport and helicopter
150,000
Purchase of goods for sale, (included in the cost of sales above)
30,000,000
Operating expenses (40% with passed-on VAT)
5,000,000
Office supplies purchased (wholly used)
900,000
VAT payments for January
5,000,000
February
2,000,000
66. How much is the output tax?
a. P18,000,000
b. P16,800,000
c. P16,320,000
d. P16,260,000
67. Can the taxpayer claim creditable
transport?
a. Yes, because the vehicle
subject business.
b. No, because the value of
c. Yes, because the vehicle
purposes.
d. No, because input tax is
input tax on importation of vehicle for land
for land transport is used for the VATthe vehicle exceeded P2,400,000.
is a depreciable asset for income tax
not allowed on importation.
68. Can the taxpayer claim input tax on acquisition of helicopter?
a. Yes, because the helicopter is used for the VAT-subject business.
b. No, because the helicopter is a non-depreciable asset, hence, no
input tax shall be allowed.
c. Yes, because the helicopter is a depreciable asset for income tax
purposes, hence, input tax shall be allowed.
d. No, because input tax is not allowed on helicopters without any
exception.
69. How much is the creditable input tax?
a. P4,080,000
b. P3,954,600
c. P3,950,200
d. P3,948,000
70. How much is the VAT payable upon filing of the quarterly return on or before April
25, 2018?
a. P6,920,000
b. P5,845,400
c. P5,370,000
d. P5,305,400
- END –
Page 11 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
ANSWERS & SOLUTIONS/CLARIFICATIONS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A
A
D
A
A
C
C
D
A
C
A
C
A
D
D
C
A
A
A
B
A
A
B
C
B
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
C
A
B
B
C
C
D
D
B
C
D
A
A
C
B
D
D
A
A
C
C
C
D
B
C
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
A
B
A
D
B
C
B
B
D
A
B
D
A
C
B
D
B
B
B
D
1.
Reference: Section 22 (E) (4), NIRC, as amended
2.
Reference: Section 24 (A) (1) (a), (b) and (c), NIRC, as amended
3.
Reference: Section 25 (C), NIRC, as amended
Section 4 (C), Revenue Regulations No. 8-2018
The preferential income tax rate under subsection (C) (D) and (E) of Section 25 of the
Tax Code, as amended, shall no longer be applicable without prejudice to the application
of preferential tax rates under existing international tax treaties, if warranted. Thus. all
concerned employees of the regional or area headquarters and regional operating
headquarters of multinational companies, offshore banking units and petroleum service
contractor and subcontractor ‘s shall be subject to the regular income tax rate under
Sec. 24(A)(2) ta) of the Tax Code. as amended.
4.
5.
Compensation income
Tax due under Section 24 (A)
2,000,000
3,000,000 x 32%
P5,000,000
P490,000
960,000
P1,450,000
References: Section 2.27 (E) (1), Revenue Regulations No. 9-98, as amended by
Revenue Regulations No. 12-2007
Section 2.28 (A) (2), Revenue Regulations No. 9-98, as amended by
Revenue Regulations No. 12-2007
Page 12 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
6.
Gross receipts
Less: Discounts
Returns and allowances
Net receipts
Less: Cost of services
Salaries of personnel
Fees of consultants
Rental of equipment
Gross income
Less: Operating expenses
Net operating loss
TAX Final Pre-Board Exam
P1,000,000
(P 100,000)
( 150,000)
(P 300,000)
( 50,000)
( 70,000 )
RCIT
MCIT (not subject yet)
Tax due and payable
(250,000)
750,000
(420,000)
330,000
420,000
(P 90,000)
P - ____
P___-____
Zero
8.
Reference: Section 52, Revenue Regulations No. 2
13.
Reference: Section 6 (E), NIRC, as amended under TRAIN
14.
Reference: Section 2, Revenue Regulations No. 30-2002
16.
References: CIR vs. Goodrich Phils., Inc. G.R. 104171, Feb. 24, 1999
Lim vs. CA, G.R. 48134-37, Oct. 18, 1990
In criminal tax cases involving tax offenses punishable under the Tax Code, prescription is
construed strictly against the taxpayer.
17.
Reference: Section 210, NIRC, as amended
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. - If at any
time prior to the consummation of the sale all proper charges are paid to the officer
conducting the sale, the goods or effects distrained shall be restored to the owner.
18.
An order the to expedite the processing of Letter Notice (LN) cases, the issuance of Notice
for Informal Conference may immediately commence, even without prior issuance of Letters
of Authority, as required in certain situations, as prescribed in the existing RMOs on the LN
system.
19.
References: Section 228, NIRC, as amended
Section 3.1.5, Revenue Regulations No. 12-99
as amended under Revenue Regulations No. 18-2013
The term “relevant supporting documents” refer to those documents necessary to support
the legal and factual bases in disputing a tax assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting documents shall not
apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be denied.
23.
Real properties, Philippines
Personal properties excluding bank deposit
Bank deposit (P3,000,000 – P1,000,000)
Gross estate
24.
Amount withdrawn
Rate
Final withholding tax
Page 13 of 17
P10,000,000
15,000,000
2,000,000
P27,000,000
P1,000,000
6%
P 60,000
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
25.
Value to take
Less: Mortgage paid
Initial basis
Less: Proportional deduction (650,000/1,800,000 x 300,000)
Final basis
Rate
Vanishing deduction
26.
Reference: Section 2, Revenue Regulations No. 30-2002
Gross estate
Less: Deductions
Estate after deductions
Less: Family home
Standard deduction
Taxable net estate
28.
29.
30.
P44,000,000
2,000,000
42,000,000
(10,000,000)
( 5,000,000)
P27,000,000
25 Personal property (From Part V Schedule A)
26 Real property (From Part V Schedule B)
27 Total gifts in this return
Less: Deductions allowed (Sum of items 28 to 32)
28 Mortgage assumed by the donee
34 Total net gifts in this return (Item 27 less Item 28)
35 Add: Total net gifts during the calendar year (Item 36 of return
previously filed with the year)
June 1, 2018
150,000
July 10, 2018
400,000
September 30, 2018
450,000
36 Total net gifts (Sum of Items 34 and 35)
37 Less: Exempt gift
38/14 Total net gifts subject to tax (Item 36 less Item 37)
14
15
16
17
Total net gifts subject to tax (From Part IV Item 38)
Applicable donor’s tax rate
Total donor’s tax due (Item 14 x Item 15)
Less: Tax credit/payments
17A Payments for prior gifts during the taxable year
(1,000,000 – 250,000 x 6%)
18 Tax payable/Overpayment ((Item 16 less Item 17A)
Alpha numeric
tax code (ATC)
PT 060
PT 010
PT 120
Total tax due
Taxable amount
P1,500,000
750,000
800,000
31.
Total tax due
Surcharge rate
Surcharge for willful neglect
32.
Interest on delinquency (April 25 to July 25)
(53,500 x 12% x 91/365)
Page 14 of 17
P 650,000
650,000
108,333
541,667
20%
P 108,333
P
180,000
180,000
40,000
140,000
1,000,000
1,140,000
250,000
P 890,000
P890,000
6%
53,400
45,000
P 8,400
Rate
2%
1%
2%
Tax due
P30,000
7,500
16,000
P53,500
P53,500
50%
P26,750
P1,600
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
33.
TAX Final Pre-Board Exam
14 Total tax due (From schedule 1 item 7)
Less: Tax credit/payment (attach proof)
15 Creditable percentage tax per BIR Form No. 2307
P53,500
7,500
46,000
Tax still payable
Add: Penalties
20 Surcharge
21 Interest
Total amount payable
34.
35.
26,750
1,600
P74,350
Sale of four (4) residential lots at P1,500,000 each to four (4) individual
buyers for socialized housing
P6,000,000
Gross receipts, trucking business
Gross receipts, lease of residential units
Gross receipts, practice of accountancy
Sale of three (3) parking spaces at P500,000 each
Vatable gross amount
P1,500,000
2,500,000
1,000,000
1,500,000
P6,500,000
36.
Gross selling price
Less: Cost
Gross selling price/net capital gain
Rate
Tax due
Sell during IPO
P1,200,000
P1,200,000
4%
P 48,000
Ratio = 100,000 shares/1,000,000 shares
Sell directly to
buyer after IPO
P1,400,000
1,000,000
P 400,000
15%
P 60,000
10%
37.
Initial payment/selling price (300,000/1,500,000 = 20%) does not exceed 25%.
38.
300,000/1,500,000 x 2,000,000 = 400,000 x 12% = 48,000
39.
Transfers exempt from donor’s tax under Section 101(a) and (b) of the Tax Code shall be
exempt from the tax imposed under this Section.
43.
Fair market value
Multiplied by assessment level
Assessed Value
Tax rate
Basic real property tax
46.
Conditions:
a. That such entities present proof as certified by the Department of Labor and
Employment that disabled persons are under their employ:
b. The disabled employee is accredited with the Department of Labor and Employment
and the Department of Health as to his disability, skills and qualifications.
47.
BMBE refers to any business entity or enterprise engaged in the production, processing or
manufacturing of products or commodities, including agro-processing, trading and services,
whose total assets including those arising from loans but exclusive of the land on which the
particular business entity's office, plant and equipment are situated, shall not be more than
Three Million Pesos (P3,000,000.00).
P10,000,000
60%
6,000,000
2%
P 120,000
“Services" shall exclude those rendered by any one, who is duly licensed by the government
after having passed a government licensure examination, in connection with the exercise of
one's profession.
Page 15 of 17
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
49.
Documentary stamp tax (P2,000,000/200 x P2) = P20,000
50.
If the return is amended substantially different from the original return, the three (3) year
prescriptive period shall be counted from the filing of the amended return.
There is substantial amendment when a new return is filed declaring more losses, which
can only be done either:
1) In reducing gross income, or
2) In increasing the items of deductions claimed.
If the amendment is minimal, the counting of the prescriptive period is still the original
period. (CIR vs. Phoenix Assurance, Inc.’ G.R. L-19727, May 20, 1965, 14 SCRA 52
52.
P68,000 x 50%
P34,000
53.
P34,000 divided by 65% x 35
P18,308
55.
Selling price
Less: Cost
Capital gain
Capital gains tax 250,000 x 15%
56.
Retirement benefits received from his previous employer that maintained
a reasonable private pension plan (he served the company for 12 years)
57.
58.
60.
P750,000
500,000
P250,000
P 37,500
Lump sum benefits received from SSS
Interest income from bonds with a maturity period of 7 years
Interest on long term deposits with maturity period of 5 years
Total
P250,000
200,000
20,000
30,000
P500,000
Prize in a sports tournament sponsored by a group of businessmen
promoting health products (P50,000 X 20%)
Share in the net income of a business partnership
(P100,000 X 10%)
Philippine Lotto winnings (500,000 x 20%)
Total
P 10,000
10,000
100,000
P120,000
Gross professional income, net of 15% withholding tax (P680,000/85%)
Less: Professional expenses
Net income from operation
Add: Non-operating income
Gain from sale of bonds (maturity period is 4 years)
Taxable income
P800,000
300,000
500,000
Regular income tax
Final tax on passive income
Total
P 57,500
120,000
P177,500
10,000
P510,000
Note: The income tax expenses include the regular income tax, final tax on passive income
and capital gains tax, if any.
61.
Real and personal properties (14,000,000 + 2,000,000)
Family home
Gross estate
62.
Unpaid real estate tax
Loss of a personal property due to theft
Transfer for public use
Total
Page 16 of 17
P16,000,000
30,000,000
P46,000,000
P2,000,000
500,000
500,000
P3,000,000
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
lOMoARcPSD|4784205
TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
23 April 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
63.
Family home
Standard deduction
Total
P 10,000,000
5,000,000
P 15,000,000
64.
34 Gross estate
35 Less: Ordinary deductions
36 Estate after ordinary deductions
37D Less: Total special deductions
40 Net taxable estate
P 46,000,000
3,000,000
43,000,000
15,000,000
P 28,000,000
65.
36
37
38
15
16
66.
Gross sales
Less: Sales returns and allowances
Sales discount
Net sales
Tax rate
Output tax
Total net gifts
Less: Exempt gift
Total net gifts subject to tax
Applicable donor’s tax rate
Total donor’s tax due
P 500,000
250,000
250,000
6%
P 15,000
P 150,000,000
10,000,000
4,500,000
14,500,000
P 135,500,000
12%
P 16,260,000
67.
Reference: Section 3 B, Revenue Regulations No. 12-2012
Only one vehicle for land transport is allowed for the use of an official or employee, the
value of which should not exceed P2,400,000.
68.
Reference: Section 3 C, D and E, Revenue Regulations No. 12-2012
C. No depreciation shall be allowed for yachts, helicopters, airplanes and/or aircrafts, and
land vehicles which exceed the threshold amount, unless the taxpayer’s main line of
business is transport operations or lease of transportation equipment and the vehicles
purchased are used in said operations.
D. All maintenance expenses on account of non-depreciable vehicles for taxation
purposes are disallowed in its entirety.
E. The input taxes on the purchase of non-depreciable vehicles and all input taxes on
maintenance expenses are likewise disallowed for taxation purposes.
69.
Office equipment (1,100,000 x 12% divided 60 x 3)
Purchase of goods for sale (30,000,000 12%)
Operating expenses (5,000,000 x 40% x 12%)
Office supplies purchased (900,000 x 12%)
Total
70.
Output tax
Less: Input taxes
VAT payable
Less: VAT payments for January and February
Tax payable
Page 17 of 17
P
6,600
3,600,000
240,000
108,000
P3,954,600
P16,260,000
3,954,600
12,305,400
7,000,000
P5,305,400
0915-2303213  resacpareview@gmail.com
Downloaded by Jared Tolosa (jared.tolosa15@gmail.com)
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Classes for De La Salle University Dasmariñas  Week No. 1
TAXATION
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX101: ESTATE TAXATION
A. ESTATE TAX RATE
Effective January 1, 2018
(Under TRAIN)
There shall be levied, assessed, collected and paid upon the transfer of
the net estate of every decedent, whether resident or nonresident of the
Philippines, a tax at the rate of six percent (6%) based on the value of such
net estate.”
B. GROSS ESTATE
Composition of Gross Estate
Real properties
Personal properties
Taxable transfers
Resident or citizen decedent
Wherever situated
Wherever situated
Wherever situated
C. GROSS ESTATE OF MARRIED DECEDENTS
Conjugal partnership of gains
(CPOG)
Exclusive properties of the
Included
decedent
Common properties
Included
Exclusive properties of the
Not included
surviving spouse
Non-resident alien decedent
Situated in the Philippines
Situated in the Philippines
Situated in the Philippines
Absolute community of
properties (ACOP)
Included
Included
Not included
D. COMPOSITION OF THE GROSS ESTATE OF MARRIED DECEDENTS
1. Conjugal Partnership of Gains (Relative Community of Properties)
Exclusive properties
Conjugal properties
a. Properties brought into the marriage a. Properties acquired by onerous title during the marriage at the
as either of the spouse’s own;
expense of the common fund, whether the acquisition be for the
partnership, or for only one of the spouses;
b. Properties acquired by gratuitous
b. Properties obtained from labor, industry, work or profession of
(or lucrative) title during the
either or both of the spouses;
marriage;
c. Properties acquired by right of
c. The fruits, natural, industrial or civil, due or received during the
redemption or by exchange with
marriage from the common property, as well as the net fruits
other property belonging to only
from the exclusive property of each spouse;
one of the spouses;
d. Properties acquired with exclusive
d. The share of either spouse in the hidden treasure which the law
money of either spouse.
awards to the finder or owner of the property where the treasure
is found;
e. Properties acquired through occupation such as fishing and
hunting;
f. Livestock existing upon the dissolution of the partnership in
excess of the number of each kind brought to the marriage by
either spouse;
g. Properties acquired by chance, such as winnings from gambling
and betting.
2. Absolute Community of Properties
Exclusive properties
a. Properties acquired during the
marriage by gratuitous (or lucrative) title by either spouse, and the fruits as
well as the income thereof, if any, unless it is specifically provided by the
donor, testator or grantor that they shall form part of the community;
b. Property for personal and exclusive use of either spouse, however, jewelry
shall form part of the community property;
c. Property acquired before the
marriage by either spouse who has legitimate descendants by a former
marriage, and the fruits as well as the income, if any, of such property.
Page 1 of 8
Community Properties
a. All properties owned
by spouses at the time
of the celebration of
marriage or acquired
thereafter.
0915-2303213  www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX101
Week 1: ESTATE TAX
3. Exercise: The decedent was married at the time of death. He was survived by his wife and children.
Indicate proper classification with a check mark.
EXCL- CONJEXCLCOMMFMV
CPOG
CPOG
ACOP
ACOP
Cash owned by the decedent before the marriage
P5,000,000
Real property inherited by the decedent during the
6,000,000
marriage
Personal property received by the wife as gift before
400,000
the marriage
Property acquired by decedent with cash owned
600,000
before the marriage
Personal effects of the decedent purchased with the
500,000
exclusive money of the wife
Jewelry purchased with cash of the surviving spouse
1,000,000
earned before marriage
Property unidentified when and by whom acquired
1,200,000
Cash representing income received during the
2,000,000
marriage from exclusive property
Property acquired before marriage by the decedent
who has legitimate descendants by a former
3,000,000
marriage
E. DETERMINATION OF THE VALUE OF THE ESTATE
Valuation
a. Generally – Fair market value at the time of decedent’s death;
Rules
b. Real property – Higher between fair market value, BIR (zonal value) and fair market value,
Provincial and City assessor (assessed value);
c. Personal properties – Recently purchased – Purchase price
Not recently purchased – Pawn value x 3
d. Securities (shares of stock)
1) Traded in the local stock exchange – Mean between the highest and lowest quotations
on valuation date or on a date nearest the valuation date;
2) Not traded in the local stock exchange
a) Common (ordinary) shares – Book value on valuation date or on a date nearest the
valuation date;
b) Preferred (preference) shares – Par value
F. RULE OF RECIPROCITY
1. Properties covered
by reciprocity
2. Basic rules
3. Properties
considered situated
in the Philippines
(NON RESIDENT ALIEN DECEDENT)
Intangible personal property situated in the Philippines owned by non-resident
alien decedent.
When there is reciprocity – The intangible personal property of non-resident
alien situated in the Philippines are not included in the gross estate.
When there is no reciprocity – The intangible personal property of nonresident alien situated in the Philippines are included in the gross estate.
The following shall be considered as situated in the Philippines (among
others):
a. Franchise which must be exercised in the Philippines;
b. Shares, obligations or bonds issued by any corporation or sociedad
anonima organized and constituted in the Philippines in accordance with
its law;
c. Shares, obligations or bonds issued by any foreign corporation 85%
of the business of which is located in the Philippines;
d. Shares, obligations or bonds issued by any foreign corporation if
such shares, obligations or bonds have acquired a business situs in
the Philippines;
e. Shares or rights in any partnership, business or industry established
in the Philippines.
G. FAMILY HOME
1. The family home, constituted jointly by the husband and the wife or by an unmarried head of the
family, is the dwelling house where they and their family reside and the land on which it is situated.
2. The family home must be the actual residential home of the decedent and his family at the time of his
death, as certified by the Barangay Captain of the locality the family home is situated.
3. The total value of the family home must be included as part of the gross estate of the decedent.
H. OTHER ITEMS
1. Proceeds of life
insurance
Page 2 of 8
Generally taxable, except when:
a. A third person is irrevocably designated as beneficiary;
b. The proceeds/benefits come from SSS or GSIS;
c. The proceeds come from group insurance.
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX101
Week 1: ESTATE TAX
Assumption when
designation is not
stated
2. Claims against
insolvent persons
3. Amount received by
heirs under R.A. No.
4917
I.
TAXABLE TRANSFERS
1. Examples of taxable
transfer
2. Motives that
preclude a transfer
from the category
of one made in
contemplation of
death
J.
When the designation of the beneficiary is not stated or is not clear, the
Insurance Code assumes revocable designation.
a. The full amount of the claims is included in the gross estate.
b. The uncollectible amount of the claims is deducted from the gross estate.
a. R.A. No. 4917 is entitled ‘An Act Providing That Retirement Benefits of
Employees of Private Firms Shall Not be Subject to Attachment, Levy,
Execution, or Any Tax Whatsoever’.
b. The amount received by heirs from decedent’s employer as a consequence of
the death of the decedent-employee is included in the gross estate of the
decedent.
c. The amount above is also allowed as deduction from gross estate.
a. Transfer in contemplation of death – motivated by thought of death although
death may not be imminent;
b. Revocable transfer – the enjoyment of the property may be altered,
amended, revoked or terminated by the decedent;
c. Transfer passing under general power of appointment;
d. Transfer with retention or reservation of certain rights;
e. Transfer for insufficient consideration.
a. To relieve donor from the burden of management;
b. To save income or property taxes;
c. To settle family litigated and un-litigated disputes;
d. To provide independent income for dependents;
e. To see the children enjoy the property while the donor is alive;
f. To protect the family from hazards of business operations; and
g. To reward services rendered.
EXEMPTIONS/EXCLUSIONS
1. Exemptions of
a. The merger of usufruct in the owner of the naked title;
certain
b. The transmission or delivery of the inheritance or legacy by the fiduciary heir
acquisitions and
or legatee to the fideicommissary;
transmissions
c. The transmission from the first heir, legatee or donee in favor of another
beneficiary in accordance with the desire of the predecessor; and
d. All bequest, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which inures to the
benefit of any individual: Provided, however, that not more than 30% of the
said bequest, devises, legacies or transfers shall be used by such institutions
for administration purposes.
2. Exclusions from a. Amount received as war damages;
gross estate under b. Amount received from US Veterans Administration;
special laws
c. Benefits from GSIS and SSS.
K. DEDUCTIONS ALLOWED TO ESTATE
1. Ordinary Deductions Under TRAIN
Resident or citizen decedent
a. Losses
Allowed actual amount
b. Indebtedness (Claims
against the estate)
Allowed actual amount
c. Taxes
Allowed actual amount
d. Claims against insolvent
Allowed uncollectible amount due to
debtor
insolvency
e. Unpaid mortgage
Allowed actual amount
f. Property previously taxed
(vanishing deduction)
Allowed amount per computation
g. Transfer for public
Allowed actual amount
purpose
2. Special Deductions Under TRAIN
Resident or citizen decedent
a. Family home
Allowed deduction P10,000,000
maximum
b. Standard deduction
Allowed deduction P5,000,000
c. Amount received under
R.A. 4917
Allowed actual amount as
deduction
3. Other Deduction Under TRAIN
Page 3 of 8
Non-resident alien decedent
Allowed actual amount (pro-rated)
Allowed actual amount (pro-rated)
Allowed actual amount (pro-rated)
Allowed uncollectible amount due
to insolvency (pro-rated)
Allowed actual amount (pro-rated)
Allowed amount per computation
Allowed actual amount
Non-resident alien decedent
Not allowed as deduction
Allowed deduction P500,000
Not allowed as deduction
TAX101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 1: ESTATE TAX
Share in the conjugal
property
L.
Resident or citizen decedent
Allowed as deduction to married
decedents
Non-resident alien decedent
Allowed as deduction to married
decedents
DEDUCTIONS AMPLIFIED
a. Losses
Requisites for
a) Incurred during the settlement of the estate;
deduction and b) Arising from fires, storms, shipwreck, or other casualties,
amount
or from robbery, theft or embezzlement;
deductible
c) Not compensated for by insurance or otherwise;
d) Not claimed as deduction for income tax purposes in an
income tax return;
e) Incurred not later than the last day for the payment of the
estate tax.
Actual amount of loss
Exercise: Wonyoung, a Filipino resident, died on November 5, 2021, and his estate incurred losses:
First loss: From fire on February 2, 2021 of improvement on his property, not compensated by
insurance, P500,000;
Second loss: From flood on February 25, 2022 of household furniture also not compensated by
insurance, P300,000.
Third loss: From sale on February 20, 2022 of a property included in the gross estate, P100,000.
Fourth loss: From theft on April 5, 2022, P300,000, 70% compensated by insurance
Fifth loss: From robbery on May 5, 2022, P150,000, claimed as deduction from gross income
The deductible loss is: P__________________
b. Indebtedness (Claims against the estate)
Requisites for
a) The liability represents a personal obligation of the deceased
deduction and
existing at the time of his death;
amount
b) The liability was contracted in good faith and for adequate and
deductible
full consideration in money or money’s worth;
c) The claim must be a debt or claim which is valid in law and
enforceable in court;
d) The indebtedness must not have been condoned by the
creditor or the action to collect from the decedent must not
have prescribed.
e) At the time the indebtedness was incurred the debt instrument
was duly notarized; and
f) If the loan was contracted within three (3) years before the
death of the decedent, the administrator or executor shall
submit a statement showing the disposition of the proceeds of
the loan
c. Unpaid taxes
Requisites for
deduction and
amount
deductible
The
tax
must
have
accrued before the death
of the decedent
Debts or demands of
pecuniary nature
which could have
been enforced
against the deceased
in his lifetime and
could have been
reduced to simple
money terms
Unpaid taxes that accrued before the decedent’s death but
not including:
a) any income tax upon income received after the death of
the decedent, or
b) property taxes not accrued before his death,
c) or any estate tax.
d. Claims against insolvent persons
Requisites for
a) Value of claims is included in the gross estate;
deduction and
b) The incapacity of the debtors to pay their obligation is
amount deductible
proven.
Claims that are not
collectible
Exercise: Escolastica died with a claim against Juanico. Juanico has properties worth P250,000 and
obligations of P350,000. Included in the obligations of Juanico are P50,000 unpaid taxes owed to the
Government of the Philippines and P90,000 payable to Ms. Escolastica.
The deductible claim against insolvent debtors is P_____________________
e. Unpaid mortgage
Requisites for
a) The fair market value of the mortgaged property without
deduction and
deducting the mortgage indebtedness has been initially included
amount
as part of the gross estate;
deductible
b) The mortgage indebtedness was contracted in good faith and for
an adequate and full consideration.
2. Transfer for Public Use
Requisite for deductibility
Page 4 of 8
Amount deductible
Amount of unpaid
mortgage
Deducted from
TAX101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 1: ESTATE TAX
The transfer must be testamentary in
character or by way of donation mortis
causa executed by the decedent before his
death
Amount of all bequest, legacies, devises,
or transfers to or for the use of the
Government of the PH, or any political
subdivision for exclusively public purpose
3. Property Previously Taxed (Vanishing Deduction)
Rates (based on
Requisites for deduction
time gap)
a. The date of death of the present
100% - if not more
decedent must not exceed 5 years
than 1 year
from the date of death of the prior
decedent or date of donation.
80% - if more than
b. The property can be identified as the
1 year but not
one received from prior decedent, or
more than 2 years
from the donor, or the property
acquired in exchanged for the original
60% - if more than
property so received.
2 years but not
c. The property must have formed part
more than 3 years
of the prior decedent’s gross estate
situated in the Philippines or been
40% -if more than
included in the total amount of the
3 years but not
gifts of the donor made within 5 years
more than 4 years
prior to the present decedent’s death.
d. The estate tax must have been finally
20% - if more than
determined and paid by the prior
4 years but not
decedent or the donor’s tax must have more than 5 years
been paid by the donor
e. No vanishing deduction was allowed in
determining the value of the net estate
of the prior decedent
Exclusive
property
Format of computation
Value to take
Less: Mortgage paid by present
decedent
Initial basis
Less: Proportional deduction
(Initial basis/Gross estate
x Deductions)
Final basis
Rate
Vanishing deduction
P xxx
xxx
xxx
xxx
xxx
xxx
xxx
Notes:
1) Under conjugal partnership of gains
vanishing is a deduction from exclusive
property.
2) Under absolute community of property,
vanishing deduction may be deducted
from exclusive property or community
property.
f. Exercise on vanishing deduction
a. Decedent was a citizen of the Philippines who was single at the time of death. Compute the vanishing
deduction based on the following information that were made available:
Properties inherited two-and-a-half years before death:
Located outside the Philippines
P3,000,000
Located in the Philippines
FMV, when inherited
6,500,000
FMV, time of death
7,000,000
Unpaid mortgage on the property when inherited
1,500,000
Unpaid mortgage on the property at the time of death
1,000,000
Property acquired through own labor
2,000,000
Losses, indebtedness, taxes, etc. (excluding the unpaid mortgage of P1,000,000)
800,000
Transfer for public use (included in property acquired through own labor)
970,000
Medical expenses
800,000
4. Family Home Deduction
Conditions for the allowance of family home
deduction
1) The family home must be the actual residential
home of the decedent and his family at the time
of his death, as certified by the Barangay Captain
of the locality the family home is situated;
2) The total value of the family home must be
included as part of the gross estate of the
decedent; and
3) Allowable deduction must be in an amount
equivalent to the current fair market value of the
family home as declared or included in the gross
estate, or to the extent of the decedent’s interest
(whether conjugal/community or exclusive
property), whichever is lower, but not exceeding
P10,000,000 (old deduction was P1,000,000.)
Amount deductible
1) Exclusive property
2) Conjugal/
community property
3) Partly exclusive
property, partly
conjugal/
community property
Note: In all three (3) cases, the maximum amount of
family home deduction is P10,000,000.
5. Standard Deduction Under TRAIN (effective January 1, 2018)
Resident/citizen decedent
Amount deductible
P5,000,000
6. Amount Received by Heirs Under R.A. No. 4917
Requisite for deduction
Page 5 of 8
Full value included in the
gross estate
One-half (1/2) of the value
included in the gross
estate
Exclusive part (full value)
Conjugal/community part
(1/2 x value)
Non-resident alien decedent
P500,000
Amount deductible
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX101
Week 1: ESTATE TAX
The amount of the separation benefit is
included as part of the gross estate of the
decedent
7.
Any amount received by the heirs from decedent’s
employer as a consequence of the death of the employeedecedent
Charges Against Exclusive or Conjugal/Communal Property Under the Family Code
a. Support of spouses, their common children and legitimate children of either spouse
b. All debts and obligations contracted during the marriage by the designated
administrator-spouse for the benefit of the conjugal partnership of gain or
community, or by both spouses, or by one spouse with the consent of the other
c. Debts and obligations contracted by either spouse without the consent of the other to
the extent that the family may have been benefited
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the
conjugal/community property
e. All taxes and expenses for mere preservation made during the marriage upon the
separate property of either spouse used by the family
f. Expenses to enable either spouse to commence or complete a professional or
vocational course, or other activity for self-improvement
g. Ante nuptial debts of either spouse insofar as they have redounded to the benefit of
the family
h. Value of what is donated or promised by both spouses in favor of their legitimate
children for the exclusive purpose of commencing or completing a professional or
vocational course or other activity for self-improvement
i. Expenses of litigation between the spouses unless the suit is found to be groundless
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family
k. Support of illegitimate children of either spouse
l. Liabilities incurred by either spouse by reason of crime or quasi-delict
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other
kind of gambling whether permitted or prohibited by law
8.
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
EXCLUSIVE
EXCLUSIVE
EXCLUSIVE
EXCLUSIVE
Share of the Surviving Spouse
Gross conjugal/community properties
Less: Conjugal/community deductions
Net conjugal/community properties (NCP)
Share of surviving spouse (1/2 x NCP)
M. Tax Credit for Estate Tax
1. Entitled to tax credit
2. Deducted from estate
tax due
3. Limitations on credit
a. Only one foreign
country is
involved
b. Two or more
foreign countries
are involved
P xxx
xxx
P xxx
P xxx
Paid to a Foreign Country
Resident or citizen decedents
The estate tax imposed in the Tax Code shall be credited with the amounts of
any estate tax imposed by the authority of a foreign country.
Limit: Net estate, foreign/Entire net estate x Philippine estate tax or
Actual foreign estate tax, whichever is lower
Limit (a) – Per foreign country : Net estate, per foreign country/Entire net
estate x Philippine estate tax due or
Limit (b) – By total: Net estate (all foreign countries)/Entire net estate x Phil.
estate tax due
whichever is lower
N. Administrative Provisions
1. Notice of Death Under TRAIN – No longer required
2. Estate Tax Returns Under TRAIN
a. Estate tax returns
1) In all cases of transfer subject to tax;
are filed
2) Where the said estate consists of registered or registrable property
(regardless of the value of the gross estate)
b. Persons to file
1) Executor
returns
2) Administrator or
3) Any of the legal heirs
c. Information shown in
1) The value of the gross estate of the decedent at the time of his death, or in
the returns
case of non-resident alien of that part of his gross estate situated in the
Philippines;
2) The deductions allowed from the gross estate;
3) Such part of such information as may at the time be ascertainable and such
supplemental data as may be necessary to establish the correct taxes;
d. Time of filing returns
Within one year from decedent’s death
e.
Returns
to
be When the estate tax returns show a gross value exceeding P5,000,000
supported
with
statements certified
Page 6 of 8
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX101
Week 1: ESTATE TAX
f.
to by a CPA
Contents
of
the
statements certified
to by a CPA
g.
Filing of certified
copy of the schedule
of partition and the
order of the court
ordering the same
h. Extension for filing
the returns
i. Place of filing of the
returns
1) Itemized assets of the decedent with their corresponding gross value at the
time of his death, or in case of non-resident alien, of that part of his estate
situated in the Philippines;
2) Itemized deductions;
3) The amount of tax due whether paid or still due and outstanding
Within 30 days after the promulgation of such order
The Commissioner can, in meritorious cases, extend the filing of returns for a
period not exceeding 30 days.
In case of resident decedent:
a) Accredited agent bank;
b) Revenue District Officer;
c) Collection Officer, or
d) Duly authorized Treasurer of the city or municipality where the decedent
was domiciled at the time of death.
2) In case of non-resident decedent:
a) Revenue District Office where the executor or administrator is registered;
b) Revenue District Office having jurisdiction over the executor or
administrator’s legal residence (if executor or administrator is not
registered);
c) Office of the Commissioner (RDO No. 39 – South Quezon City) (if the
estate does not have an executor or administrator in the Philippines)
3. Exercise: Decedent died January 1, 2020. Determine whether or not notice of death, estate tax
return or statement certified by a CPA need to be filed (Y/N)
Estate
Statement
Notice
tax
certified by
of death
return
CPA
Case 1 – Gross estate is P16,000,000; Deductions, P11,000,000
2 – Gross estate is P4,000,000; Deductions, P6,000,000
3 – Gross estate is P2,000,000, Deductions, P600,000
(NRA decedent)
4– Gross estate is P15,00,000 comprising of car, land and
shares of stock; Deductions, P10,000,000
5 – Gross estate is P5,000,000; Deductions are
P1,200,000 (NRA decedent)
6 – Gross estate is P5,500,000; Deductions are
P1,000,000 (NRA decedent)
4. Payment of Tax Under TRAIN (effective January 1, 2018)
a. Time of
At the time the estate tax returns are filed
payment
b. Extension of
1) Estate is settled through the courts – not to exceed 5 years
time of
2) Estate is settled extrajudicially – not to exceed 2 years
payment
c. Requirement of
If an extension is granted, the Commissioner or his duly authorized representative
bond if
may require the executor, or administrator, or beneficiary, as the case may be, to
extension is
furnish a bond in such amount, not exceeding double the amount of the tax and with
granted
such sureties as the Commissioner deems necessary, conditioned upon the payment
of the said tax in accordance with the terms of the extension.
d. Extension of
When there is negligence, intentional disregard of rules and regulations and fraud on
payment not
the part of the taxpayer.
allowed
e. Liability for
1) The estate tax shall be paid by the executor or administrator before the delivery of
payment
the distributive share in the inheritance to any heir or beneficiary;
2) Where there are two or more executors or administrators, all of them are severally
liable for the payment of tax;
3) The executor or administrator of an estate has the primary obligation to pay the
estate tax but the heir or beneficiary has subsidiary liability for the payment of that
portion of the estate tax which his distributive share bears to the value of the total
net asset.
f. Payment in
1) In case the available cash of the estate is insufficient to pay the total estate tax
installment
due, payment by installment shall be allowed within two (2) years from statutory
date for its payment without civil penalty and interest.
2) In case of lapse of two years without the payment of the entire tax due, the
Page 7 of 8
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX101
Week 1: ESTATE TAX
3)
g. Modes of
payment
1)
2)
3)
4)
5)
remaining balance thereof shall be due and demandable subject to the applicable
penalties and interest reckoned from the prescribed deadline for filing the return
and payment of the estate tax.
No civil penalties or interest may be imposed on estates permitted to pay the
estate tax due by installment. Nothing, however, prevents the Commissioner from
executing enforcement action against the estate after the due date of the estate tax
provided that all the applicable laws and required procedures are
followed/observed.
Payment through Authorized Agent Bank (AAB)
Payment through Tax Debit Memo (TDM) (not acceptable as payments for
withholding taxes, fringe benefit tax, and for taxes, fees and charges collected
under special schemes or procedures or programs of the Government or BIR)
Payment through E-Payment System
Payment directly to the BIR
Payment through creditable withholding taxes
5. Acts Requiring Certification from the Commissioner that the Estate Tax Has been Paid
Acts requiring
1. Delivery of distributive shares to the heirs;
certification
2. Registration in the Registry of Deeds of transfer of inherited real property or real
rights;
3. Payments of debt by decedent’s debtor to the heirs, legatees, executor or
administrator of the creditor-decedent;
4. Transfer of inherited shares, rights or bonds;
5. Withdrawal from decedent’s bank deposit (allowed subject to final withholding tax
of 6%, withdrawal slip shall contain a statement that all joint depositors are still
living at the time of withdrawal by any one of the joint depositors and such
statement shall be under oath by the said depositor)
6. Accomplishing Tax Returns and Forms (BIR Form No. 1801)
a. BIR Form No. and
BIR Form No. 1801 shall be filed in triplicate (per the BIR form.)
number of copies
a. Payment and
1) Upon filing of Estate Tax Return, the estate tax due shall be paid to the
issuance of
Authorized Agent Bank (AAB) where the return is filed.
Revenue Official
2) In places where there are no AABs, payment shall be made directly to the
Receipt
Revenue Collection Officer or duly authorized City or Municipal Treasurer who
shall issue Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower portion of the return must
be properly machine-validated and stamped by AAB to serve as the receipt of
payment.
4) The machine validation shall reflect the date of payment, amount paid and
transaction code, and the stamp mark shall show the name of the bank,
branch code, teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank debit advice or credit
document, whichever is applicable, as additional proof of payment.
END
Page 8 of 8
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Classes for De La Salle University Dasmariñas  Week No. 1
TAXATION
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX-201: DONOR’S TAX
A. Donor’ Tax Rates
The tax for each calendar year shall be six percent (6%) computed on the basis of the total gifts in
excess of Two hundred fifty thousand pesos (P250,000) exempt gift made during the calendar year.
Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign
purposes shall be governed by the Election Code, as amended.
B. Composition of Gross Gifts
Personal properties
Real properties
Resident or citizen donor
Wherever situated
Wherever situated
Non-Resident Alien Donor
Situated in the Philippines
Situated in the Philippines
C. Rule of Reciprocity
Properties covered
Intangible personal properties situated in the Philippines given as gifts by nonby the rule
resident alien donor.
Basic rules:
a. When there is reciprocity – The intangible personal properties situated in the
Philippines given as gifts by a non-resident alien donor are not subject to donor’s tax.
b. When there is no reciprocity – The intangible personal properties situated in the
Philippines given as gifts by a non-resident alien donor are subject to donor’s tax.
D. Transfer for Less Than Adequate and Full Consideration
1. The rule: Where property, other than a real property that has been subjected to the final capital gains tax,
is transferred for less than an adequate and full consideration in money or money’s worth, then the amount
by which the fair market value of the property at the time of the execution of the Contract to Sell or
execution of the Deed of Sale which is not preceded by a Contract to Sell exceeded the value of the agreed
or actual consideration or selling price shall be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.
Personal properties
Real properties
Ordinary assets
Subject to donor’s tax
Subject to donor’s tax
Capital assets
Subject to donor’s tax
Not subject to donor’s tax
2. A sale, exchange, or other transfer of property made in the ordinary course of business (a transaction
which is a bona fide, at arm’s length, and free from any donative intent), will be considered as made for an
adequate and full consideration in money or money’s worth.”
E. Valuation of Gifts Made in Property
Property Donated
Valuation
Gift is made in property
Fair market value at the time of the gift
Real property
Provisions in estate tax shall apply to the valuation of said real property.
F. Exemptions of Certain Gifts/Deductions from Gross Gifts
1. Found in the Tax Code Under TRAIN (Effective January 1, 2018)
Resident/citizen
donor
a. Gifts made to or for the use of the National Government or
any entity created by any of its agencies which is not
conducted for profit, or to any political subdivision of the
said Government
Allowed as deduction
b. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution,
accredited
nongovernment
organization,
trust
or
philanthropic organization or research institution or
organization.
Allowed as deduction
Non-resident alien
donor
Notes:
1) In case of gifts made to certain institutions (no. 1 c above), in order to be exempt, not more than 30% of
said gifts shall be used by such donee for administration purposes.
2) For the purpose of the exemption, a 'non-profit educational and/or charitable corporation, institution,
accredited nongovernment organization, trust or philanthropic organization and/or research institution or
organization' is a school, college or university and/or charitable corporation, accredited nongovernment
organization, trust or philanthropic organization and/or research institution or organization, incorporated as
a nonstock entity, paying no dividends, governed by trustees who receive no compensation, and devoting
all its income, whether students' fees or gifts, donation, subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes enumerated in its Articles of Incorporation.
Page 1 of 4
0915-2303213  www.resacpareview.com
TAX-201
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 1: DONOR’S TAX
2. Other deductions
a. Encumbrance on the property donated if assumed by the donee
b. Those specifically provided by the donor as a diminution from the
property donated
Resident or
Citizen Donor
Allowed
Non-Resident
Alien Donor
Allowed
Allowed
Allowed
3. Exempt Donations Under Special Laws. – Donations to:
a. International Rice Research Institute (IRRI);
b. Philippine American Cultural Foundation;
c. Ramon Magsaysay Award Foundation;
d. Philippine Inventors Commission;
e. Integrated Bar of the Philippines (IBP);
f. Development Academy of the Philippines (DAP);
g. National Social Action Council;
h. Aquaculture Department of Southeast Asian Fisheries Development Center of the Philippines (SEAFDEC).
G. The Law That Governs The Imposition Of Donor’s Tax
1. The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter
vivos.
2.
2. The donor’s tax shall not apply unless and until there is a completed gift.
3. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the
donee; it is completed by the delivery, either actually or constructively, of the donated property to the
donee.
4. In order that the donation of an immovable may be valid:
a. It must be made in a public document specifying therein the property donated.
b. The acceptance may be made in the same Deed of Donation or in a separate public document, but it
shall not take effect unless it is done during the lifetime of the donor.
c. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic
form, and this step shall be noted in both instruments.
5. A gift that is incomplete because of reserved powers, becomes complete when either:
(1) the donor renounces the power; or
(2) his right to exercise the reserved power ceases because of the happening of some event or
contingency or the fulfilment of some condition, other than because of the donor’s death.
6. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community
after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s is
subject to donor’s tax.
7. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate
left by the decedent is not subject to donor’s tax, unless specifically and categorically done in favor of
identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate.
8. The law in force at the time of the completion of the donation shall govern the imposition of donor’s tax.
9. For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that
accrues to the donee.
10. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the donee the obligation
to pay the mortgage liability, then the net gift is measured by deducting from the fair market value of the
property the amount of mortgage assumed.
1.
H. Computation of Taxable Net Gift and the Donor’s Tax Due
1. Donations made on or after January I, 1998 shall be subject to the donor’s tax computed in accordance
with the amended schedule of rates prescribed under Section 99 of the National Internal Revenue Code of
1997 (R.A. No. 8424).
2. Donations made on or after January 1, 2018 shall be subject to the donor’s tax under TRAIN (R.A. No.
10963).
3. The computation of the donor’s tax is on a cumulative basis over a period of one calendar year.
4. Husband and wife are considered as separate and distinct taxpayers for purposes of donor’s tax.
5. If what was donated is a conjugal or community property and only the husband signed the deed of
donation, there is only one donor for donor’s tax purposes, without prejudice to the right of the wife to
question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil
Code of the Philippines and the Family Code of the Philippines.
6. With the exception of moderate donations for charity or on occasions of family rejoicing, neither spouse
may donate any community property or conjugal property without the consent of the other.
7. Every donation between the spouses during the marriage shall be void except for moderate gifts, which
the spouse may give each other on the occasion of any family rejoicing, and donation mortis causa.
8. Any provision of law to the contrary notwithstanding, any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign purposes, duly reported to the commission (COMELEC)
shall not be subject to the payment of any gift tax (Sec. 13 R.A. No. 7166).
Exercise: Determine whether or not the following is subject to donor’s tax (Y/N):
a. Husband donated conjugal property with the consent of the wife to charity event (charitable
institution’s administration expenses exceed 30% of the gifts)
Page 2 of 4
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-201
Week 1: DONOR’S TAX
b. Wife donated community property without the consent of the husband on occasion of their
legitimate child’s birthday (amount of gift is moderate)
c. Husband gifted his wife a diamond ring on occasion of her birthday
d. Wife gifted her husband a branded shirt of account of his birthday (amount is moderate)
e. Husband transferred some of his exclusive property to his wife, transfer to take effect after his
death
f. Surviving spouse renounced his share in the conjugal partnership in favor of the heirs of the
deceased spouse
g. An heir renounced his share in the hereditary estate in favor of no one in particular
h. Taxpayer donated to the campaign fund of a candidate, duly reported to the COMELEC
i. Donee failed to indicate his acceptances of the donation before the transferor died
j. Donee signified his acceptance of the donated property known to the donor before he died,
delivery of the donated property done after the transferor died
I. Tax Credit for Donor’s Taxes Paid to a Foreign Country
1. One foreign
Limit
country
Net gift, foreign X Philippine donor’s tax due
Total net gifts
xxx
Actual foreign donor’s tax
xxx
Allowed (lower between actual and limit)
xxx
2. Two or more
Limit (a) – By country
xxx
foreign
Limit (b) – By total
xxx
countries
Limit [lower between limits (a) and (b)]
xxx
Actual total foreign donor’s taxes
xxx
Allowed tax credit (lower between allowed limit and actual total foreign donor’s taxes)
xxx
J. Filing of Return and Payment of Tax
1. Requirement
Any individual who makes any transfer by gift (except those which are exempt from
donor’s tax) shall, for the purpose of donor’s tax, make a return under oath at least in
duplicate (triplicate per BIR Form No. 1800)
2. Contents of the
The return shall set forth:
donor’s tax return
a. Each gift made during the calendar year which is to be included in computing net
gifts;
b. The deductions claimed and allowable;
c. Any previous net gifts made during the same calendar year;
d. The name of the donee; and
e. Such other information as may be required by rules and regulations made pursuant
to law.
3. Time for filing of
return
4. Payment of
donor’s tax
4. Modes of
payment
6. Place of filing of
return
7. Notice of
donation by a
donor engaged
in business
The donor’s tax return shall be filed within thirty (30) days after the date the gift is
made or completed.
The donor’s tax due shall be paid at the same time that the return is filed.
Same as estate tax (See TAX-101 handouts)
a. In case of resident donors:
1) Authorized agent bank;
2) Revenue District Officer;
3) Revenue Collection Officer;
4) Duly authorized Treasurer of the city or municipality where the donor was
domiciled at the time of the transfer.
b. In case of non-resident donors:
1) Philippine Embassy or Consulate where he is domiciled at the time of the transfer,
or
2) Office of the Commissioner (RDO No. 39 –South Quezon City)
Note: Returns filed with Philippine Embassy or Consulate shall be paid thereat.
The donor engaged in business shall give a notice of donation on every donation worth
at least P50,000 to the RDO which has jurisdiction over his place of business within 30
days after receipt of the qualified donee institution’s duly issued Certificate of Donation,
which shall be attached to the said Notice of Donation, stating that not more than 30%
of the said donations/gifts for the taxable year shall be used for administration
purposes.
K. Accomplishing Tax Returns and Forms
1. Separate return
1) A separate return shall be filed by each donor for each gift (donation) made on
different dates during the year reflecting therein any previous net gifts made in the
same calendar year.
Page 3 of 4
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-201
Week 1: DONOR’S TAX
2. Payment and
issuance of
Revenue Official
Receipt
2) Only one return shall be filed for several gifts (donations) by a donor to the different
donees on the same date.
3) If the gift (donation) involves conjugal/community property, each spouse shall file
separate return corresponding to his/her share in the conjugal/community property.
This rule shall likewise apply in the case of co-ownership over the property being
donated.
1) Upon filing of Donor’s Tax Return, the total amount payable shall be paid to the
Authorized Agent Bank (AAB) where the return is filed.
2) In places where there are no AABs, payment shall be made directly to the Revenue
Collection Officer or duly authorized City or Municipal Treasurer who shall issue
Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower portion of the return must be
properly machine-validated and stamped by AAB to serve as the receipt of payment.
4) The machine validation shall reflect the date of payment, amount paid and
transaction code, and the stamp mark shall show the name of the bank, branch code,
teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank debit advice or credit document,
whichever is applicable, as additional proof of payment.
Cases
1. A resident alien donor donated to a Philippine domestic corporation a property located abroad valued at
P500,000. The foreign donor’s tax on the donation was P100,000. A donation earlier within the same
calendar year, was donated to a legitimate daughter, a property valued at P300,000.
How much was the tax payable?
2. On January 15, 2022, Momo gave a piece of land to her brother-in-law who is getting married on February
14, 2022. The assessed value and zonal value of the land were P750,000 and P1,000,000 respectively.
The land had an unpaid mortgage of P200,000, which was not assumed by the donee and an unpaid realty
tax of P10,000 which was assumed by the donee.
Question
1 – What value shall be reflected in the gross gift?
2 - How much shall be the total deductions?
3 – How much was the taxable gift?
4 - How much was the donor’s tax due?
5 - When shall be the due date for the filing of donor’s tax return?
END
Page 4 of 4
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Classes for De La Salle University Dasmariñas  Weeks No. 2-3
TAXATION
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX-301: VALUE-ADDED TAX
1.
VAT-Subject Transactions
Transactions
a. Sale of goods or properties in the course of trade or business
b. Sale of services and lease of properties in the course of trade or business
c. Importation
Tax Base
Gross selling price
Gross receipts
Total landed cost
2. “In the Course of Trade or Business” Defined
The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or
an economic activity including transactions incidental thereto, by any person regardless of whether or not
the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of
its net income and whether or not it sells exclusively to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as defined in the Tax Code rendered in the
Philippines by non-resident foreign persons shall be considered as being rendered in the course of trade or
business.
3. Goods or properties
The term “goods or properties” refers to all tangible and intangible objects which are capable of
pecuniary estimation and shall include, among others:
a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or
business;
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like property or right;
c. The right or the privilege to use any industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.
4.
Sale or exchange of services
Sale or exchange of services means the performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration, whether in kind or in cash, including those performed or
rendered by:
a. Construction and service contractors;
b. Stock, real estate, commercial, customs and immigration brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or repacking goods for others;
g. Proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; (theatres
and movie houses (deleted in TRAIN);
h. Proprietors, operators of restaurants, refreshment parlors, cafes and other eating places, including clubs
and caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or cargoes including persons who transport goods
or cargoes for hire and other domestic common carriers by land, relative to their transport of goods
or cargoes;
l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one
place in the Philippines to another place in the Philippines;
m. Sales of electricity by generation, transmission, and/or distribution companies, including electric
cooperatives;
n. Services of franchise grantees of electric utilities, telephone and telegraph, radio and television
broadcasting and all other franchise grantees, except those under Section 119 of the Tax Code;
o. Non-life insurance companies (except their crop insurance), including surety, fidelity, indemnity and
bonding companies;
p. Similar services regardless of whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties.
The phrase “sale of exchange of services” shall likewise include:
(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan
secret formula or process, goodwill, trademark, trade brand or other like property or right;
(2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or information;
(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph
(2) or any such knowledge or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his employee in connection with the use of property
Page 1 of 20
0915-2303213  www.resacpareview.com
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
or rights belonging to, or the installation or operation of any brand, machinery or other apparatus
purchased from such nonresident person.
(6) The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television
time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of
lease or licensing agreement was executed if the property is leased or used in the Philippines.
5. Computation of VAT Payable (Excess Input Tax)
a. Output tax exceeds input tax at the end of any taxable
quarter
b. Input tax inclusive of input tax carried over from the
previous quarter exceeds output tax
Output tax
Less: Input tax
VAT payable
Output tax
Less: Input tax
Excess input tax
6. Computation of the Tax Base and the Applicable Tax Rates
Transaction
Tax Base
a. Sale of goods
The term "gross selling price" means the total amount of money or
its equivalent which the purchaser pays or is obligated to pay to
the seller in consideration of the sale, barter or exchange of the
goods or properties, excluding the value-added tax. The excise tax,
if any, on such goods or properties shall form part of the gross
selling price.
xxx
xxx
xxx
xxx
( xxx )
(xxx )
Tax Rate
12% or 0%
In computing the taxable base during the month or quarter,
the following shall be allowed as deductions from gross
selling price:
(a) Discounts determined and granted at the time of sale,
which are expressly indicated in the invoice, the
amount thereof forming part of the gross sales duly
recorded in the books of accounts.
Sales discount indicated in the invoice at the time of
sale, the grant of which is not dependent upon the
happening of a future event, may be excluded from
the gross sales within the same month/quarter it was
given.
(b) Sales returns and allowances for which a proper credit
or refund was made during the month or quarter to
the buyer for sales previously recorded as taxable
sales.
b.
Sale
of
real
properties
on
installment
plan
(initial payments do
not exceed 25% of
the gross selling
price)
Gross selling price
Gross sales
Less: Sales returns and allowances
Sales discount
Net sales
Add: Excise tax, if any
Tax base (excluding VAT)
Installment received
Add: Interest
Penalties for late payment
Tax base
xxx
xxx
xxx xxx
xxx
xxx
xxx
xxx
xxx
xxx xxx
xxx
If FMV is greater than selling price:
Actual collection (VAT exclusive)
--------------------------------------------- x Fair Market Value
Agreed consideration (VAT exclusive)
c.
Sale
of
real Selling price stated in the sales documents or fair market value,
properties on cash whichever is higher
basis or deferred
payment plan (initial
payments
exceed
25% of the gross
Page 2 of 20
12% or 0%
12% or 0%
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
selling price)
d. Sale of services
The term "gross receipts" means the total amount of money or its
equivalent representing the contract price, compensation, service
fee, rental or royalty, including the amount charged for materials
supplied with the services and deposits and advanced payments
actually or constructively received during the taxable quarter for
the services performed or to be performed for another person,
excluding value-added tax.
Gross receipts computed as follows:
Cash received (actually and constructively)
Advance payments for future projects
Materials charged with the services
Gross receipts (excluding VAT)
e. Gross receipts for
dealer
in
securities
f. Gross receipts on
the sale of electricity
by
generation,
transmission
and
distribution
companies
g.
7.
Gross
receipts
from
non-life
insurance
companies
12% or 0%
xxx
xxx
xxx
xxx
Note: Receivables, although earned, are not included.
For Dealer in Securities, the term “gross receipts” means gross
selling price less cost of the securities sold.
12% or 0%
Gross receipts computed as follows:
Gross selling price
xxx
Less: Acquisition cost of securities sold for the month or quarter
xxx
Balance
xxx
Add: Other or incidental income
xxx
Gross receipts (excluding VAT)
xxx
Gross receipts shall refer to the following:
12% or 0%
a. Total amounts charged by generation companies for the sale of
electricity and related ancillary services;
b. Total amount charged by transmission by any entity including
National Grid Corporation of the Philippines (NGCP) for
transmission of electricity and related ancillary services;
c. Total amount charged by distribution companies and electric
cooperatives for distribution and supply of electricity and related
electric service. The universal charge passed on and collected by
distribution companies and electric cooperatives shall be excluded
from the computation of the Gross Receipts.
Sale of electricity by generation, transmission by any entity
including the National Grid Corporation of the Philippines
(NGCP),
and
distribution
companies
including
electric
cooperatives shall be subject to 12% VAT on their gross
receipts.
Total premiums collected, whether paid in money, notes, credits or
any substitute for money
12% or 0%
VAT on Importation
a. When importation Importation begins when the carrying vessel or aircraft enters the jurisdiction of
begins and
the Philippines with intention to unload therein.
deemed
terminated
Importation is deemed terminated upon payment of the duties, taxes and other
charges due upon the articles, or secured to be paid, at a port of entry and the
legal permit for withdrawal shall have been granted, or in case said articles are
free of duties, taxes and other charges, until they have legally left the jurisdiction
of the customs.
There shall be levied, assessed and collected on every importation of goods a
b. Tax base
value-added tax equivalent to 12% based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such tax to be paid by the importer
prior to the release of such goods from customs custody: Provided, That
where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus
excise taxes, if any.
In general where customs duties are based on the value (ad valorem)
Total value (i.e. dutiable value-cost, insurance, freight)
Add: Customs duties
Page 3 of 20
xxx
xxx
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
c. Tax rate
Excise tax
Other charges prior to release of goods from Customs custody
Tax Base
xxx
xxx
xxx
In case where customs duties is based on volume or quantity (specific)
Total landed cost
Add: Excise tax
Tax Base
xxx
xxx
xxx
12%
8. Output VAT
a. Meaning of output tax
b. Determination of output
tax
Output tax means the value-added tax on sale or lease of taxable goods
or properties or services by any person registered or required to register.
In a sale of goods or properties, the output tax is computed by
multiplying the gross selling price by the regular rate of VAT.
c. Exercises
1) The following data are taken from sale of a real estate dealer on January 2, 2018:
Consideration in the Deed of Sale
Fair market value per tax declaration
Fair market value per BIR
Selling price of an adjacent lot sold on the same date
Payments on the consideration:
January 2, 2018
January 2, 2019
January 2, 2020
P5,000,000
4,800,000
5,200,000
6,000,000
1,000,000
2,000,000
2,000,000
How much is the output tax for January 2, 2018, January 2, 2019 and January 2, 2020 using 12% VAT
rate?
c.
2) A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2018:
Accounts receivable, January 1, 2018
Sales on account for the month of January
Cash sales for the month of January
Accounts receivable, January 31, 2018
Cash purchases for the month of January 2018
P
500,000
1,000,000
300,000
700,000
400,000
How much is the output tax for the month of January, 2018 using 12% rate assuming the taxpayer is a:
a) trader.
b) service provider
3) Mr. K Ganda, not VAT-registered, imported an article from Japan for his personal use. The invoice value
of the imported article was Y1,000,000 (Y1=P0.35). The following were incurred in connection with the
importation:
Insurance
P15,000
Freight
10,000
Postage
5,000
Wharfage dues
7,000
Arrastre charges
8,000
Brokerage fees
25,000
Facilitation fee
3,000
The imported article was subject to P50,000 customs duties and to P30,000 excise tax. How much was
the VAT on importation using 12% rate?
Sources of Output Taxes
Sale of goods or properties
a. Actual regular sales
b. Actual zero-rated sales
c. Deemed sales
9.
Sale of services and lease of properties
a. Actual regular sales
b. Actual zero-rated sales
10. Zero-Rated Sales Defined
A zero-rated sale of goods or properties and services (by a VAT-registered person) is a taxable transaction
for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods,
properties or services, related to such zero-rated sale, shall be available as tax credit or refund in
accordance with the Regulations.
Under TRAIN
Page 4 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
a. Export sales of goods
b. Foreign currency denominated sales
a. Effectively zero-rated sales
Zero-rated
12% regular VAT rate
Zero-rated
11. Zero-Rated Sales of Goods or Properties
a. Export sales of goods
1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership
of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services,
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale and delivery of goods to:
a) Registered enterprises within a separate customs territory as provided under special laws; and
b) Registered enterprises within tourism enterprise zones as declared by the Tourism Infrastructure and
Enterprise Zone Authority (TIEZA) subject to the provisions under Republic Act No. 9593 or The
Tourism Act of 2009. (Vetoed)
3) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export
oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of
the said buyer’s goods and paid for in acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
4) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed
70% of the total annual production;
5) Those considered export sales under the Omnibus Investment Code of 1987 (E. O. No. 226), and other
special laws.
6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations Provided, That the goods, supplies, equipment and fuel shall be
used for international shipping or air transport operations.
b. Sales to persons or entities whose exemption under special laws or international agreements to which
the Philippines is a signatory effectively subjects such sales to zero rate.
12. Zero-rated Sales of Goods or Properties which Shall be Subject to 12% VAT Upon Satisfaction of
Certain Conditions (under the TRAIN)
a. Items subject to the twelve
1) Sale of raw materials or packaging materials to a nonresident buyer
percent (12%) valuefor delivery to a resident local export oriented enterprise to be used
added tax and no longer be
in manufacturing, processing, packing or repacking in the
considered export sales
Philippines of the said buyer’s goods and paid for in acceptable
subject to zero percent
foreign currency and accounted for in accordance with the rules and
(0%) VAT rate
regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale of raw materials or packaging materials to export-oriented
enterprise whose export sales exceed 70% of the total annual
production;
3) Those considered export sales under the Omnibus Investment
Code of 1987 (E. O. No. 226), and other special laws.
1) Successful establishment and implementation of an enhanced VAT
b. Conditions to be satisfied
refund system that grants refunds of creditable input tax within
ninety (90) days from the filing of the VAT refund application with
the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety (90) days from the filing of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
13. Considered Export Sales Under Omnibus Investment Code
“Considered export sales under Executive Order No. 226” shall mean:
a. the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit,
landing certificates, and other commercial documents, of export products exported directly by a
registered export producer, or
b. the net selling price of export products sold by a registered export producer to another export
producer, or to an export trader that subsequently exports the same;
Sales of export products to another producer or to an export trader shall only be deemed export sales
when actually exported by the latter, as evidenced by landing certificates or similar commercial
documents.
Pursuant to EO 226 and other special laws, even without actual exportation, the following shall be
considered constructively exported:
a. sales to bonded manufacturing warehouses of export-oriented manufacturers;
Page 5 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
b.
sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903,
7922 and other similar export processing zones;
c. sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant
to RA 7227;
d. sales to registered export traders operating bonded trading warehouses supplying raw materials in the
manufacture of export products under guidelines to be set by the Board in consultation with the Bureau
of Internal Revenue (BIR) and the Bureau of Customs (BOC);
e. sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities,
of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.
14. Zero-Rated Sales of Services and Lease of Properties
1) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines
which goods are subsequently exported where the services are paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Services other than processing, manufacturing or repacking rendered to a person engaged in business
conducted outside the Philippines or to a non-resident person not engaged in business who is outside
the Philippines when the services are performed the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the BSP;
3) Services rendered to persons or entities whose exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects the supply of such services to zero percent
rate;
4) Services rendered to persons engaged in international shipping or air transport operations, including
lease of property for use thereof: Provided, That these services shall be exclusive for international
shipping or air transport operation;
5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing
goods for an enterprise whose export sales exceed 70% of the total annual production.
6) Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign
country.
7) Sale of power or fuel generated through renewable sources of energy. Provided, however, that zerorating shall not extend to the sale of services related to the maintenance or operation of plants
generating said power.
8) Services rendered to:
a) Registered enterprises within a separate customs territory as provided under special law; and
b) Registered enterprises within tourism enterprise zones as declared by the TIEZA subject to the
provisions under Republic Act No. 9593 or The Tourism Act of 2009. (Vetoed)
9) Services rendered to offshore gaming licensees subject to gaming tax under Section 125-A of the Tax
Code by service providers, including accredited service providers as defined under Section 27(G) (as
amended on 22 September 2021 by RA 11590)
15. Zero-rated sales of Services and Lease of Properties which shall be subject to 12% VAT upon
satisfaction of Certain conditions (under the TRAIN)
a. Items subject to the
1) Processing, manufacturing or repacking of goods for other persons
twelve percent (12%)
doing business outside the Philippines which goods are subsequently
value-added tax and no
exported where the services are paid for in acceptable foreign
longer be considered
currency and accounted for in accordance with the rules and
export sales subject to
regulations of the Bangko Sentral ng Pilipinas (BSP);
zero percent (0%) VAT
2) Services performed by subcontractors and/or contractors in
rate
processing, converting, or manufacturing goods for an enterprise
whose export sales exceed 70% of the total annual production.
1) Successful establishment and implementation of an enhanced VAT
b. Conditions to be satisfied
refund system that grants refunds of creditable input tax within
ninety (90) days from the filing of the VAT refund application with
the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety (90) days from the filing of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
16. Effectively Zero-Rated Sales Defined
Sales of goods or property or services to persons or entities who are tax-exempt under international
agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International
Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate.
17. Deemed Sales Transactions
1) Transfer, use or consumption not in the course of trade or business of goods and properties originally
intended for sale or use in the course of trade or business;
2) Distribution or transfer to shareholders or investors as share in the profits of VAT-registered person;
3) Distribution or transfer to creditors in payment of debt or obligation;
Page 6 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
4) Consignment of goods if not sold within 60 days following the date of consignment;
5) Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-intrade, supplies or materials as of the date of such retirement or cessation, whether or not the business is
continued by the new owner or successor.
Notes: a) In cases 1) to 4), the tax base is the market value.
b) In case 5), the tax base is the lower between acquisition cost or market value.
The Commissioner of Internal Revenue shall determine the appropriate tax base where the gross selling price is
unreasonably lower than the actual market value (lower by more than 30% of the actual market value).
Exercises:
1) Determine whether the following qualify as VAT-subject deemed sale transactions or not (Y/N)
a. VAT-registered person withdraws goods from his business for his personal use
b. Property dividends which constitute stocks in trade or properties primarily held for sale or lease
declared out of retained earnings
c. Consigned goods returned by the consignee within the 60-day period
d. Goods on hand when a single proprietorship incorporates
e. Proprietor of a single proprietorship sells his entire business
f. Goods on hand upon the dissolution of a partnership and creation of a new partnership which
takes over the business
18. Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons
a. In the case of goods imported into the Philippines by VAT-exempt persons, entities, or agencies which are
subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter
shall be considered the importers thereof who shall be liable for VAT on such importation.
b. The tax due on such importation shall constitute a lien on the goods, superior to all charges or liens,
irrespective of the possessor of said goods.
19. Differences Between Sale of Goods or Properties and Sale of Services or Lease of Properties
Sale of Goods or Properties
Sale of Services or Lease of
Properties
a. Tax base
Gross selling price (accrual basis)
Gross receipts (cash basis)
b. Sources of output
a. Actual regular sales
a. Actual regular sales
tax
b. Actual zero-rated sales
b. Actual zero-rated sales
c. Deemed sales
20. Caselets
a. A VAT-registered corporation has the following data taken from the books of accounts for the first calendar
quarter of 2018:
Gross sales
P 5,000,000
Sales returns and allowances
100,000
Sales discount given at the time of sale
400,000
Sales discount given to cover prompt payment
200,000
Sales allowance to cover roll back in prices
120,000
Cost of sales
1,500,000
Office equipment purchased January 1, 2018
1,100,000
Vehicle for land transport imported January 1, 2018
2,500,000
Purchase of goods for sale, (included in the cost of sales above)
300,000
Operating expenses (40% with passed-on VAT)
500,000
Office supplies purchased (wholly used)
90,000
VAT payments for January and February
40,000
How much is the taxable sales and the output VAT?
b. A VAT-registered service contractor has the following data for the month of January, 2018:
Cash received for buildings completed on January 2018 with a contract price of
P5,000,000
Cash advances received for building to be constructed on February, 2018
Cash received from VAT-registered supplier on materials returned to the supplier
Cash received from owners of building for materials charged with the services
Cash received from owners of building to be used to pay building permit fees
Cash received from VAT-registered sub-contractors for overpayments
Payments to subcontractors for the electrical job
Purchase of supplies and materials used in the construction
How much is the gross receipts for the month and the output tax using 12% VAT?
21. VAT-Exempt Transaction Defined
Page 7 of 20
P3,800,000
300,000
100,000
1,000,000
200,000
300,000
500,000
100,000
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
“VAT-exempt transactions” refer to sale of goods or services which, by their nature, are specifically listed in
and expressly exempted from VAT, under the Tax Code, without regard to the tax status of the party in the
transaction.
Transactions not subject to VAT (output tax) are not entitled to tax credit of VAT (input tax) on purchases.
The person making the exempt sale shall not bill any output tax to his customers because the said
transaction is not subject to VAT.
22. VAT-Exempt Transaction Under Section 109
(a) Sale or importation of:
-agricultural and marine food products in their original state,
-livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption;
and
-breeding stock and genetic materials therefor;
(b) Sale or importation of:
- fertilizers, seeds, seedlings and fingerlings;
- fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported,
used in the manufacture of finished feeds
-(except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals
generally considered as pets);
(c) Importation of personal and household effects
-belonging to residents of the Philippines returning from abroad and
-non-resident citizens coming to resettle in the Philippines;
-Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the
Philippines;
(d) Importation of:
professional instruments and implements,
wearing apparel, domestic animals, and
tools of trade, occupation or employment,
personal and household effects
--belonging to:
persons coming to settle in the Philippines or
Filipinos or their families and descendants who are now residents or citizens of other countries, such
parties hereinafter referred to as overseas Filipinos,
in quantities and of the class suitable to the profession, rank or position of the persons importing said
items,
for their own use and not for barter or sale, accompanying such persons, or arriving within a reasonable
time:
Provided, That the Bureau of Customs may, upon the production of satisfactory evidence that such
persons are actually coming to settle in the Philippines and that the goods are brought from their former
place of abode, exempt such goods from payment of duties and taxes:
Provided, further, That vehicles, vessels, aircrafts, machineries and other similar goods for use in
manufacture, shall not fall within this classification and shall therefore be subject to duties, taxes and
other charges;
(e) Services subject to percentage tax;
(f) Services by agricultural contract growers and
milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
(g) Medical, dental, hospital and veterinary services, except those rendered by professionals;
(h) Educational services rendered by:
-private educational institutions, duly accredited by DepEd, CHED and Technical Education and Skills
Development Authority (TESDA), and
-those rendered by government educational institutions;
(i) Services rendered by individuals pursuant to an employer-employee relationship;
(j) Services rendered by regional or area headquarters established in the Philippines by multinational
corporations which act as supervisory, communications and coordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;
(k) Transactions which are exempt
-under international agreement to which the Philippines is a signatory or
-under special laws except those granted under PD No. 529
(l) Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development
Authority to their members as well as sale of their produce, whether in its original state or processed form,
to non-members; their importation of direct farm inputs, machinery and equipment, including spare parts
thereof, to be used directly and exclusively in the production and/or processing of their produce;
Page 8 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the
agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g., trader),
then only those sales to its members shall be exempted from VAT; It is to be reiterated, however, that sale
or importation of agricultural food products in their original state is exempt from VAT irrespective of the
seller and buyer thereof, pursuant to Subsection (a) hereof;
(m) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good
standing with the Cooperative Development Authority;
(n) Sales by non-agricultural, non-electric and non-credit cooperatives duly registered and in good standing
with the Cooperative Development Authority; Provided, That the share capital contribution of each
member does not exceed P15,000 and regardless of the aggregate capital and net surplus ratably
distributed among the members;
(o) Export sales by persons who are not VAT-registered;
(p) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of
trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act
No. 7279, otherwise known as the Urban Development and Housing Act, residential lot valued at
P1,500,000 and below, house and lot, and other residential dwellings valued at P2,500,000 and below:
Provided, That beginning January 1, 2021, the VAT exemption shall only apply to sale of real properties not
primarily held for sale to customers or held for lease in the ordinary course of trade or business, sale of real
property utilized for socialized housing as defined by Republic Act No. 7279, sale of house and lot, and other
residential dwellings with selling price of not more than P2,000,000:
Provided, further, That every three (3) years thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index, as published by the Philippine Statistics Authority (PSA);
Note: Sale of parking lot in a condominium is a separate and distinct transaction and is not covered by the
rules on threshold amount not being a residential lot, house and lot or a residential dwelling, thus,
should be subject to VAT regardless of the amount of selling price.
(q) Lease of residential units with a monthly rental not exceeding P15,000;
(r) Sale or importation, printing or publication of books and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of paid advertisement; (see amendment of CREATE Act below)
(s) The transport of passengers by international carriers;
(t) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international transport operations; Provided, however, that the
exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be
subject to the requirements on restriction on vessel importation and mandatory vessel retirement
program of Maritime Industry Authority (MARINA);
(u) Importation of fuel, goods and supplies by persons engaged in international shipping and air transport
operations. The fuel, goods and supplies shall be used for international shipping or air transport
operations. Thus, said fuel, goods and supplies shall be used exclusively or shall pertain to the transport
of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice versa, without
docking or stopping at any other port in the Philippines unless the docking or stopping at any other
Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or
to load passengers and/or cargoes bound for abroad: Provided, further, that if any portion of such fuel,
goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel,
goods and supplies shall be subject to twelve percent (12%) VAT
(v) Services of bank, non-bank financial intermediaries performing quasi-banking functions, and other nonbank financial intermediaries; such as money changers and pawnshops, subject to percentage tax under
Secs. 121 and 122, respectively, of the Tax Code
(w) Sale or lease of goods and services to senior citizens and persons with disability, as provided under
Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and 10754 (An Act Expanding the
Benefits and Privileges of Persons With Disability), respectively;
(x) Transfer of property pursuant to Section 40 (C) (2) of the NIRC, as amended (merger or consolidation);
(y) Association dues, membership fees, and other assessments and charges collected by homeowners
associations and condominium corporations;
(z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
(aa) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning
January 1, 2019; and
(bb) Sale or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of Three million pesos (P3,000,000).
Self-employed individuals and professionals availing of the 8% tax on gross sales and/or receipts and other
non-operating income, under Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of this Code shall also be
exempt from the payment of twelve percent (12%) VAT.
For the purpose of the threshold of P3,000,000 (used to be P1,919,500), the husband and the wife shall be
considered separate taxpayers. However, the aggregation rule for each taxpayer shall apply. For instance, if
a professional, aside from the practice of his profession, also derives revenue from other lines of business
Page 9 of 20
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the
threshold has been exceeded. Thus, the VAT-exempt sales shall not be included in determining the threshold.
A VAT-registered person may, in relation to Sec. 236 (H) of the 1997 Tax Code, as amended, elect that the
exemption in Sec. 4.109-1(B) hereof shall not apply to his sales of goods or properties or services.
Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter
when the election was made except for franchise grantees of radio and TV broadcasting whose annual gross
receipts for the preceding year do not exceed ten million pesos (P10,000,000.00) where the option becomes
perpetually irrevocable.
Under CREATE Act
Sale, importation, printing or publication of books, and any newspaper, magazine, journal, review bulletin, or
any such educational reading material covered by the UNESCO agreement on the importation of educational,
scientific and cultural materials, including the digital or electronic format thereof: provided, that the
materials enumerated herein are not devoted principally to the publication of paid advertisements;
Sale of or importation of prescription drugs and medicines for cancer, mental illness, tuberculosis, and
kidney diseases beginning January 1, 2021.
Under CREATE Act (COVID-19 related VAT-exemptions)
Sale or importation of the following beginning January 1, 2021 to December 31, 2023:
Capital equipment, its spare parts and raw materials, necessary for the production of personal protective
equipment components such as coveralls, gown, surgical cap, surgical mask, n-95 mask, scrub suits, goggles
and face shield, double or surgical gloves, dedicated shoes, and shoe covers, for COVID-19 prevention
All drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID19
Drugs for the treatment of COVID-19 approved by the Food and Drug Administration (FDA) for use in clinical
trials, including raw materials directly necessary for the production of such drugs
23. Exercises on VAT-Exempt Items
a. Based on the following current year data, determine the VAT-subject and VAT-exempt amounts:
Case 1
Case 2
Case 3
Selling price, condominium unit
P2,000,000
P2,500,000
P4,500,000
Selling price, parking lot
500,000
800,000
900,000
Total
P2,500,000
P3,300,000
P5,400,000
VAT-subject
Vat-exempt
b.The following information pertains to adjacent residential lots sold to different buyers for the current year:
Lot 1
Lot 2
Lot 3
Value of the lot
P800,000
P900,000
P1,000,000
Sold to
Mr. P. Cruz
Mr. M. Juan
Mr. J. Ramos
VAT-subject
VAT-exempt
c. The following information pertains to adjacent lots sold to one buyer during the current year:
Lot 1
Lot 2
Lot 3
Value of the lot
P800,000
P900,000
P1,000,000
Sold to
Mr. A. Juan
Mr. A. Juan
Mr. A. Juan
VAT-subject
VAT-exempt
d.The following information pertains to lease of property for the current year:
Apartment house
Case 1 – Rent per unit per month
P 15,000
Annual gross receipts
P2,500,000
VAT-subject
VAT-exempt
Commercial building
P 15,000
P2,500,000
Case 2 – Rent per month
Annual gross receipts
VAT-subject
VAT-exempt
P 15,000
P3,500,000
P 15,000
P3,500,000
Case 3 – Rent per month
Annual gross receipts
VAT-subject
VAT-exempt
P 20,000
P3,000,000
P 20,000
P3,000,000
Page 10 of 20
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
Case 4 – Rent per month
Annual gross receipts
VAT-subject
VAT-exempt
P 20,000
P3,500,000
P 20,000
P3,500,000
e. Based on the following current year information, determine the VAT-subject and the VAT-exempt amounts:
Husband
Wife
Case 1 – Gross receipts, practice of profession
P2,500,000
P2,000,000
VAT-subject
VAT-exempt
Case 2 – Gross receipts, practice of profession
Gross receipts, beauty parlor
Gross receipts, trucking business
Gross sales, grocery store
Gross sales, agricultural food products (original state)
Gross sales, livestock
Total
VAT-subject
VAT-exempt
P1,800,000
1,500,000
1,200,000
P4,500,000
P
1,200,000
1,500,000
1,300,000
P4,000,000
f.
The following data taken from its books are presented to you by Fish Fresh, Canned and Dried, VATregistered company:
Sale of locally produced canned sardines
1,000,000
Sale of newly hauled fresh sardines
1,500,000
Sale of canned sardines to a Subic Bay Metropolitan Authority accredited enterprise
500,000
Sale of locally produced dried fish
700,000
Importation of fresh fish from Alaska, USA
2,000,000
Importation of canned sardines from Portugal
3,000,000
g.
Identify the following transactions as of January , 2018: A) VAT-subject at regular rate
zero rate C) VAT-exempt
1)
2)
3)
4)
B) VAT-subject at
Sale of an apartment house
Sale of the right or the privilege to use any industrial, commercial or scientific equipment
Services rendered by local construction and service contractors
Services rendered by transportation contractors on their transport of goods or cargoes
from one domestic port to another domestic port
5) Sale of electricity by generation, transmission and/or distribution companies
6) Services rendered by a beauty parlor
7) Services rendered by a funeral parlor
8) Transport of passengers and cargoes by a domestic air or sea carriers from the Philippines
to a foreign country
9) Sale of goods, supplies, equipment and fuel to persons engaged in international shipping
and air transport operations
10) Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed 70% of the total annual production
11) Sale of power or fuel generated through renewable sources of energy
12) Services rendered to persons engaged in international shipping or air transport operations,
including lease of property for use thereof
13) Sale of gold to Bangko Sentral ng Pilipinas
14) Sale to non-resident buyer of goods assembled in the Philippines to be delivered to a
resident in the Philippines, paid for in acceptable foreign currency and accounted per BSP
rules and regulations
15) Distribution or transfer of goods to creditor in payment of debt or obligation
16) Sale of goods or services to Asian Development Bank
17) Sale of goods or services to Land Bank of the Philippines
18) Services rendered by review schools for CPA Licensure Examination
19) Educational services rendered by private educational institutions accredited by DEPED,
CHED or TESDA
20) Export sales of persons who are VAT-registered
21) Export sales of persons who are not VAT-registered
22) Sale of real property utilized for low-cost or socialized housing
23) Lease of residential units by VAT-registered lessor where the monthly rental per unit does
not exceed P15,000
24) Lease of commercial units by VAT-registered lessor where the monthly rental per unit
does not exceed P15,000 and whose annual gross rentals amount to P3,000,000
Page 11 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
25) Sale of agricultural foods products in their original state where the annual gross sales
exceed P3,00,000
26) Sale by a person who is VAT-registrable of canned food products where the annual gross
sales exceed P3,000,000
27) Performance of VAT-subject services where the gross annual receipts do not exceed
P3,000,000
28) Medical services rendered by professionals
29) Medical services rendered to confined patient by a doctor employed by the hospital
30) Transfer of property through merger or consolidation
31) Association due of homeowners association
32) Sale of residential lot by a VAT-registered real estate dealer the value of which is
P1,500,000
33) Sale of medicine to Senior Citizens and Person With Disability
34) Sale of lechong manok (take out)
35) Sale of lechong manok in a restaurant
36) Sale of cut flowers
37) Sale of broom and walis tingting
38) Sale of copra, molasses and ordinary salt
39) Laboratory services rendered by hospitals
40) Sale of medicine to in-patients of the hospital
24. Input Tax Defined
a. Meaning of
Input tax is the value-added tax due from or paid by a VAT-registered person in the
input tax
course of his trade or business on importation of goods or local purchase of goods,
properties or services, including lease or use of properties, in the course of his trade or
business. It shall also include the transitional input tax and the presumptive input tax.
b. Categories of
1) VAT paid on local purchases (passed on by seller) or on importation (passed-on VAT)
creditable or
2) Presumptive input tax
deductible
3) Transitional input tax
input taxes
4) Standard input tax
c. Persons who
The input tax credit on importation of goods or local purchases of goods, properties or
can avail of
services by a VAT-registered person shall be creditable:
input tax credit 1) to the importer upon payment of VAT prior to the release of goods from customs
custody;
2) to the purchaser of the domestic goods or properties upon consummation of the sale;
or
3) to the purchaser of services or the lessee or licensee upon payment of the
compensation, rental, royalty or fee.
a. Exercises: Determine whether or not input tax credit can be availed of (Y/N)
1) Importation of goods for personal use, VAT already paid
2) Importation of goods for business use, VAT not yet paid
3) Purchase on account of domestic goods from VAT-registered supplier evidenced by VAT
invoice
4) Purchase for cash of domestic goods from VAT-registered supplier, evidenced by a receipt
printed by unaccredited printer
5) Purchase of domestic properties from non-VAT seller, evidenced by VAT official receipt
6) Purchase of services from a VAT-registered service-provider, bills already paid
7) Purchase of services from a VAT-registered service provider, bills not yet paid
8) Purchase on account of goods from a non-VAT seller who issued VAT invoice
25. Determination of Allowable Input Taxes
a. Determination
Input tax carried over from previous period
xxx
of creditable
Input tax deferred on capital goods exceeding P1,000,000 from previous quarter xxx
input tax
Transitional input tax
xxx
Presumptive input tax
xxx
Others
xxx
Total
xxx
Input taxes on current transactions
xxx
Total available input taxes
xxx
Less: Deductions from input taxes
xxx
Total allowable input taxes
xxx
b. Deductions
a. Input tax claimed as tax credit certificate or refund
from
b. Input tax attributed to VAT-exempt sales
input taxes
c. Input tax attributed to sales to Government
26. Sources of Creditable Input Taxes (Local Purchases or Importation)
a. Passed-on VAT
1) Input tax
1) Purchase or importation of goods:
Page 12 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
evidenced by
a VAT invoice
or official
receipts
issued by a
VATregistered
person which
shall be valid
for 5 years
from the date
of permit to
use
a) For sale; or
b) For conversion into or intended to form part of a finished product for sale, including
packaging materials; or
c) For use as supplies in the course of trade or business;
d) For use as raw materials supplied in the sale of services;
e) For use in trade or business for which deduction for depreciation or amortization is
allowed.
2) Purchase of real properties for which a VAT has actually been paid;
3) Purchase of services in which a VAT has actually been paid;
4) Transactions “deemed sale”;
2) VATregistered
person is also
engaged in
transactions
not subject to
VAT
A VAT-registered person who is also engaged in transactions not subject to VAT shall be
allowed to recognize input tax credit on transactions subject to VAT as follows:
a) All the input taxes that can be directly attributed to transactions subject to VAT may
be recognized for input tax credit; and
b) If any input tax cannot be directly attributed to either a VAT taxable or VAT-exempt
transaction, the input tax shall be pro-rated to the VAT taxable and VAT-exempt
transactions and only the ratable portion pertaining to transactions subject to VAT
may be recognized for input tax credit computed as follows:
VAT sales / Total sales X Input taxes
3) Exercise: A VAT-registered taxpayer is also engaged in VAT-exempt transactions. The following VAT
exclusive data are made available:
a. Domestic VAT-subject cash sales
P1,000,000
b. VAT-exempt sales on account
500,000
c. Export cash sales
300,000
d. Cash purchases of supplies from VAT supplier (used for all transactions)
150,000
e. Purchase on account of merchandise from VAT-registered trader (for VAT sales only)
200,000
REQ: Compute the VAT payable assuming the taxpayer will use the input tax on zero-rated sales as input tax
credit
27. Claim for Input Tax on Depreciable Goods
a) Where a VAT-registered
a) Estimated useful life is 5 years or more - Input tax shall be spread
person purchases or
evenly over of a period of 60 months to commence in the calendar month
imports capital goods,
when the capital good is acquired.
which are depreciable
assets for income tax
b) Estimated useful life is less than 5 years – Input tax shall be spread
purposes, the aggregate
evenly on a monthly basis by dividing the input tax by the actual number
acquisition of which
of months comprising the estimated useful life. The claim for input tax
(exclusive of VAT) in a
shall commence in the calendar month the capital good is acquired
calendar month exceeds
P1,000,000, regardless of
the acquisition cost of
each capital good
b) Where the aggregate
The total amount of input taxes will be allowable as credit against output tax
acquisition cost (exclusive in the month of acquisition.
of VAT) of the existing or
finished depreciable
capital goods purchased or
imported during any
calendar month does not
exceed P1,000,000
c) Amortization allowed
The amortization of the input VAT shall only be allowed until December 31,
until December 31, 2021
2021 after which taxpayers with unutilized input VAT on capital goods
purchased or imported shall be allowed to apply the same as scheduled until
fully utilized.
d) Meaning of aggregate
acquisition cost
Page 13 of 20
In the case of purchase of services, lease or use of properties, the input tax
shall be creditable to the purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
The aggregate acquisition cost of a depreciable asset in any calendar month
refers to the total price, excluding the VAT, agreed upon for one or more
assets acquired and not on the payments actually made during the calendar
month. An asset acquired in installment for an acquisition cost of more than
P1,000,000, excluding the VAT, will be subject to the amortization of input
tax despite the fact that the monthly payments or installments may not
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
e) Sale or transfer of
depreciable good within a
period of 5 years or prior
to the exhaustion of the
amortizable input tax
f) Meaning of capital goods
or properties
g) Meaning of construction
in progress
h) Input tax on
construction in progress
i) Contract for the sale of
service where only the
labor will be supplied
j) Input tax claimed while
the construction is in
progress
k) Rules on allowing input
tax credit on vehicles,
and other expenses
incurred (RR No. 122012, Oct. 12, 2012)
exceed P1,000,000.
If the depreciable capital good is sold or transferred within a period of 5
years or prior to the exhaustion of the amortizable input tax thereon, the
entire unamortized input tax on the capital goods sold or transferred can be
claimed as input tax credit during the month or quarter when sale or transfer
was made.
Capital goods or properties refers to goods or properties with estimated
useful life greater than one (1) year and which are treated as depreciable
assets under the Tax Code, used directly or indirectly in the production or
sale of taxable goods or services.
Construction in progress (CIP) is the cost of construction work which is not
yet completed. CIP is not depreciated until the asset is placed in service.
Normally, upon completion, a CIP is reclassified and the reclassified asset is
capitalized and depreciated.
a) CIP is considered, for purposes of claiming input tax, as a purchase of
service, the value of which shall be determined based on the progress
billings.
b) Until such time the construction has been completed, it will not qualify as
capital goods as defined, in which case, input tax credit on such
transaction can be recognized in the month the payment was made;
Provided, that an official receipt of payment has been issued based on the
progress billings.
In case of contract for the sale of service where only the labor will be
supplied by the contractor and materials will be purchased by the contractee
from other suppliers, input tax credit on the labor contracted shall still be
recognized on the month the payment was made based on the progress
billings while input tax on the purchase of materials shall be recognized at
the time the materials were purchased.
Once the input tax has already been claimed while the construction is in
progress, no additional input tax can be claimed upon completion of the
asset when it has been reclassified as a depreciable capital asset and
depreciated.
a. Only one vehicle for land transport is allowed for the use of an official or
employee, the value of which should not exceed P2,400,000.
b. No depreciation shall be allowed for yachts, helicopters, airplanes and/or
aircrafts, and land vehicles the value of which exceed the P2,400,000
threshold amount, unless the taxpayer’s main line of business is transport
operations or lease of transportation equipment and the vehicles
purchased are used in said operations;
c. All maintenance expenses on account of non-depreciable vehicles for
taxation purposes are disallowed in its entirety;
d. The input taxes on the purchase of non-depreciable vehicles and all input
taxes on maintenance expenses incurred thereon are likewise disallowed
for taxation purposes.
l) Exercises:
1) Lalisa Corp. acquires 3 units of office equipment at P600,000 each on February 2018. The estimated life is
4 years.
Question
1 – Can the taxpayer amortize the input tax?
2 – If it can amortize the input tax, how much is the monthly amortization?
3 – Up to what month will the amortization be?
4 – Assuming the taxpayer acquires the office equipment on February 2022, can it amortize the input tax on
the acquisition?
2) A taxpayer acquires an office furniture on January 2018 for P1,000,000. Its estimated life is 3 years.
Question
1 – Can the taxpayer amortize the input tax?
2 – If he can amortize the input tax, how much is the monthly amortization?
28. Presumptive Input Tax
Page 14 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
1) Persons allowed
presumptive input tax
2) Rate and basis of
presumptive input tax
1) Processors of sardines, mackerel and milk
2) Manufacturers of refined sugar and cooking oil
3) Manufacturers of packed noodle-based instant meals
4% (used to be 1 ½%) of gross value in money of purchases of primary
agricultural products which are used as inputs to their production
3) Exercises: Determine whether or not the following can avail of the presumptive input tax (Y/N)
a) Processor of sardines on its purchase of tomatoes, onions and other agricultural products used as
inputs in the production
b) Processor of sardines on its purchase of fresh fish to be used in the production of processed
sardines
c) Processor of fruits on its purchase of fresh fruits to be used in processing canned fruits
d) Manufacturer of refined sugar on its purchase of packaging materials and labels
e) Manufacturer of cooking oil on its purchase of copra
f) Manufacturer of instant champorado on its purchase of glutinous rice to be used in manufacturing
instant champorado
29. Transitional Input Tax
1) Situations where
transitional input tax
may be allowed
2) Basis of transitional
input tax
3) Amount of transitional
input tax
1) Taxpayers who became VAT-registered persons upon exceeding the
minimum turnover of P3,000,000 in any 12-month period;
2) Taxpayers who voluntarily register even if their turnover does not exceed
P3,000,000 (except franchise grantee of radio and/or television
broadcasting whose threshold is P10,000,000);
Beginning inventory of goods, materials and supplies (including those that
are VAT-exempt under Sec. 109)
2% of the value of the beginning inventory on hand or actual VAT paid on
such goods, materials and supplies, whichever is higher.
The value allowed for income tax purposes on inventories shall be the basis
for the computation of the 2% transitional input tax, including goods that are
exempt from VAT under Sec. 109 of the Tax Code.
A taxpayer is engaged in VAT-subject transactions but enjoys exemption from VAT as an entity because his
annual gross sales do not exceed the VAT threshold amount. Beginning the current year, he decides to
optionally register under the VAT system. Compute the transitional input tax based on the following data:
Ending inventory VAT-subject goods, previous year
Cost
Net realizable value
Ending inventory VAT-exempt goods, previous year
Cost
Net realizable value
Actual VAT paid on the inventory
P 250,000
200,000
1,400,000
1,450,000
30,000
30. Standard Input Tax (as updated by RMC No. 36-2021)
Standard input tax is no longer applicable beginning 1 January 2021 in accordance with Section 4-114-2 of
Revenue Regulations No. 13-2018 as further implemented by Revenue Memorandum Circular No. 036-2021
31. Withholding VAT
Transactions
Withholding Agent
1) Purchase of goods by
Government, political
subdivisions, etc.
Government or any of its political subdivisions,
instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs)
2) Purchase of services by
Government, political
subdivisions, etc.
Government or any of its political subdivisions,
instrumentalities or agencies, including GOCCs
3) Payments for lease or
use of properties or
property rights to nonresident owners
Government or any of its political subdivisions,
instrumentalies or agencies, including GOCC’s;
4) Purchase of goods or
services in the course of
Page 15 of 20
Withholdng VAT
Rate
5% (used to be
3%)
of
gross
payment
made
(creditable)
5% (used to be
6%)
of
gross
payments
(creditable)
12%
Private corporations, individuals, estate and trusts,
whether large or non-large taxpayers
Payor or person in control of the payment
Payor-purchaser in the course of trade of business
12%
gross
of
payee’s
sales
or
TAX-301
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Weeks 2-3: VALUE-ADDED TAX
Transactions
Withholding Agent
trade or business
(payee-seller has more
than one payor-buyer)
Payee-seller shall execute:
1) “Waiver of the Privilege to Claim Input Tax
Credit”, and
2) “Notice of Availment of the Option to Pay the Tax
through the Withholding Process”.
Payor-purchaser in the course of trade of business
5) Purchase of goods or
services in the course of
trade or business
(payee-seller has only
one payor-buyer for the
whole year)
Payee-seller shall execute
availment as in above.
waiver
and
notice
of
Withholdng VAT
Rate
receipts
12%
of
payee’s
gross
sales
or
receipts
f. Remittance of withholding VAT
Remittance of
The VAT withheld shall be remitted within ten (10) days following the end of the
withholding VAT
month the withholding was made.
32. Advance Payment of
Transactions
requiring
advance payment of
VAT
Advance payment of
VAT allowed as credit
against output tax
Advance
payments
may be available for
issuance of tax credit
certificate (TCC)
Advance
VAT
payment claimed as
TCC cannot be carried
over
Issuance
of
TCC
limited to unutilized
advance VAT payment
Separare applications
required
33. Refund of Input Tax
a. Input Tax on ZeroRated
Sales
of
Goods or Property,
etc.
b. Printing of the word
“zero-rated” required
c. Other documents
may be used to prove
“zero-rated” sale
d. Unused Input Tax
of Person Who Retired
or Ceased Business
e. Period of Refund or
Tax Credit of Input
Page 16 of 20
VAT
1) Sale of refined sugar
2) Sale of flour
3) Transport of Naturally Grown and Planted Timber Products (RR No. 13-2007)
4) Sale of jewelry, gold and other metallic minerals (RR No. 5-2013)
The advance payments made by the seller/owner of refined sugar, importer or
miller of wheat/flour and sellers/ owners of naturally grown and planted timber
products shall be allowed as credit against their output tax on the actual gross
selling price of refined sugar/flour/timber products.
Advance payments which remain unutilized at the end of the taxpayer’s taxable
year where the advance payment was made, which is tantamount to excess
payment,
may,
at
the
option
of
the
owner/seller/taxpayer
or
importer/miller/taxpayer, be available for the issuance of TCC upon application duly
filed with the BIR by the seller/owner or importer/miller within two (2) years from
the date of filing of the 4th quarter VAT return of the year such advance payments
were made, or if filed out of time, from the last day prescribed by law for filing the
return.
Advance VAT payments which have been the subject of an application for the
issuance of TCC shall not be allowed as carry-over nor credited against the output
tax of the succeeding quarter/year.
Issuance of TCC shall be limited to the unutilized advance VAT payment and shall
not include excess input tax.
Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a
separate
application for TCC following the applicable rules.
A VAT-registered person whose sales of goods, properties or services are zerorated or effectively zero-rated may apply for the issuance of a tax credit certificate
or refund of input tax attributable to such sales. The input tax that may be subject
of the claim shall exclude the portion of input tax that has been applied against the
output tax. The application should be made within 2 years after the close of the
taxable quarter when the sales were made.
The Supreme Court has ruled in several cases that the printing of the word “zerorated” is required to be placed on the VAT invoices or receipts covering zero-rated
sales in order to be entitled to claim for tax credit or refund.
In another case, failure of the taxpayer to indicate its zero-rated sales in its VAT
returns and in its official receipts is not sufficient reason to deny its claim for tax
credit or refund when there are other documents from which the court can
determine the veracity of the taxpayer’s claims. (Southern Philippine Power Corp.
vs. CIR, G.R. 179632, Oct. 19, 2011)
A VAT-registered person whose registration has been cancelled due to retirement
or cessation of business, or due to change in or cessation of status may, within 2
years from the date of cancellation, apply for the issuance of a tax credit certificate
for any unused input tax which he may use in payment of his other internal
revenue taxes. He shall be entitled to a refund if he has no internal revenue tax
liabilities.
Refund or tax credit certificate shall be granted within 90 days from the date of
submission of the official receipts or invoices and other documents in support of
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
Tax
f.
Appeal of full
partial denial
g. Manner of Giving
Refunds
the application filed.
or
Should the Commissioner find that the grant of refund is not proper, the
Commissioner must state in writing the legal and factual basis for the denial.
“In case of full or partial denial of the claim for tax refund, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim,
appeal the decision with the Court of Tax Appeals: Provided, however,
That
failure on the part of any official, agent, or employee of the BIR to act on the
application within the 90-day period shall be punishable under Section 269.
Refunds shall be made upon warrants drawn by the CIR or by his authorized
representative without the necessity of being countersigned by the COA Chairman.
34. Caselets on Input VAT
IU Corporation, VAT-registered, has the following transactions during the month of January 2021:
Domestic sales, exclusive of VAT
P 800,000
Importation of goods for sale
240,000
Importation of goods for personal use
100,000
Purchase of office supplies, exclusive of VAT
20,000
Purchase of office equipment, total invoice price (estimated life is 3 years)
1,680,000
Purchase of home appliances for the residence of IU Corp’s President., gross of VAT
17,920
Payment of services for store repair, contractor not VAT- registered but issued VAT
official receipt (total invoice amount)
33,600
Purchase of services for repainting of store (evidenced by ordinary receipt issued by
contractor)
4,480
Purchase of real property to be used as office, VAT not included, purchase price not paid
yet
500,000
Purchase of vehicle for land transport and for business use, net of VAT
1,200,000
Payment of maintenance expenses for vehicle for land transport, net of VAT
50,000
Question
1 – How much of the VAT on importation can be claimed as input tax credit?
2 – How much of the input tax on purchase of office equipment can be claimed as input tax credit?
3 – Can the passed-on VAT on purchase of vehicle for land transport be claimed as input tax credit? Why or
why not?
4 – Can the passed-on VAT by a service contactor who is not VAT registered be claimed as input tax credit?
5 – How much is the total allowable input taxes for the month?
35. Invoicing Requirement, Refund of Input Taxes and Others
a. VAT Invoice and
A VAT-registered person shall issue:
VAT Official
a) a VAT invoice for every sale, barter, or exchange of goods or properties; and
Receipt
b) a VAT official receipt for every lease of goods or properties, and for every sale,
barter or exchange of services.
b. Validity of VAT
The invoice/receipt shall be valid for five (5) years from the date of the permit to
invoice and VAT
use.
OR
c. Invoicing
The following information shall be indicated in VAT invoice or VAT official
Requirement
receipt:
a) A statement that the seller is VAT-registered person followed by TIN;
b) The total amount to be paid with the indication that such amount includes
the VAT:
1) Amount of tax shall be shown as a separate item in the invoice or receipt;
2) “VAT-exempt sale”, if the sale is exempt;
3) “Zero-rated sale”, if the sale is subject to zero percent VAT;
4) If mixed sales, breakdown of the sales price between its taxable, exempt
and zero-rated components and the calculation of the VAT on each
portion. Separate invoices or receipts may be issued for each type of
sales.
c) The name, business style, if any, address and TIN of the customer, in case the
sales amount to P1,000 or more.
Exercise: Indicate what invoice or official receipt shall be issued by the following assuming VAT
threshold amount is exceeded
1) Office supplies trader
2) Warehousing services
3) Beauty parlor
4) Mango farm owner
5) Trucking business
6) Fuel or power supplier generated from renewable sources of energy
7) Movie theatre owner
Page 17 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
8) Professional basketball player in the Philippine Basketball Association (PBA)
9) Contract artists of television companies
10) Fresh fish dealer
36. Invoicing and Recording Deemed Sale Transactions
Deemed Transaction
Invoicing and Recording
a. Transfer, use or
Memorandum entry
consumption not in the
course of trade or
business;
b. Distribution or transfer to
Invoice shall be prepared at the time of the occurrence of the transaction
shareholders or investors
and shall be duly recorded in the subsidiary sales journal. The total amount
or to creditor in payment
of “deemed sale” shall be included in the return to be filed for the month or
of debt or obligation;
quarter.
c. Consignment of goods if
Same as in 2) above
not sold within 60 days
following the date of
consignment;
d. Retirement from or
An inventory shall be prepared and submitted to the RDO having jurisdiction
cessation of business
over the taxpayer’s principal place of business not later than 30 days after
retirement or cessation from business.
37. VAT Returns and Payment of Value-Added Tax
a. Monthly VAT Declaration and Payment of VAT
1) Filing of the declaration
Not later than 20th day following the end of the first two (2) months in a
and payment of valuequarter
added tax
2) Taxpayers enrolled with
Group A – 25 days following the end of the month
Electronic Filing and
B – 24 days following the end of the month
Payment System (EFPS)
C – 23 days following the end of the month
D – 22 days following the end of the month
E – 21 days following the end of the month
b. Filing of Quarterly VAT Return and Payment of VAT
1) Filing of quarterly return
Every person liable to pay the value-added tax imposed under this Title shall
and payment of valuefile a quarterly return of the amount of his gross sales or receipts within 25
added tax
days following the close of each taxable quarter prescribed for each
taxpayer.
VAT-registered persons shall pay the value-added tax on a monthly basis.
Monthly VAT declarations shall remain until December 31, 2022.
2) Meaning of taxable
quarter
3) Quarterly return includes
the amounts reflected in
the monthly VAT
declarations
4) Monthly payments to be
credited in the quarterly
VAT return
5) Deductions from the
quarterly VAT payable
(excess input tax)
Beginning January 1, 2023, the filing and payment required shall be done
within 25 days following the close of the taxable year.
The term “taxable quarter” shall mean the quarter that is synchronized to
the income tax quarter of the taxpayer (i.e. calendar quarter or fiscal
quarter.)
Amounts reflected in the monthly VAT declarations for the first two (2)
months of the quarter shall still be included in the quarterly VAT return,
which reflects the cumulative figures for the taxable quarter.
Payments in the monthly VAT declarations shall be credited in the quarterly
VAT return to arrive at the net VAT payable, or excess input
tax/overpayment as of the end of the quarter.
The VAT payable/Excess Input tax for each taxable quarter shall be reduced
by the total amount of taxes previously paid for the immediately preceding
two (2) months, and the advance payments/creditable VAT withheld by the
payors for the three months of the quarter.
d. Substituted VAT Return
1) Substituted VAT
1) In case of sale of goods or services by persons subject to 12% VAT, whose gross
Return (Payee with
sales or receipts have already been subjected to 12% VAT by the lone payor, the
Lone Payor)
payee (seller) shall no longer be required to file the monthly VAT declaration and the
quarterly returns.
2) The Monthly Remittance Return of VAT Withheld duly filed by the withholding
agent-payor serves as the substituted return of the payee (seller) with lone payor.
2) Payee with Several
Payees with several payors are still required to file the regular VAT return reflecting
Payors
the consolidated total of all taxable transactions for the taxable period and applying
as tax credits the taxes withheld by several payors.
Page 18 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
e. Substituted Official Receipts
Sellers who are
Sellers of services whose gross receipts have been subjected to 12% final VAT shall
exempt from issuing
be exempt from the obligation of issuing duly registered VAT official receipts
Official Receipts
covering their receipts for services sold.
f. Short Period Return
1) Final return of a
person who retires
from business
2) Subsequent
monthly
declarations/
quarterly returns to
be filed after
retirement
3) Effective date of
VAT registration
4) Initial monthly VAT
declaration or
quarterly VAT return
Any person who retires from business with due notice to the BIR office where the
taxpayer (head office) is registered and whose VAT registration has been cancelled
shall file a final quarterly return and pay the tax due thereon within 25 days from the
end of the month when the business ceases to operate or when the VAT registration
has been officially cancelled.
Subsequent monthly declarations/quarterly returns are still required to be filed if the
results of the winding up of the affairs/business of the taxpayer reveal taxable
transactions.
All persons first registered shall be liable to VAT on the effective date of registration
stated in their Certificates of Registration (i.e., the first day of the month following
their registration.)
1) If the effective date of registration falls on the first or second month of the
taxable quarter, the initial monthly VAT declaration shall be filed within twenty
(20) days after the end of the month, and the initial quarterly return shall be filed
on or before the 25th day after the end of
the taxable quarter.
2) If the effective date of registration falls on the third month of the taxable quarter,
the quarterly return shall be filed on or before the 25th day of the month following
the end of the taxable quarter, and no monthly VAT declaration need be filed for
the initial quarter.
g. Payment of VAT on Importation
The VAT on importation shall be paid by the importer prior to the release of such goods from customs
custody.
38. Where to File and Pay
a. Where to file
monthly VAT
declaration and
quarterly VAT
return if payment
is involved
b. Where to file
monthly VAT
declaration and
quarterly VAT
return if no
payment is
involved
c. Consolidated
monthly
declaration and
quarterly return
VAT
The monthly VAT declaration and quarterly returns shall be filed with:
1) Bank duly accredited by the Commissioner of Internal Revenue located in the
revenue district office where such taxpayer (head office of the business
establishment) is required to register.
2) In the absence of accredited bank, the monthly VAT declaration and quarterly
return shall be filed with Revenue District Officer, Collection Agent, duly authorized
Treasurer of the Municipality/City where such taxpayer (head office of the
business establishment) is required to be registered.
The monthly VAT declaration and the quarterly VAT return, where no payment is
involved, shall be filed with:
a) Revenue District Officer/Large Taxpayer District Office/Large Taxpayer
Assistance Division;
b) Collection Agent;
c) Duly authorized Municipal/City Treasurer of the Municipality or City where the
taxpayer (head office of the business establishment) is registered or required
to be registered.
Only one consolidated quarterly VAT return or monthly VAT declaration covering the
results of operations of the head office as well as the branches for all lines of
business subject to VAT shall be filed by the taxpayer, for every return period, with
the BIR office where the taxpayer is required to be registered.
39. Submission of Quarterly Summary Lists of Sales/Purchases
a. Persons required to
1) Persons required to submit summary lists of sales. – All persons liable to
submit summary
VAT such as manufacturers, wholesalers, service-providers, among others. (RR
list of sales or
No. 1-2012 deleted the requirement of having quarterly total sales/receipts, net of
purchases
VAT, exceeding P2,500,000.)
2) Persons required to submit summary lists of purchases. – All persons liable
to VAT such as manufacturers, wholesalers, service-providers, among others. (RR
No. 1-2012 deleted the requirement of having quarterly total purchases, net of
VAT, exceeding P1,000,000).
b. Where to File the
The quarterly summary list of all sales or purchases, whichever is applicable, shall be
Summary Lists of
submitted to the RDO, LTDO or LTAD having jurisdiction over the taxpayer.
Sales or Purchases
c. When to Submit the
The quarterly summary list shall be submitted, on or before the 25th day of the
Summary Lists of
month following the close of the taxable quarter (VAT quarter) – calendar quarter or
Page 19 of 20
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-301
Weeks 2-3: VALUE-ADDED TAX
Sales or Purchases
fiscal quarter.
40. Power of the Commissioner to Suspend Business Operations
Power of the
The Commissioner of Internal Revenue or his authorized representative may order
Commissioner to
suspension or closure of a business establishment for a period of not less than 5 days for
Suspend
any of the following violations:
Business
a) Failure to issue receipts or invoices;
Operations
b) Failure to file VAT return;
c) Understatement of taxable sales or receipts by 30% or more of the correct taxable
sales or receipts for the taxable quarter;
d) Failure of any person to register as required under the law.
41. Mandatory Registration under the VAT System
Persons required Any person who, in the course of trade or business, sells, barters or exchanges goods or
to mandatorily
properties or engages in the sale or exchange of services shall be liable to register if:
register
(a) His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109(A) to (BB), have exceeded P3,000,000; or
“(b) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109(A) to (BB),
will exceed P3,000,000.
42. Optional Registration of VAT-Exempt Persons
a. Persons
(1) Any person who is not required to register for value-added tax may elect to register for
allowed
value-added tax by registering with the Revenue District Office that has jurisdiction
optional VAT
over the head office of that person, and paying the annual registration fee P500 for
registration
every separate or distinct establishment or place of business, including facility types
where sales transactions occur, shall be paid upon registration and every year
thereafter on or before the last day of January.
Cooperatives, individuals earning purely compensation income, whether locally or
abroad, and overseas workers are not liable to the registration fee herein imposed.
(2) Any person who elects to register optionally shall not be entitled to cancel his
registration for the next three (3) years.
(3) Any person who elected to pay the eight percent (8%) tax on gross sales or receipts
shall not be allowed to avail of this option.
(4) For purposes of Value-Added Tax, any person who has registered value-added tax as a
tax type shall be referred to as a ‘VAT-registered person’ who shall be assigned only
one Taxpayer Identification Number (TIN).
Page 20 of 20
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Classes for De La Salle University Dasmariñas  Week No. 3
TAXATION
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX-401: PERCENTAGE TAX
1. OTHER PERCENTAGE TAXES (SUMMARIZED)
Percentage Tax
Sec. 116 – Tax on persons
exempt from VAT under Sec.
109 (BB) (annual gross sales or
receipts do not exceed
P3,000,000
Sec. 117 – Percentage tax on
domestic carriers and keepers
of garage (transport of
passengers)
Sec. 118 – Percentage tax on
international carriers
Sec. 119 – Tax on franchises
Sec. 120 – Tax on overseas
dispatch, message or
conversation originating from
the Philippines
Sec. 121 – Tax on banks and
non-bank financial
intermediaries performing
quasi-banking functions
Tax Base
Tax Rate
Gross quarterly sales or receipts
3%
Actual or minimum quarterly gross receipts whichever is
higher
3%
Quarterly gross receipts
3%
Gross receipts:
Franchises on radio and/or TV broadcasting companies
whose annual gross receipts of the preceding year do
exceed ₱10,000,000
Franchises on gas and water utilities
3%
2%
Amount paid for such services (by the person who used the
communications facilities)
Gross receipts on interest, commissions and discounts from
lending activities; income from financial leasing:
Remaining maturity period of instrument is 5 years or less
Remaining maturity period of instrument is more than 5
years
Dividends and equity shares in net income of subsidiaries;
Royalties, rentals of property, real or personal, profits from
exchange and all other items treated as gross income
under the Tax Code
Net trading gains within the taxable year on foreign
currency, debt securities, derivatives and other similar
financial instruments
Sec. 122 – Tax on other nonGross receipts derived from interest, commissions, discounts
bank financial intermediaries
and all other items treated as gross income under the Tax
Code
Interests, commissions and discounts from lending
activities, as well as income from financial leasing:
Remaining maturity of instrument is 5 years or less
Remaining maturity of instrument is more than 5 years
Sec. 123 – Tax on life insurance Total premiums collected
premiums
Sec. 124 – Tax on agents of
Total premiums collected/paid
foreign insurance companies
Generally
(fire, marine or miscellaneous
Owners of property obtain insurance directly with foreign
insurance)
insurance companies
Sec. 125 – Amusement taxes
Gross receipts
Jai-alai and race track
Cockpits, cabarets, night or day clubs
Professional basketball games
Boxing exhibitions
Sec. 126 – Tax on winnings
Actual amount paid for every winning ticket after deducting
the cost of the ticket
Winnings from double, forecast/quinella and trifecta bets
Prize of winning race horse owners
Sec. 127 (A) Tax on sale,
Gross selling price or gross value in money
barter or exchange of shares Gross selling price or gross value in money in accordance
of stock listed and traded
with the proportion of shares of stock sold, bartered,
through the local stock
exchanged or otherwise disposed to the total outstanding
exchange
shares of stock after listing in the local stock exchange
(B) Tax on shares of stock
Up to 25%
sold or exchanged through
Over 25% but not over 33 1/3%
public offerings
Over 33 1/3%
Page 1 of 9
10%
5%
1%
0%
7%
7%
5%
5%
1%
2%
4%
5%
30%
18%
15%
10%
10%
4%
10%
6/10 of
1%
4%
2%
1%
0915-2303213  www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
2. PERCENTAGE TAXES AMPLIFIED
a. Sec. 116 - Tax on Persons Exempt from VAT Under Section 109 (BB)
1) Persons subject to the
Persons whose annual sales or receipts do not exceed P3,000,000 (used to
tax
be P1,919,500) and who are not VAT registered. [Sec. 109 (BB)]
2) Tax base
Gross quarterly sales or receipts
3) Tax rate
3%
4) Optional VAT
Persons subject to the above tax may apply for registration as VAT-subject
registration
persons not later than ten (10) days before the beginning of the taxable
quarter.
5) Cancellation of VAT
Any person exempt from VAT under Sec. 109 (BB) who elects to register
registration
under the VAT system shall not be allowed to cancel his registration for the
next three (3) years.
6) Non-VAT registered
A non-VAT registered taxpayer who initially opted to avail of the 8% option
taxpayer exceeded the
but has exceeded the VAT threshold during the taxable year, shall be subject
VAT threshold
to 3% Percentage Tax on the first P3,000,000 of his or her gross sales or
gross receipts under Section 116 of the Tax Code, as amended, without
imposition of any penalty if payment is timely made on the following month
when the threshold is breached.
The excess of the threshold shall be subject to VAT prospectively, and the
8% income tax previously paid shall be credited to the Income Tax Due
under the graduated rates.
Cooperatives shall be exempt from the 3% gross receipts tax.
6) Cooperatives
7) Exercises:
a) Mr. Jaime Rodriguez is the owner of a small variety store. His gross sales in any one year do not exceed
the VAT threshold amount. He is not VAT-registered. The following data are taken from the books of the
variety store for the month ending November 30, 2018:
Merchandise inventory, December 31, 2018
P 150,000
Gross sales
250,000
Purchases from VAT-registered suppliers
150,000
How much is the percentage tax due and payable?
b) A taxpayer is non-VAT because his VATable sales do not exceed the VAT threshold of P3,000,000. He
initially opted to pay 8% income tax in the first three (3) quarters of 2018 because his gross sales
amounted to P3,000,000 only. During the same taxable year, however, his annual gross sales reached
P4,000,000.
Question 1 – How much is the percentage tax, if any?
2 – How much is the VAT, if any?
b.
Sec. 117 - Percentage Tax on Domestic Carriers and Keepers of Garage (Common Carrier’s Tax)
1) Common carrier defined
2) Persons subject to
common carrier’s tax
3) Persons not subject to
common carrier’s tax
4) Tax base
5) Tax rate
6) Minimum quarterly
receipts
Page 2 of 9
Persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public and shall include
transportation contractors.
1) Cars for rent or hire driven by the lessee
2) Transportation contractors, including persons who transport passengers
3) Other domestic carriers by land for the transport of passengers
4) Keepers of garage
1) Owners of banca
2) Owners of animal-drawn two wheeled vehicle
Actual quarterly gross receipts or minimum quarterly gross receipts
whichever is higher.
3%
1) Jeepney for
Manila and other cities
P65,700 (P2,400)
hire
Provincial
P32,900 (P1,200)
2) Public utility
Not exceeding 30 passengers
P98,600 (P3,600)
bus
>30 but ≤50 passengers
P164,200 (P6,000)
Exceeding 50 passengers
P197,100 (P7,200)
3) Taxis
Manila and other cities
P98,600
(P3,600)
Provincial
P65,700
(P2,400)
4) Car for hire
With chauffeur
P82,100
(P3,000)
Without chauffeur
P49,300 (P1,800)
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
7) Exemption from local
taxes
8) Transportation
contractors and
common carriers
subject to VAT
The gross receipts of common carriers derived from their incoming and
outgoing freight shall not be subject to the local taxes imposed under the
Local Government Code of 1991.
1) Transportation contractors on their transport of goods or cargoes;
2) Persons who transport goods or cargoes for hire;
3) Other domestic carriers by land relative to their transport of goods or
cargoes;
4) Common carrier by air and sea relative to their transport of passengers,
goods or cargoes from one place in the Philippines to another place in the
Philippines.
9. Exercise
Jill Ilustre Transport Co., VAT-registered, is a domestic common carrier by land and sea within the
Philippines. It had the following data in a quarter:
On land carriers:
Gross receipts from cargoes
P500,000
Gross receipts from passengers
700,000
On sea carriers:
Gross receipts from cargoes
900,000
Gross receipts from passengers
1,000,000
Question 1 – How much is the percentage tax?
Question 2 – How much is the output value-added tax
c. Sec. 118 - Percentage
1) Persons subject to
tax
2) Tax base
3) Tax rate
4) Gross receipts
defined
5) Exempt from VAT
(not allowed to
register for VAT
purposes)
6) Offline
international carrier
having
branch/office as a
sales agent in the
Philippines
Tax on International Carrier (Common Carrier’s Tax)
1) International air carriers doing business in the Philippines
2) International shipping carriers doing business in the Philippines
Gross receipts derived from the transport of cargo from the Philippines to another
country
3%
Gross receipts shall include, but shall not be limited to, the total amount of
money or its equivalent representing the contract, freight/cargo fees, mail fees,
deposits applied as payments, advance payments and other service charges and
fees actually or constructively received during the taxable quarter from cargo
and/or mail, originating from the Philippines in a continuous and uninterrupted
flight, irrespective of the place of sale or issue and the place of payment of the
passage documents. (Sec. 5, RR 15-2013, implementing R.A. No. 10378)
1) Transport of passengers by international carriers doing business in the
Philippines
2) Transport of cargo by international carriers doing business in the Philippines
Not subject to the 3% common carrier’s tax on international carriers
4) Exercises: Determine whether or not the following shall be subject to the common carrier’s tax
on international carriers. (Answers are provided)
a) All Nippon Airlines, maintaining flight operations to and from the Philippines, on freight and
cargo fees, cargo originating from the Philippines (passage documents sold in Japan)
b) Japan Air Lines, maintaining flight operations to and from the Philippines, on freight and
cargo fees, cargo originating from the Japan (passage documents sold in the Philippines)
c) All Nippon Airlines, maintaining flight operations to and from the Philippines, gross receipts
from sale of tickets to passengers originating from the Philippines (passage documents sold
in the Philippines)
d) United Airlines, no flight operations to and from the Philippines, on gross receipts from
transport of cargo from Singapore to Tokyo (passage documents sold in the Philippines by its
sales agent)
d. Sec. 119 – Tax on Franchises
1) Persons subject to
1) Franchises on radio and/or television broadcasting companies whose annual
tax
gross receipts of the preceding year does not exceed P10,000,000;
2) Franchises on gas and water utilities.
2) Tax base
Gross receipts derived from the business covered by the law granting the
franchise.
Page 3 of 9
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
3) Tax rates
4) Optional VAT
registration
5) Franchise grantees
subject to VAT
6) PAGCOR and its
licensees and
franchisees
1)
2)
3)
1)
Franchise on gas and water utilities
- 2%
Franchise on radio and/or TV broadcasting - 3%
PAGCOR and its licensees and franchisees
- 5%
Radio and TV broadcasting companies whose annual gross receipts of the
preceding year does not exceed P10,000,000 shall have the option to be
registered within 10 days before the beginning of the calendar quarter as VAT
taxpayer and pay VAT thereon.
2) Once the option is exercised, it shall not be revoked.
1) Telephone and telegraph;
2) Radio and/or television broadcasting;
3) Toll road operations;
4) All other franchisees, other than those covered by Sec. 119 of the Tax Code,
regardless of how their franchise may have been granted.
PAGCOR and its licensees and franchisees were subjected to VAT but nullified in
a Supreme Court decision (G.R. 172087). Subject to 5% franchise tax of the
gross revenue or earnings from its operations and licensing of gambling casinos,
gaming clubs and other similar recreation or amusement places, gaming pools,
and other related operations pursuant to Section 13 (2) of P.D. No. 1869
(Revenue Memorandum Circular No. 33-2013).
6) Exercises: Determine what business tax will the following be subject to
As a franchisee, Ms. Kathleen En, had the following data on revenues and receivables, taxes not included:
Receivables
Revenues
Beginning
End
From operations:
Covered by the franchise
P2,000,000
P300,000
P400,000
Not covered by the franchise
600,000
50,000
How much is franchise tax due if she is a franchise grantee of :
1) water and gas utilities.
2) electric utility.
e. Sec. 120 - Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines
1) Persons subject
The tax imposed shall be payable by the person paying for the services rendered
to tax
and shall be paid to the person rendering the services who is required to collect
and pay the tax within twenty (20) days after the end of the quarter.
2) Persons not
1) Philippine Government;
subject to tax
2) Diplomatic services;
3) International organizations;
4) News services.
3) Tax base
Amount paid for the services rendered
4) Tax rate
10%
5) Examples of
1) Telephone;
communication
2) Telegraph;
facilities
3) Telewriter exchange;
4) Wireless and other communication equipment services.
f.
Sec. 121 - Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking
Functions (Gross Receipts Tax)
1) Bank defined
The term “bank” means every banking institution, as defined in Sec. 2 of R.A. 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 a
specialized government bank.
2) Non-bank
The term “non-bank financial intermediary” means a financial intermediary, as
financial
defined in Sec. 2 (D) (c) of R.A. No. 337, as amended, otherwise known as The
intermediary
General Banking Act, authorized by the BSP to perform quasi-banking activities
defined
3) Quasi-Banking
The term “quasi-banking activities” means borrowing funds from twenty (20) or
activities
more personal or corporate lenders at any 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 repurchase agreements for
purposes of relending or purchasing receivables and other similar obligation:
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.
4) Persons subject
Banks and non-bank financial intermediaries performing quasi-banking functions
to the tax
Page 4 of 9
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
5) Tax base and tax
rates
6) In case maturity is
shortened through
pre-termination
Tax base
Tax rates
Gross receipts on interest, commissions and discounts from
lending activities; income from financial leasing:
Remaining maturity period of instrument is 5 years or less
5%
Remaining maturity period of instrument is more than 5
1%
years
Dividends and equity shares in net income of subsidiaries
0%
Royalties, rentals of property, real or personal, profits from
exchange and all other items treated as gross income
under the Tax Code
7%
Net trading gains within the taxable year on foreign
currency, debt securities, derivatives and other similar
financial instruments
7%
In case the maturity period is shortened thru pre-termination, the maturity
period shall be reckoned to end as of the date of pre-termination for purposes of
classifying the transaction and applying the correct rate of tax accordingly.
7) Exercise: A domestic bank had the following data in a quarter.
Rentals from safety deposit boxes and real property acquired through mortgage
foreclosures, gross of applicable tax
Service fees, net of applicable tax
Dividends and equity shares in the net income of subsidiaries
Amounts received from lending activities, net of applicable tax, on instruments with
maturities of:
Five years and less
More than five years
Net trading gain during the quarter
Net trading loss during the quarter (within the same year)
P300,000
186,000
500,000
760,000
891,000
500,000
300,000
Compute the percentage tax for the quarter.
g. Sec. 122 – Tax on Other Non-Bank Financial Intermediaries (Gross Receipts Tax)
1) Persons subject to
Non-bank financial intermediaries, such as money changers and pawnshops
tax
2) Tax base and tax
Tax base
Tax
rates
rates
Gross receipts derived from interest, commissions, discounts and
all other items treated as gross income under the Tax Code
5%
Interests, commissions and discounts from lending activities, as
well as income from financial leasing:
Remaining maturity of instrument is 5 years or less
5%
Remaining maturity of instrument is more than 5 years
1%
3) In case maturity is
In case the maturity period is shortened thru pre-termination, the maturity
shortened through
period shall be reckoned to end as of the date of pre-termination for purposes
pre-termination
of classifying the transaction and applying the correct rate of tax accordingly.
h. Sec. 123 – Tax on Life Insurance Premiums
1) Persons subject to tax
Person, company or corporation (except purely cooperative companies or
associations) doing life insurance business of any sort in the Philippines.
2) Tax base
Total premiums collected, whether such premiums are paid in money, notes,
credits or any substitute for money.
3) Tax rate
2% (per Sec. 1, R.A. No. 10001)
4) Other items subject to
a) Premium on Health and Accident Insurance, whether received by a life or
the premium tax (RMC
non-life insurance company
No. 49-2010)
b) Re-issuance fees, reinstatement fees, renewal fees as well as penalties
paid to the life insurance company which are incidental to or in connection
with the insurance policy contracts issued
c) Investment income realized from the investment of funds obtained from
others allowed and approved by the Insurance Commission
5) Items earned by life
a) Insurance and reinsurance commissions, whether life or non-life
insurance company
b) Management fees
subject to VAT or
c) Rental income
percentage tax as the
d) Other income earned which can be pursued independently of the
case may be (RMC No. 49insurance business activities
2010)
Page 5 of 9
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
6) Investment income
realized from the
investment of
premiums earned
7) Persons subject to VAT
The interest income earned by the life insurance companies from investing
the premiums received in marketable securities, bonds and other financial
instruments is considered exempt from further imposition of business tax
since the premiums which have been the source of the funds invested had
already been subject to the premium tax (RMC No. 49-2010).
1) Non-life insurance companies (except their crop insurance) including
surety, fidelity, indemnity and bonding companies;
2) Pre-need companies;
3) Health Maintenance Organizations (HMOs).
i. Sec. 124 – Tax on Agents of Foreign Insurance Companies
1) Persons subject to tax
Every fire, marine or miscellaneous insurance agent authorized under the
Insurance Code to procure policies of insurance on risks located in the
Philippines.
2) Tax base
Total premiums collected
3) Tax rate
4%
4) Direct insurance with
In all cases where owners of property obtain insurance directly with
foreign insurance
foreign companies, they shall pay the tax of 5% on premiums paid.
companies
j. Sec. 125 – Amusement Taxes
1) Persons subject to tax
Proprietor, operator or lessee of:
1) cockpits;
4) Professional basketball games;
2) cabarets, night and day clubs;
5) Jai-alai and race tracks.
3) boxing exhibitions;
2) Tax base and tax rates
TAX BASE
TAX RATE
Jai-alai and race tracks
Gross receipts
30%
Cockpits
Gross receipts
18%
Cabarets, night and day clubs
Gross receipts
18%
Professional basketball
Gross receipts
15%
games
Boxing exhibitions
Gross receipts
10%
3) Payment of tax
4) Exempt boxing
exhibition
5) 15% tax on professional
basketball games in lieu
of all other percentage
taxes
6) 30% tax and other taxes
imposed even if no
amount is charged for
admission
7) Meaning of gross
receipts
Note: The term “cabarets, night and day clubs” includes videoke bars,
karaoke bars, karaoke televisions, karaoke boxes and music
lounge. (RMC No. 18-2010)
It shall be the duty of the proprietor, lessee or operator concerned, as well
as any party liable, within twenty (20) days after the end of each quarter
to make a true and complete return of the amount of gross receipts
derived during the preceding quarter and pay the tax due thereon.
Boxing exhibitions wherein World or Oriental Championships in any
division is at stake shall be exempt from amusement tax provided that at
least one of the contenders is a citizen of Philippines, and said exhibitions
are promoted by citizen/s of the Philippines or by a corporation or
association at least 60% of the capital is owned by such citizens.
The 15% tax on professional basketball games shall be in lieu of all other
percentage taxes of whatever nature and description.
The 30% tax in the case of Jai-Alai and racetracks of their gross receipts
is irrespective of whether or not any amount is charged for admission
For the purpose of amusement tax, the term “gross receipts” embraces
all the receipts of the proprietor, lessee or operator of the amusement
place. Said gross receipts also include income from television, radio and
motion picture right, if any.
8) Exercise
Boy Logro is a caterer and a videoke bar operator. In a taxable period, she had the following data, tax not
included:
Sales:
From operations of the Sherep Catering Service:
Cash sales
P400,000
Accounts receivable (catering)
250,000
Credit card sales
243,000
From operations of the Sintonado Videoke Bar:
Cash sales
1,360,000
Credit card sales
624,200
Page 6 of 9
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
Payments for catering service, based on gross receipts (80% of which are to
VAT taxpayers)
60%
Question 1 – How much is the amusement tax payable?
b. The following data
Gross receipts,
Gross receipts,
Gross receipts,
are presented to you:
sale of tickets
sale of food and drinks inside the amusement place
sale of souvenir items inside the amusement place
P 500,000
1,000,000
300,000
Compute the amusement tax assuming the amusement place is a:
1) Race track.
2) Cockpit.
3) Videoke bar.
4) Venue where professional basketball games are held.
5) Venue where boxing exhibitions featuring Philippine championship.
6) Venue where world boxing championship is held involving a Filipino boxer and promoted by a
domestic corporation.
k. Sec. 126 - Tax on Winnings
1) Persons subject to
1) Every person who wins in horse races;
tax
2) Winning from double, forecast/quinella and trifecta bets;
3) Owners of winning race horses
2) Tax base and tax
Tax base
Tax rate
rates
Amount paid for every winning
10% (person who wins in horse
ticket less cost of the tickets
races)
Amount paid for every winning
4% (double, forecast/quinella and
ticket
trifecta bets)
less cost of the tickets
Prize
10% (owners of winning race
horses)
3) Definition of terms 1) Daily double or extra double is an event wherein the bettor selects a number
in each of two consecutive races and the selection in each race must finish
first.
2) Forecast is an event wherein the bettor selects two (2) numbers in a selected
race, and the selection must finish first and second in the correct order.
3) Double quinella is an event wherein the bettor selects two (2) numbers in
each of the two (2) selected races, and the selection in each race must finish
first and second in either order.
4) Trifecta is an event wherein the bettor selects three (3) numbers in a selected
race and the selection must finish first, second and third in the correct order.
4) Collection of tax
1) Tax on winnings shall be deducted from the “dividends” corresponding to each
winning ticket or the “prize” of each winning racehorse.
2) Tax on winnings shall be withheld by the operator, manager or person in
charge of the horse races before paying the dividends or prizes.
5) Remittance of tax
The operator, manager or person in charge of horse races shall remit the taxes
to BIR
to the BIR within 20 days from the date the tax was deducted and withheld.
l.
Sec. 127 (A) - Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded Through the
Local Stock Exchange.
1) Persons subject to tax
Seller or transferor of shares of stock
2) Person not subject to
Dealer in securities
tax
3) Tax base
Gross selling price or gross value in money
4) Tax rate
6/10 of 1% (.006) effective January 1, 2018 (used to be 1/2 of 1%)
5) Collection of tax
It shall be the duty of every stock broker who effected the sale to collect the
tax.
6) Remittance of tax
The tax collected shall be remitted within 5 banking days from the date of
collected
collection.
7) Not deductible for
The tax on sale, etc. of shares of stock listed and traded through the local
income tax purposes
stock exchange shall not be deductible for income tax purposes
8) Gain derived from sale, Any gain derived from the sale, barter, exchange or other disposition of
barter, exchange or
shares of stock under Sec. 127 shall be exempt from capital gains tax and
other disposition of
from the regular individual or corporate income tax.
shares stock of under
Sec. 127
9) Exercise: Pink Yummy has shares of stock of Manila Trading Corp valued at P500,000 which are held as
investment. She sold them for P300,000.
Page 7 of 9
TAX-401
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 3: PERCENTAGE TAX
REQ: a. How much is the percentage tax on the sale of the shares listed and traded in the local stock
exchange assuming the sale is on January 5, 2018?
b. How much is the capital gains tax assuming the shares are sold January 5, 2018 directly to a buyer and
not through the stock exchange?
c. How much is the value-added tax assuming the shares are held as inventory and Pink Yummy is a VATregistered dealer in securities?
m. Sec. 127 (B) - Tax on Shares of Stock in Closely Held Corporation Sold or Exchanged Through
Initial Public Offering.
1) Persons subject to tax
1) Issuing corporation in initial public offering;
2) Seller in secondary offering.
2) Tax base
Gross selling price or gross value in money
3) Tax rates
Shares sold, bartered, exchanged
--------------------------------= Up to 25%
- 4%
= Over 25% but not over 33 1/3%
- 2%
Total outstanding shares
= Over 33 1/3%
- 1%
4) Payment of tax
5) Not deductible for
income tax purposes
6) Gain derived from sale,
barter, exchange or
other disposition of
shares stock of under
Sec. 127
7) Repeal
1) In case of primary offering – The corporate issuer shall file the return and
pay the tax within 30 days from the date of listing of the shares in the
local stock exchange.
2) In case of secondary offering – The stock broker shall collect the tax and
remit the same to BIR within 5 banking days from the date of collection.
The tax paid on initial public offering and secondary offering shall not be
deductible for income tax purposes.
Any gain derived from the sale, barter, exchange or other disposition of
shares of stock under Sec. 127 shall be exempt from capital gains tax and
from the regular individual or corporate income tax.
Section 6 of Bayanihan to Recover as One Act (RA 11494) repeals the
imposition of the IPO Tax.
2. RETURNS AND PAYMENTS OF PERCENTAGE TAXES
a. Quarterly Return
b. Consolidated return of
large taxpayers
c. Large taxpayers
Every person subject to the percentage taxes imposed shall file a quarterly
return of the amount of his gross sales, receipts or earnings and pay the tax
due thereon within twenty-five (25) days after the end of each taxable
quarter.
Large taxpayers shall file a consolidated return and pay the tax accordingly.
1) As to tax payments
Percentage tax
VAT
Excise tax
Income tax
Documentary stamp tax
Withholding tax
2) As to financial condition
Gross sales/receipts
Gross purchases
d. Person whose VAT
registration is cancelled
e. Person retiring from a
business subject to
percentage tax
Page 8 of 9
At
At
At
At
At
At
least
least
least
least
least
least
P200,000 per quarter
P200,000 per quarter
P1,000,000 per year
P1,000,000 per year
P1,000,000 per year
P1,000,000 annually
At least P1,000,000,000 per year
At least P800,000,000 for the preceding
year
Net worth
At least P300,000,000 at the close of
each calendar or fiscal year
In the case of a person whose VAT registration is cancelled and who
becomes liable to the 3% tax on VAT-exempt persons, the tax shall accrue
from the date of cancellation and shall be paid within 25 days after the end
of each taxable quarter.
Any person retiring from a business subject to percentage tax shall notify
the nearest internal revenue officer, file his return and pay the tax due
thereon within 20 days after closing his business.
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-401
Week 3: PERCENTAGE TAX
f. Withholding of
percentage tax
g. Commissioner of
Internal Revenue may
prescribe a minimum
amount of gross receipts
h. Place of filing the
return and payment of
the percentage tax
i. Option to file a separate
return or consolidated
return
Page 9 of 9
Any person, natural or juridical, with respect to his/its purchase in the
course of trade or business from non-VAT taxpayers subject to the 3%
percentage under Section 116 of the Tax Code shall be subject to a
percentage tax withholding at source at a rate of 3% based on the payee’s
(or seller’s) sales/receipts. The withholding shall be done if the taxpayerpayee opts to remit his percentage tax through withholding by filing “Notice
of Availment of the Option to Pay the Tax Through the Withholding Process”.
The Commissioner of Internal Revenue may prescribe a minimum amount of
gross receipts under the following cases:
1) When a taxpayer fails to issue receipts or invoices;
2) When no return is filed;
3) When there is reason to believe that the books of accounts or other
records do not correctly reflect the declarations made or to be made in
return.
1) Authorized agent bank;
2) Revenue District Office/Large Taxpayer District Office/Large Taxpayer
Assistance Division;
3) Collection Agent;
4) Duly authorized Treasurer of the city or municipality where the business
or principal place of business is located, as the case may be.
A person liable to percentage tax (except large taxpayers) may, at his
option, file a separate return for each branch or place of business, or a
consolidated return for all branches or places of business.
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Classes for De La Salle University Dasmariñas  Week No. 4
TAXATION
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX-501: EXCISE TAXES
A. Definition of excise tax
Excise taxes apply to taxes on goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported as well as services performed in the
Philippine, which tax shall be in addition to the value-added tax.
B. Concept and nature of excise taxes
1. Considered
These excise taxes may be considered taxes on production as they are collected only
taxes on
from the manufacturers and producers.
production
2. An indirect tax
Basically excise tax is an indirect tax, excise taxes are directly levied upon the
manufacturer or importer upon removal of the taxable goods from its place of
production or from the customs custody.
These taxes, however, may be actually passed on to the end consumer as part of the
transfer value or selling price of the goods sold, bartered or exchanged.
C. Goods and services subject to excise tax
Excise taxes apply to:
1. Goods subject
a) goods manufactured or produced in the Philippines for domestic sales or
to excise taxes
consumption or for any other disposition,
b) things imported, as well as
c) services rendered in the Philippines
Excise
a)
b)
c)
d)
e)
f)
g)
2. Kinds of excise
taxes
3. Examples of
specific tax
4. Examples of ad
valorem tax
5. Manner of
Computation of
Excise Tax
taxes specifically apply to:
Alcohol products,
Tobacco products,
Petroleum products,
Miscellaneous articles such as automobiles and non-essential goods,
Non-essential services,
Sweetened beverages, and
Mineral products
The excise tax imposed herein shall be in addition to the value-added tax imposed.
'Specific tax' - an excise tax imposed and based on weight or volume capacity or any
other physical unit of measurement.
'Ad valorem tax - an excise tax imposed and based on selling price or other specified
value of the good.'
a) Excise tax on Cigarettes Packed by Hand
b) Excise tax on Cigarettes Packed by Machine
c) Excise tax on petroleum products
d) Excise tax on mineral products
e) Excise tax on sweetened beverages
a) Excise tax on alcoholic products
b) Excise tax on cigars
c) Excise tax on automobiles
d) Excise tax on non-essential services
a) Specific tax = Units x Specific tax rate
b) Ad valorem tax = Units x SP/unit x Ad valorem tax rate
D. Filing of Return and Payment of Excise Tax on Domestic Products.
1. Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. Every person liable to pay excise tax shall file a separate return for each place of
a. Persons
Liable to File production setting forth, among others:
a) the description and quantity or volume of products to be removed,
a Return
b) the applicable tax base and the amount of tax due thereon.
In the case of indigenous petroleum, natural gas or liquefied natural gas, the excise tax
shall be paid by the first buyer, purchaser or transferee for local sale, barter or transfer.
Excise tax on exported products shall be paid by the owner, lessee, concessionaire or
operator of the mining claim.
Should domestic products be removed from the place of production without the
Page 1 of 7
0915-2303213  www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week 4: EXCISE TAX
b. Time for
Filing of
Return and
Payment of
the Tax
payment of the tax, the owner or person having possession thereof shall be liable for
the tax due thereon.
Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by
the manufacturer or producer before removal of domestic products from place of
production.
Excise tax on locally manufactured petroleum products and indigenous petroleum levied
under Sections 148 (Manufactured Oil and Other Fuels) and 151(A)(4) (Indigenous
Petroleum), respectively, shall be paid before removal from the place of production of
such products.
Excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due
and payable upon removal of such products from the locality where mined or extracted.
With respect to the excise tax on locally produced or extracted metallic mineral or
mineral products, the person liable shall file a return and pay the tax within fifteen (15)
days after the end of the calendar quarter when such products were removed subject to
such conditions as may be prescribed by rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
For this purpose, the taxpayer shall file a bond in an amount which approximates the
amount of excise tax due on the removals for the said quarter.
c. Place of
Filing of
Return and
Payment of
the Tax
d. Exceptions
The foregoing rules notwithstanding, for imported mineral or mineral products, whether
metallic or nonmetallic, the excise tax due thereon shall be paid before their removal
from customs custody.
Except as the Commissioner otherwise permits, the return shall be filed with and the tax
paid to any authorized agent bank or Revenue Collection Officer, or duly authorized City
or Municipal Treasurer in the Philippines.
The Secretary of Finance, upon recommendation of the Commissioner may, by rules and
regulations, prescribe:
(a) The time for filing the return at intervals other than the time prescribed in the
preceding paragraphs for a particular class or classes of taxpayers after considering
factors such as volume of removals, adequate measures of security and such other
relevant information required to be submitted under the pertinent provisions of this
Code; and
(b) The manner and time of payment of excise taxes other than as herein prescribed,
under a tax prepayment, advance deposit or similar schemes. In the case of locally
produced of extracted minerals and mineral products or quarry resources where the
mine site or place of extraction is not the same as the place of processing or
production, the return shall be filed with and the tax paid to the Revenue District
Office having jurisdiction over the locality where the same are mined, extracted or
quarried: Provided, however, That for metallic minerals processed abroad, the return
shall be filed and the tax due thereon paid to the Revenue District Office having
jurisdiction over the locality where the same are mined, extracted or quarried.
2. Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax
a. Price excluding
Unless otherwise provided, the price, excluding the value-added tax, at which the
VAT
goods are sold at wholesale in the place of production or through their sales agents
to the public shall constitute the gross selling price
b. Manufacturer
If the manufacturer also sells or allows such goods to be sold at wholesale in
also sells or
another establishment of which he is the owner or in the profits of which he has an
allows goods to
interest, the wholesale price in such establishment shall constitute the gross selling
be sold at
price.
wholesale in
another
establishment he
owns
Should such price be less than the cost of manufacture plus expenses incurred until
c. Should price be
the goods are finally sold, then a proportionate margin of profit, not less than 10%
less than the
of such manufacturing cost and expenses, shall be added to constitute the gross
cost of
selling price.
manufacture
3. Manufacturer's or Producer's Sworn Statement
Every manufacturer or producer of goods or products subject to excise taxes shall file with the Commissioner
Page 2 of 7
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week 4: EXCISE TAX
on the date or dates designated by the latter, and as often as may be required, a sworn statement showing,
among other information:
A) the different goods or products manufactured or produced and their corresponding gross selling
price or market value,
B) together with the cost of manufacture or production
C) plus expenses incurred or to be incurred until the goods or products are finally sold.
4. Credit for Excise tax on Goods Actually Exported
a. When goods
When goods locally produced or manufactured are removed and actually exported
locally produced without returning to the Philippines, whether so exported in their original state or as
or
ingredients or parts of any manufactured goods or products, any excise tax paid
manufactured
thereon shall be credited or refunded upon submission of the proof of actual
are removed
exportation and upon receipt of the corresponding foreign exchange payment.
and actually
exported
The excise tax on mineral products, except coal and coke, imposed under Section
b. Excise tax on
151 shall not be creditable or refundable even if the mineral products are actually
mineral
exported.
products,
except coal and
coke
E. Payment of Excise Taxes on Imported Articles
1. Person liable
a. Excise tax on
imported
articles
b. Tax-free articles
brought or
imported into
the Philippines
by persons,
entities, or
agencies
exempt from
tax
c. Importation of
cigars and
cigarettes,
distilled spirits,
fermented
liquors and
wines into the
Philippines
d. Non-labeling or
re-selling of
certain goods
punishable
e. Destruction of
confiscated
articles
f. Lien on the
article
Excise taxes on imported articles shall be paid by the owner or importer to the
Custom Officers, conformably with the regulations of the Department of Finance and
before the release of such articles from the customs house, or by the person who is
found in possession of articles which are exempt from excise taxes other than those
legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons,
entities, or agencies exempt from tax which are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entitles, the purchasers or
recipients shall be considered the importers thereof, and shall be liable for the duty
and internal revenue tax due on such importation
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines
into the Philippines, even if destined for tax and duty free shops, shall be subject to
all applicable taxes, duties, charges, including excise taxes due thereon.
Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free
shops which are not labeled as herein above required, as well as tax and duty-free
articles obtained from a duty free shop and subsequently found in a non duty-free
shop to be offered for resale shall be confiscated, and the perpetrator of such nonlabeling or re-selling shall be punishable under the applicable provisions of this
Code.
Articles confiscated shall de destroyed using the most environmentally friendly
method available in accordance with the rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioners of Customs
and Internal Revenue.
The tax due on any such goods, products, machinery, equipment or other similar
articles shall constitute a lien on the article itself, and such lien shall be superior to
all other charges or liens, irrespective of the possessor thereof.
2. Rate and Basis of the Excise Tax on Imported Articles
Unless otherwise specified imported articles shall be subject to the same rates and basis of excise taxes
applicable to locally manufactured articles.
F. Mode of Computing Contents of Cask or Package
Page 3 of 7
TAX-501
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 4: EXCISE TAX
Every fractional part of a proof liter equal to or greater than a half liter in a cask or package containing
more than one liter shall be taxed as a liter, and any smaller fractional part shall be exempt but any
package of spirits, the total content of which are less than a proof liter, shall be taxed as one liter.
G.
EXCISE TAX RATES
1. Alcoholic products tax base and rates
Product
Tax base and rates
(A) Effective on January 1, 2015
a. Distilled spirits
(1) An ad valorem equivalent to twenty percent (20%) of the net retail price* per
proof; and
(2) In addition, the specific tax rate of Twenty pesos (P20.00) per proof liter.
(B) Effective January 1, 2020
(1) An ad valorem tax equivalent to twenty-two percent (22%) of the net retail
price per proof; and
(2) In addition to the ad valorem tax herein imposed, a specific tax of P42.00 per
proof liter.
(C) Effective January 1, 2021
(1) An ad valorem tax equivalent to 22% of the net retail price per proof; and
(2) In addition, a specific tax of P47.00 per proof liter.
(D) Effective January 1, 2022
(1) An ad valorem tax equivalent to 22% of the net retail price per proof; and
(2) In addition, a specific tax of P52.00 per proof liter.
(E) Effective January 1, 2023
(1) An ad valorem tax equivalent to 22% of the net retail price per proof; and
(2) In addition, a specific tax of P59.00 per proof liter.
(F) Effective January 1, 2024
(1) An ad valorem tax equivalent to 22% of the net retail price per proof; and
(2) In addition, a specific tax of P66.00 per proof liter.
(G) In addition, the specific tax imposed under this Section shall be increased by six
percent (6%) every year thereafter, effective January 1, 2025, through revenue
regulations to be issued by the Secretary of Finance.
*net retail price excludes the excise tax and the value-added tax
b. Wines
[Amended by Republic Act No. 11467, 22 January 2020]
On wines, effective on January 1, 2020, excise tax is equivalent to P50.00 per liter.
The rate of tax imposed under this Section shall be increased by 6% every year
thereafter, effective January 1, 2021, through revenue regulations issued by the
Secretary of Finance.
Manufacturers and importers of wines shall within the first five (5) days of every
month, submit to the Commissioner a sworn statement of the volume of sales and
removals for each particular brand of wine sold at their establishments for the
three-month period immediately preceding.
c. Fermented liquor
[Amended by Republic Act No. 11467, 22 January 2020]
Effective on January 1, 2017, the tax on all fermented liquors shall be P23.50 per
liter.
There shall be levied, assessed and collected an excise tax on beer, lager beer, ale,
porter and other fermented liquors regardless if manufactured in factories or sold
and brewed at micro-breweries or small establishments such as pubs and
restaurants, except tuba, basi, tapuy and similar fermented liquors in accordance
with the following schedule:
Effective
Effective
Effective
Effective
Effective
on
on
on
on
on
January
January
January
January
January
1,
1,
1,
1,
1,
2020,
2021,
2022,
2023,
2024,
the
the
the
the
the
tax
tax
tax
tax
tax
shall
shall
shall
shall
shall
be
be
be
be
be
P35.00
P37.00
P39.00
P41.00
P43.00
per
per
per
per
per
liter;
liter;
liter;
liter;
liter.
The rates of tax imposed under this Section shall be increased by 6% every year
thereafter effective January 1, 2025, through revenue regulations issued by the
Secretary of Finance.
Page 4 of 7
TAX-501
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
Week 4: EXCISE TAX
[Amended by Republic Act No. 11467, 22 January 2020]
2. Tobacco products (tax base and tax rates)
Product
Under TRAIN
There shall be levied, assessed and collected on cigars an excise tax in accordance with the
a. Cigars
following schedule:
(1) Effective on January 1, 2013
(a) An ad valorem tax equivalent to 20% of the net retail price (excluding the excise tax
and the VAT) per cigar; and
(b) In addition, a specific tax of P5.00 per cigar.
(2) In addition, the specific tax rate of P5.00 shall be increased by 4% effective on
January 1, 2014 through revenue regulations issued by the Secretary of Finance.
Effective on January 1, 2018, P32.50 per pack;
b. Cigarettes
Packed
by Effective on July 1, 2018, P35.00 per pack;
Effective on January 1, 2020, P37.50 per pack; and
Hand
Effective on January 1, 2022, P40.00 per pack.
Effective on January 1, 2018, the tax on all cigarettes packed by machine shall be P32.50
c. Cigarettes
Packed
by per pack;
Machine
Effective on July 1, 2018, P35.00 per pack;
Effective on January 1, 2020, P37.50 per pack; and
Effective on January 1, 2022, P40.00 per pack.
d. Heated
tobacco
products
The rates of tax imposed under this Subsection shall be increased by four percent (4%)
every year thereafter effective on January 1, 2024, through revenue regulations issued by
the Secretary of Finance.
There shall be levied, assessed and collected on heated tobacco products an excise tax at
the rate prescribed below:
Effective on January 1, 2020, P25.00;
Effective on January 1, 2021, P27.50;
Effective on January 1, 2022, P30.00; and
Effective on January 1, 2023, P32.50 per pack of twenty (20) units or packaging
combinations of not more than twenty (20) units.
The rates of tax imposed under this Subsection shall be increased by five percent (5%)
every year effective on January 1, 2024 through revenue regulations issued by the
Secretary of Finance.
e. Vapor
products
[Introduced by Republic Act No. 11467, 22 January 2020]
(1) Nicotine Salt or Salt Nicotine. — There shall be levied, assessed and collected on any
liquid substance, regardless of nicotine content, including nicotine-free liquids or any
similar product, further classified as nicotine salt or salt nicotine, an excise tax based on
the following schedules:
Effective
Effective
Effective
Effective
on
on
on
on
January
January
January
January
1,
1,
1,
1,
2020,
2021,
2022,
2023,
P37.00
P42.00
P47.00
P52.00
per
per
per
per
milliliter
milliliter
milliliter
milliliter
or
or
or
or
a
a
a
a
fraction
fraction
fraction
fraction
thereof;
thereof;
thereof; and
thereof.
Provided, That the rates of tax imposed under this Subsection shall be increased by five
percent (5%) every year effective on January 1, 2024, through revenue regulations issued
by the Secretary of Finance.
(2) Conventional 'Freebase' or 'Classic' Nicotine. — There shall be levied, assessed and
collected on any liquid substance, regardless of nicotine content, including nicotine-free
liquid or any similar product, further classified as conventional 'freebase' or 'classic'
nicotine an excise tax based on the following schedules:
Effective
Effective
Effective
Effective
on
on
on
on
January
January
January
January
1,
1,
1,
1,
2020,
2021,
2022,
2023,
P45.00
P50.00
P55.00
P60.00
per
per
per
per
ten
ten
ten
ten
(10)
(10)
(10)
(10)
milliliters
milliliters
milliliters
milliliters
or
or
or
or
a
a
a
a
fraction
fraction
fraction
fraction
thereof;
thereof;
thereof; and
thereof.
Provided, That the rates of tax imposed under this Subsection shall be increased by five
percent (5%) every year effective January 1, 2024, through revenue regulations to be
issued by the Secretary of Finance.
Page 5 of 7
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week 4: EXCISE TAX
[Introduced by Republic Act No. 11467, 22 January 2020]
3. Petroleum products (tax base and tax rates)
Product
Under TRAIN
1) Lubricating oils and greases, per liter and kilogram, respectively, of volume capacity or weight,
including but not limited to, base Eight pesos (P8.00)
stock for lube oils and greases,
high vacuum distillates, aromatic Effective January 1, 2019, Nine pesos (P9.00):
extracts,
and
other similar Effective January 1, 2020, Ten pesos (P10.00)
preparations, and additives for
lubricating oils and greases,
whether such additives are
petroleum based or not,
per liter of volume capacity, Eight pesos (P8.00)
2) Processed gas
3) On denatured alcohol to be used Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
for motive power
4) Waxes and petrolatum
5) Naphtha, regular gasoline and
other
similar
products
of
distillation
6) Unleaded premium gasoline
7) Aviation turbo jet fuel, aviation
gas
8) Kerosene
9) Diesel fuel oil, and on similar
fuel oils having more or less the
same generating power
10) Liquefied petroleum gas
11) Asphalts
12) Bunker fuel oil, and on similar
fuel oils having more or less the
same generating power
13) Petroleum coke
per kilogram, Eight pesos (P8.00)
Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
per liter of volume capacity, Seven pesos (P7.00)
Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
per liter of volume capacity, Four pesos (P4.00);
per liter of volume capacity, Three pesos (P3.00)
Effective January 1, 2019, Four pesos (P4.00)
Effective January 1, 2020, Five pesos (P5.00)
per liter of volume capacity, Two pesos and fifty centavos (P2.50)
Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
Effective January 1, 2020, Six pesos (P6.00)
per kilogram, One peso (P1.00)
Effective January 1, 2019, Two pesos (P2.00)
Effective January 1, 2020, Three pesos (P3.00)
per kilogram, Eight pesos (P8.00)
Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
per liter of volume capacity, Two pesos and fifty centavos (P2.50)
Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
Effective January 1, 2020, Six pesos (P6.00)
per metric ton, Two pesos and fifty centavos (P2.50):
Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
Effective January 1, 2020, Six pesos (P6.00)
4. Miscellaneous articles (tax base and tax rates)
1) Automobiles
2) Nonessential
services
Under TRAIN
Effective January 1, 2018
Net manufacturer’s price/Importer’s Selling Price
Up to P600,000
Over P600,000 to P1,000,000
Over P1,000,000 to P4,000,000
Over P4,000,000
Rate
4%
10%
20%
50%
Hybrid vehicles shall be subject to 50% of the applicable excise tax rates on automobiles
Purely electric vehicles and pick-ups shall be exempt from excise tax on automobiles.
There shall be levied, assessed, and collected a tax equivalent to 5% based on the gross
receipts derived from the performance of services, net of excise tax and VAT, on invasive
cosmetic procedures, surgeries, and body enhancements 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.
This tax shall not apply to procedures necessary to ameliorate a deformity arising from, or
directly related to, a congenital or developmental defect or abnormality, a personal injury
resulting from an accident or trauma, or disfiguring disease, tumor, virus or infection:
Page 6 of 7
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week 4: EXCISE TAX
3) Sweetened
beverages
Provided, further, That cases or treatments covered by the National Health Insurance
Program shall not be subject to this tax.”
Effective January 1, 2018:
(1) A tax of Six pesos (P6.00) per liter of volume capacity shall be levied, assessed, and
collected on sweetened beverages using purely caloric sweeteners, and purely non-caloric
sweeteners, or a mix of caloric and non-caloric sweeteners: Provided, That this tax rate
shall not apply to sweetened beverages using high fructose corn syrup: Provided, further,
That sweetened beverages using purely coconut sap sugar and purely steviol glycosides
shall be exempt from this tax; and
(2) A tax of Twelve pesos (P12.00) per liter of volume capacity shall be levied, assessed,
and collected on sweetened beverages using purely high fructose corn syrup or in
combination with any caloric or non-caloric sweetener.
5. Mineral products (tax base and tax rates)
1. On
domestic
or
imported
coal and coke
notwithstandi
ng
any
incentives
granted in any
law or special
law
2. On
all
nonmetallic
minerals
and
quarry
resources
3. Copper and
other metallic
minerals
Under TRAIN
Effective January 1, 2018, Fifty pesos (P50.00) per metric ton;
Effective January 1, 2019, One hundred pesos (P100.00) per metric ton; and
Effective January 1, 2020, One hundred fifty pesos (P150.00) per metric ton.
Four percent (4%) based on the actual market value of the gross output thereof at the
time of removal, in the case of those locally extracted or produced
Four percent (4%) based the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation.
Four percent (4%) on the actual market value of the gross output thereof at the time of
removal, in the case of those locally extracted or produced; or
4. Gold and
chromite
Four percent (4%) on the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation
Four percent (4%) on the actual market value of the gross output thereof at the time of
removal, in the case of those locally extracted or produced; or
5. On indigenous
petroleum
Four percent (4%) on the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation
Six percent (6%) of the fair international market price thereof, on the first taxable sale,
barter, exchange or such similar transaction
Such tax to be paid by the buyer or purchaser before removal from the place of
production.
Page 7 of 7
De La Salle University - Dasmarinas
Preboard Examinations
Kenneth L. Manuel, CPA, JD
1. The inherent powers of the government are primarily _____ in character.
a. Executive
b. Legislative
c. Judicial
d. Quasi-judicial
2. The Philippine government recently passed RA No. 14023, otherwise known as Bardagulan
to Heal as One Act, which penalized, among others, violation of community quarantine
rules in light of the prevailing pandemic. This is an example of the exercise of the
government of which inherent power?
a. Taxation
b. Eminent Domain
c. Police Power
d. Corruption
3. Eminent domain:
a. Is the power
compensation.
b. Is the power
compensation.
c. Is the power
compensation.
d. Is the power
compensation.
to take public property for public purpose after payment of just
to take private property for private purpose after payment of just
to take public property for private purpose after payment of just
to take private property for public purpose after payment of just
4. The Marshall doctrine justifies:
a. The use of taxation as an implement of police power.
b. The imposition of taxes in progressive rates.
c. The bias of taxation for the protection of the less fortunate.
d. The power of the government to collect taxes even without the grant of the Constitution.
5. When the law itself provides for non-payment of taxes, such tax escape is known as:
a. Tax evasion
b. Tax holiday
c. Tax minimization
d. Tax avoidance
6. Statement 1: A revenue bill must originate from the House of Representatives.
Statement 2: A bill granting tax exemption must originate from the Senate.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
7. Statement 1: Under the non-establishment clause, the government cannot support any
religion.
Statement 2: Taxes may be used to establish a park in honor of a saint or a religious figure.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
8. All of the following are major Divisions of the BIR, except:
a. Operations Group
b. Legal Group
c. Inventory Systems Group
d. Resource Management Group
9. Which of the following statements is true?
a. The National Internal Revenue Code is a codification by our executive department of
our taxation laws.
b. The Bureau of Internal Revenue does not have a lawmaking power, but it is able to
promulgate rules within limits provided by law through Revenue Regulations.
c. The Tariffs and Customs Code, the Local Government Code, and the Omnibus
Investment Code are not sources of tax laws.
d. The Congress does not need the concurrence of the Senate in enacting a tax law.
10. The valuation of the CIR of real properties is called:
a. Zonal value
b. Assessed value
c. Fair market value
d. Appraised value
11. It is defined as a delinquency tax assessment made without the benefit of a complete or
partial investigation by an authorized revenue officer.
a. Hasty assessment
b. Jeopardy assessment
c. Delinquency assessment
d. Impartial assessment
12. Within how many days must additional supporting documents be submitted?
a. Fifteen (15) days from filing of a request for reinvestigation.
b. Thirty (30) days from filing of a request for reinvestigation.
c. Sixty (60) days from filing of a request for reinvestigation.
d. Ninety (90) days from filing of a request for reinvestigation.
13. Mimiyuuuh Company filed its annual income tax return for the calendar year 2020 on April
12, 2021. The BIR assessed Mimiyuuuh of deficiency taxes on April 14, 2024, without
alleging fraud. Mimiyuuuh, in its protest, contended that the period for BIR to assess has
already prescribed. Is Mimiyuuuh correct?
a. Yes, the right of BIR to assess has prescribed on April 12, 2023.
b. Yes, the right of BIR to assess has prescribed on April 12, 2024.
c. No, the right of BIR to assess will only prescribe on April 15, 2024.
d. No, the right of BIR to assess will only prescribe on April 15, 2025.
14. Which of the following is not a test to determine the timing of taxability of income?
a. Realization Test
b. All Events Test
c. Immediacy Test
d. Claim of Right Doctrine
15. Statement 1: Individuals can only use the calendar year
Statement 2: Corporations can only use the fiscal year
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
16. Momo is a resident citizen, Nayeon is a non-resident citizen, while Dahyun is a resident
alien. Who among them is subject to income tax only on income derived from sources
outside the Philippines?
a. Momo only.
b. Nayeon only.
c. Dahyun only.
d. Neither Momo, Nayeon, or Dahyun.
Situational Problem No. 1: For items 17 to 19, refer to the following information:
Lalisa, a resident citizen, purchased a parcel of land, measuring 1,000 square meters at a price of
P2,000,000, on January 5, 2021. Due to the construction of a subway station a few hundred
meters away from Lalisa’s parcel of land, the fair market value of the land increased to
P15,000,000 by 2022. Lalisa procured an appraiser to determine the new value of the land, and
the appraiser affirmed the increase to P15,000,000. The land was used as a collateral to secure a
loan amounting to P10,000,000 by way of a real estate mortgage. The proceeds of the loan was
used by Lalisa to construct buildings on the land for leasing.
17. Is Lalisa subject to income tax?
a. Yes. The amount that will be subject to income tax is P15,000,000.
b. Yes. The amount that will be subject to income tax is P13,000,000.
c. No. The increase in value of the land is not subject to income tax.
d. No. Loans are exempt from all internal revenue taxes.
18. Under the realization test, under which of the following scenarios would Lalisa be subject to
income tax?
a. Repayment of the loan
b. Foreclosure of the real estate mortgage
c. Payment of the documentary stamp taxes on the loan
d. Further appreciation of the value of the land to ten times the amount it was originally
acquired.
19. Suppose that Rose is a real estate dealer, and she saw that everything she needs is on the
ground that Lalisa owns. Rose wanted to purchase half of Lalisa’s parcel of land, or an area
of 500 square meters. Lalisa sold the land to Rose at a gain on 2025. When shall Lalisa file
her annual income tax return and reflect the gain from the sale of land to Rose?
a. Thirty (30) days from the date of sale.
b. April 15, 2026.
c. April 15, 2025.
d. Fifteenth day of the fourth month following the close of Lalisa’s taxable year which may
be in any last day of the month other than December 31.
20. A non-resident alien engaged in trade or business is one whose stay in the Philippines is:
a. At least 180 days
b. More than 180 days
c. At least 183 days
d. More than 183 days
21. Which is true regarding the taxation of non-resident aliens not engaged in trade or business?
a. They are subject to the final tax of 30% based on gross income.
b. They are subject to the final tax of 30% based on taxable income.
c. They are subject to the final tax of 25% based on gross income.
d. They are subject to the final tax of 25% based on taxable income.
22. Statement 1: An individual taxpayer whose only income is interest from bank deposits need
not file his income tax return.
Statement 2: A minimum wage earner who has derives no other income aside from his
minimum wage employment need not file his income tax return.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
Situational Problem No. 2: For items 23 to 25, refer to the following information:
Industrious as he is known, Arthur, a non-VAT registered resident citizen, works as a
government employee at daytime and accepts clients for accounting work after office hours. At
the same time, Arthur maintains a t-shirt printing shop to earn more. For the taxable year
ending December 31, 2021, Arthur earned the following amounts:
Taxable compensation income
Gross receipts from accounting work
T-shirt printing shop
Gross sales
Cost of sales
Gross income
Operating expenses
Net income
P
850,000
1,500,000
P 1,400,000
(800,000)
P 600,000
(400,000)
P 200,000
Upon filing his first quarter income tax return, Arthur availed of the 8% income tax option:
23. Is his availment of the 8% income tax option correct?
a. No, because the 8% income tax option is available only for VAT-registered taxpayers.
b. No, because Arthur is not a purely compensation income earner.
c. No, because Arthur’s gross receipts exceeded the threshold allowed to avail of the 8%
income tax option.
d. Yes.
24. Assuming that the availment of the 8% income tax option is proper, how much is Arthur’s
income tax due?
a. 232,000
b. 300,000
c. 357,000
d. 377,000
Solutions:
Taxable compensation income
850,000
(800,000)
50,000
Income tax on compensation
Gross receipts from accounting work
Gross sales on t-shirts
Total gross sales/receipts
Tax rate
Income tax on businesses
Income tax on compensation
Income tax on businesses
Income tax due
1,500,000
1,400,000
2,900,000
8%
232,000
145,000
232,000
377,000
25. How much is Arthur’s percentage tax due?
a. 0
b. 29,000
c. 58,000
x 30% =
130,000
15,000
145,000
d. 87,000
26. Which is true regarding the taxation of non-resident foreign corporations?
a. They are subject to the final tax of 30% based on gross income.
b. They are subject to the final tax of 30% based on taxable income.
c. They are subject to the final tax of 25% based on gross income.
d. They are subject to the final tax of 25% based on taxable income.
27. Samahan ng mga Nagkakaisang Manggagawa ng Bagong Silang is a labor organization
registered with the Department of Labor and Employment. It collected union dues from its
members amounting to P400,000, and it likewise operated a memorabilia shop in which it
earned an income of P350,000. The said labor organization used P600,000 of the proceeds for
the professional development of its union members. How much of the above amount is
subject to the regular corporate income tax of 30%?
a. P 350,000
b. P 150,000
c. P 600,000
d. P 750,000
28. In order for the reduced rate of 20% corporate income tax to apply, a domestic corporation
must have a taxable income:
a. Not exceeding P5,000,000
b. Less than P5,000,000
c. Not exceeding P100,000,000
d. Less than P100,000,000
29. Under the CREATE Act, interest income from depository banks under the Foreign Currency
Deposit System earned by a resident foreign corporation is:
a. Subject to capital gains tax of 15%
b. Subject to final withholding tax of 15%
c. Subject to final withholding tax of 7.5%
d. Exempt
Situational Problem No. 3: For items 30 to 32, refer to the following information:
Transit earned the following items of income for the taxable year ending December 31, 2021.
Dividends from domestic corporation
480,000
Receipts from rental of machinery
330,000
Interest income from expanded foreign currency deposit
system
140,000
Royalties from literary compositions
190,000
1,140,000
30. If Transit is a partnership constituted in the Philippines, which of the following statements is
true?
a. P1,140,000 will be subject to regular income tax at the rate of 0 to 35%.
b. P330,000 will be subject to regular income tax at the rate of 25%.
c. All items will not be subject to regular income tax as they are all passive income and are
therefore subject to final withholding tax.
d. All items will not be subject to any income tax as Transit will be merely considered as
pass-through entity.
31. If Transit is a resident foreign corporation, how much is final withholding tax?
a. 10,500
b. 38,000
c. 48,500
d. 59,000
Solutions:
Dividends from domestic corporation
Receipts from rental of machinery
Interest income from expanded foreign currency
deposit system
Royalties from literary compositions
Amount
480,000
330,000
140,000
190,000
1,140,000
Rate
15%
20%
Tax
21,000
38,000
59,000
32. If Transit is a non-resident foreign corporation, how much is final withholding tax?
a. 144,250
b. 153,750
c. 202,000
d. 228,000
Solutions:
Dividends from domestic corporation
Receipts from rental of machinery
Interest income from expanded foreign currency
deposit system
Royalties from literary compositions
Amount
480,000
330,000
Rate
15%
7.5%
Tax
72,000
24,750
140,000
190,000
1,140,000
25%
47,500
144,250
Situational Problem No. 4: For items 33 to 35, refer to the following information:
Fearless Corporation, a dealer in sugar under the brand Mr. Perfectly Refined Sugar, has gross
sales of ₱1,400,000,000 with cost of sales of ₱560,000,000 and allowable deductions of
₱150,000,000 for calendar year 2020. Fearless Corporation began operating in 1989.
Fearless Corporation’s total assets of ₱180,000,000 includes the land and building in which the
business is situated, amounting to ₱50,000,000 and ₱25,000,000, respectively.
33. How much is Fearless Corporation’s income tax due?
a. 172,500,000
b. 189,750,000
c. 193,500,000
d. 207,000,000
Solutions:
Sales
Less: Cost of sales
Gross profit
Less: Deductions
Taxable income
Divided by 12 months
Taxable income per month
January - June (57,500,000 x 6 x 30%)
July - December (57,500,000 x 6 x 25%)
Income tax due
1,400,000,000
(560,000,000)
840,000,000
(150,000,000)
690,000,000
12
57,500,000
103,500,000
86,250,000
189,750,000
34. Compute for Fearless Corporation’s minimum corporate income tax.
a. 4,200,000
b. 8,400,000
c. 12,600,000
d. 16,800,000
Solutions:
Sales
Less: Cost of sales
Gross profit
Divided by 12 months
Gross profit per month
January - June (70,000,000 x 6 x 2%)
July - December (70,000,000 x 6 x 1%)
Income tax due
1,400,000,000
(560,000,000)
840,000,000
12
70,000,000
8,400,000
4,200,000
12,600,000
35. Assuming Fearless Corporation follows a fiscal year which begins on March 1, how much is
Fearless Corporation’s income tax due considering the amounts presented above were
earned or incurred from March 1, 2020, to February 28, 2021?
a. 161,000,000
b. 184,000,000
c. 189,750,000
d. 207,000,000
Solutions:
January - June (57,500,000 x 6 x 30%)
July - December (57,500,000 x 6 x 25%)
Income tax due
69,000,000
115,000,000
184,000,000
36. Statement 1: Freeport zones are managed as separate customs territory.
Statement 2: Freeport zones need not be adjacent to a seaport or airport of entry.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
37. Which of the following is not an investment promotion agency that is covered by Title XIII
of the Tax Code as introduced by the CREATE Act?
a. Philippine Economic Zone Authority (PEZA)
b. Subic Bay Metropolitan Authority (SBMA)
c. Maritime Industry Authority (MARINA)
d. Authority of the Freeport Area of Bataan (AFAB/FAB)
38. All of the following are enhanced deductions that a registered business enterprise may avail,
except:
a. 50% additional deductible amount on direct labor expense
b. 10% additional depreciation allowance on buildings
c. 20% additional deduction on administrative expenses
d. 100% additional deduction on training expenses
39. In computing for the optional standard deduction of individuals, the computation is based
on:
a. Gross sales or receipts
b. Gross income
c. Net income
d. Taxable income
40. Net operating loss carry over
a. Can be deducted against income tax due to arrive at taxable income
b. Can be deducted against income tax due to arrive at income tax payable
c. Can be deducted against gross income to arrive at income tax payable
d. Can be deducted against gross income to arrive at taxable income
41. A CPA certification containing the itemized assets and liabilities of the estate is required if:
a. The gross estate exceeds P500,000.
b. The gross estate exceeds P5,000,000.
c. The gross estate exceeds P200,000.
d. The gross estate exceeds P2,000,000.
42. Which of the following is/are transmitted by way of succession?
I.
Transmissible rights
II.
Transmissible properties
III.
Obligations of the decedent in their full amount
a.
b.
c.
d.
II only.
I and II only.
II and III only.
I, II, and III.
43. A decedent died with an unpaid liability of P2,000,000. A week after his death, the debt fell
due. The creditor called the decedent’s phone, the decedent’s son picked up, and informed
the creditor that the decedent has died. The creditor lashed out, saying that that is not a
valid excuse to not pay the debt. The decedent’s son settled one-fourth of the debt, an
amount of P500,000, within two hours. The remainder is unpaid. What is the effect of the
payment of P500,000 to the claimable deduction of the estate for estate tax purposes?
a. No effect.
b. The P500,000 payment reduces the amount of claimable deduction.
c. The entire P2,000,000 will no longer be considered as claimable.
d. The P500,000 payment shall be removed from the gross estate of the decedent
44. Which of the following transfers is subject to estate tax?
a. Transfer passing under general power of appointment
b. Merger of usufruct to the owner of naked title
c. Transfer of property from fiduciary heir to fideicommissary heir
d. Irrevocable donation inter vivos
Situational Problem No. 5: For items 45 to 47, refer to the following information:
Niels Bohr died with a receivable collectible from Ernest Rutherford. Ernest Rutherford have
assets amounting to P400,000, and liabilities amounting P1,000,000, and included among
Ernest’s liabilities is an obligation payable to Niels amounting to P300,000, and an obligation on
unpaid taxes payable to the government amounting to P100,000.
Niels also mortgaged his property to the bank in consideration for a loan worth P1,000,000. The
property is worth P1,500,000. P300,000 of the loan was paid by Niels before her death.
45. Which of the following statement is true regarding Niels’ gross estate?
a. Niels is insolvent; hence, there is no requirement for Niels to declare anything in his
gross estate
b. The receivable of Niels from Ernest should be included as part of Niels’ gross estate
in its full amount.
c. Considering that Ernest is insolvent, the receivable of Niels from Ernest should be
excluded from Niels’ gross estate.
d. Considering that Ernest is insolvent, the receivable of Niels from Ernest should be
proportionately reduced for purposes of determining the valuation of Niels’ gross estate.
46. How much may Niels’ estate claim as deduction for claims against insolvent persons?
a. 100,000
b. 120,000
c. 180,000
d. 200,000
Solutions:
Beginning balance
Less: Preferred credit (Taxes)
Remaining assets to common credits
Remaining assets
Common credits
Collectible portion
Assets
400,000
(100,000)
300,000
Liabilities
1,000,000
(100,000)
900,000
300,000
900,000
33.33%
100.00%
66.67%
300,000
200,000
Uncollectible portion
Claim of Niels against Ernest
Uncollectible amount
47. In relation to the mortgage, how much may be claimed as deduction?
a. 700,000
b. 1,000,000
c. 1,200,000
d. 1,500,000
Solution:
Amount of mortgage
Paid before death
Unpaid mortgage
1,000,000
(300,000)
700,000
Situational Problem No. 6: For items 48 to 49, refer to the following situation:
A married decedent had the following properties:
I.
A car that was owned by the decedent before marriage and earned through industry
II.
Rentals from a building that was inherited by the decedent during marriage
48. Under the conjugal partnership of gains, which of the following would be considered as
exclusive property?
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
49. Under the absolute community of property, which of the following would be considered as
exclusive property?
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
50. Which of the following transfers of property is subject to donor’s tax?
a. Conditional donation when the fulfillment of condition has been waived.
b. Revocable donation when the donation was not revoked until the death of the transferor.
c. Donations between spouses on occasion of family celebrating
d. Transfers for inadequate consideration
51. Statement 1: An unborn child may become a donee.
Statement 2: If the donee does not accept what is given to him by the donor, although it has
already been delivered, the donor is not liable to pay any donor’s tax.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
52. A, B, C, D, and E are the legal heirs of Z. If A renounces her share in favor of B and C, then:
a. The renunciation is not subject to donor’s tax nor estate tax.
b. The renunciation is subject to donor’s tax.
c. The renunciation is subject to estate tax.
d. The renunciation is subject to both donor’s tax and estate tax.
53. VAT is imposed on:
I.
Sale of goods or properties not in the course of business
II.
Sale of goods or properties in the course of business
III.
Importation of goods or properties in the course of business
IV.
Importation of goods or properties not in the course of business
a.
b.
c.
d.
I and III only.
I, III, and IV only.
I, II, and III only.
I, II, III, and IV.
54. Which among the following taxpayers can avail of the 8% flat rate of income tax?
a. A non-VAT registered taxpayer whose annual VAT-subject gross sales or receipts
exceed P3,000,000
b. A non-VAT registered taxpayer whose annual VAT-subject gross sales or receipts
do not exceed P3,000,000
c. A VAT registered taxpayer whose annual VAT-subject gross sales or receipts exceed
P3,000,000
d. A VAT registered taxpayer whose annual VAT-subject gross sales or receipts do not
exceed P3,000,000
55. All of the following are requisites for discount to be allowed as a deduction from the selling
price, except:
a. Determined and granted at the time of sale
b. Recorded in the seller’s books of accounts
c. Subject to condition
d. Amount of discount is reflected in the invoice
56. In order to be zero-rated, the sale and actual shipment of goods from the Philippines to a
foreign country:
a. Must be paid for in Philippine pesos.
b. Must be paid for in acceptable foreign currency
c. Must be FOB Shipping Point
d. Must be FOB Destination
57. Which of the following is an attachment to the quarterly VAT return?
a. Alphalist of payees
b. Summary list of sales
c. Audited financial statements
d. Certificate of registration
Situational Problem No. 7: For items 58 to 60, refer to the following situation:
Philippine Airlines is a domestic corporation engaged in the transport of cargo and passengers.
The following are the routes that PAL flew and the corresponding amounts it received for the
rendering of such services:
Route
Manila to Cebu
Cebu to Manila
Manila to Davao
Davao to Manila
Manila to Seoul
Seoul to Manila
Manila to Tokyo
Tokyo to Manila
Total
Amount
P 2,300,000
7,460,000
8,490,000
5,900,000
6,060,000
5,870,000
4,550,000
5,650,000
P 46,280,000
58. How much are the zero-rated sales?
a. 0
b. 10,610,000
c. 11,520,000
d. 22,130,000
Solutions:
Manila to Seoul
Manila to Tokyo
Total
6,060,000
4,550,000
10,610,000
59. How much is Philippine Airlines’ output VAT?
a. 0
b. 2,898,000
c. 4,280,400
d. 5,553,600
Solutions:
Manila to Cebu
Cebu to Manila
Manila to Davao
Davao to Manila
Manila to Seoul
Manila to Tokyo
Total
2,300,000
7,460,000
8,490,000
5,900,000
6,060,000
4,550,000
12%
12%
12%
12%
0%
0%
Output VAT
276,000
895,200
1,018,800
708,000
2,898,000
60. How much is Philippine Airlines’ common carriers tax?
a. 0
b. 724,500
c. 1,070,100
d. 1,388,400
Situational Problem No. 8: For items 61 to 64, refer to the following information:
Farm Solutions, Inc., sold the following items to farmers for the taxable quarter ending June 30,
2021:
Fertilizers
Pesticides
Seeds
Seedlings
Farm equipment
Total
3,040,000
2,260,000
3,200,000
6,050,000
18,730,000
33,280,000
61. How much is Farm Solutions, Inc.’s output VAT?
a. 0
b. 2,247,600
c. 2,518,800
d. 3,244,800
Solutions:
Pesticides
Farm equipment
Total
VAT rate
Output VAT
2,260,000
18,730,000
20,990,000
12%
2,518,800
62. When should Farm Solutions file its VAT return for the taxable quarter ending June 30, 2021?
a. July 10, 2021
b. July 20, 2021
c. July 25, 2021
d. August 29, 2021
63. Assuming Farm Solutions is an agricultural cooperative, which of the following sales are
exempt from VAT?
I.
Sale of processed meat products to non-members of the cooperative. The meat
products are produce of the members.
II.
Sale of processed meat products to members of the cooperative. The meat products
are produce of non-members.
a.
b.
c.
d.
I only.
II only.
Both I and II.
Neither I nor II.
64. Assuming Farm Solutions is an agricultural cooperative and the farmers are its members,
how much is Farm Solutions’ output VAT?
a. 0
b. 2,247,600
c. 2,518,800
d. 3,244,800
65. Transport of cargoes by air from Philippines to abroad by international carriers
a. Subject to 3% common carriers tax
b. Subject to 12% value-added tax
c. Subject to 0% value-added tax
d. Exempt from both common carriers tax and value-added tax
66. Which of the following franchisees is not subject to franchise tax?
a. Radio franchisees
b. Television franchisees
c. Electric utility franchisees
d. Water utility franchisees
67. Which of the following transactions is subject to the overseas communications tax?
a. Outbound calls
b. Inbound calls
c. Outbound payments to postal services
d. Inbound payments to postal services
68. Who is the taxpayer for tax on winnings?
I.
Owner of the winning horse
II.
Holder of the winning ticket
a.
b.
c.
d.
I only.
II only.
Both I and II.
Neither I nor II.
69. Sabungan sa Bambang is operated by Alfred Hitchcock. During the first quarter of 2019, it had
the following receipts:
Entrance fees for audience
Registration fees for cockfighters
Receipts from restaurants owned by Hitchcock inside the cockpit
Lease payments made by private concessionaire with places inside
the cockpit
Advertisement fees
Total
P 5,150,000
5,930,000
3,580,000
4,270,000
4,200,000
P 23,130,000
How much is the amusement tax due?
a. 2,638,800
b. 2,775,600
c. 3,407,400
d. 4,163,400
Solutions:
Entrance fees for audience
Registration fees for cockfighters
Receipts from restaurants owned by Hitchcock inside the cockpit
Lease payments made by private concessionaire with places inside the
cockpit
Advertisement fees
Total
Amusement tax rate
5,150,000
5,930,000
3,580,000
4,270,000
4,200,000
23,130,000
18%
Amusement tax due
4,163,400
70. Which of the following taxes have been repealed by the Bayanihan to Recover as One Act?
a. Overseas Communications Tax
b. Stock Transaction Tax
c. Tax on Initial Public Offerings
d. Amusement Tax
De La Salle University - Dasmarinas
Preboard Examinations – Set B
Kenneth L. Manuel, CPA, JD
1. Statement 1: Inherent powers arise from a grant of the Constitution.
Statement 2: Without the Constitution, the inherent powers of the government cannot be
exercised.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
2. Which of the following is an example of the State’s exercise of police power?
a. Collection of taxes on sweetened beverages as enacted by the Congress
b. Congress’s prohibition of illegally copying pirated movies.
c. The government’s taking of a privately owned land for the construction of a railway
d. Conduct of the State of elections for positions in the national government.
3. Tax evasion is:
a. Also known as tax avoidance, and is the illegal way of not paying taxes.
b. Also known as tax avoidance, and is the legal way of not paying taxes.
c. Also known as tax dodging, and is the illegal way of not paying taxes.
d. Also known as tax dodging, and is the legal way of not paying taxes.
4. Withholding is:
a. A method of reducing a taxpayer’s income
b. A method by which the government collect taxes at the time of its deadline
c. A method by which the government collect taxes in advance
d. A method of increasing a taxpayer’s income
5. Substituted filing of income tax returns is a manifestation of which principle of a sound tax
system?
a. Equality
b. Theoretical justice
c. Fiscal adequacy
d. Administrative feasibility
6. Which stage of taxation will the legislative department be involved with?
a. Levy
b. Assessment
c. Collection
d. Imprisonment
7. Statement 1: Under the non-establishment clause, the government cannot support any
religion.
Statement 2: Taxes may be used to establish a park in honor of a saint or a religious figure.
a.
b.
c.
d.
Only Statement 1 is true.
Only Statement 2 is true.
Both statements are true.
Both statements are not true.
8. Statement 1: The Constitution provides that the Congress must enact a regressive system of
taxation.
Statement 2: Due process in taxation is observed when taxes are enacted to favor the poor.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
9. The Bureau of Internal Revenue is under which department of the Executive Branch of the
government?
a. Department of Agriculture
b. Department of Finance
c. Department of Public Works and Highways
d. Department of CPAs
10. Which of the following issuance is signed by the Secretary of Finance?
a. Revenue Regulations (RR)
b. Revenue Memorandum Orders (RMO)
c. Revenue Memorandum Circular (RMC)
d. BIR Rulings
11. The CIR may inquire into bank deposits of the following, except:
a. decedent to determine his gross estate; and
b. any taxpayer who has filed an application for compromise of his tax liability by reason
of financial incapacity to pay his tax liability
c. a specific taxpayer or taxpayers subject of a request for the supply of tax information
from a foreign tax authority pursuant to an international convention or agreement on tax
matters to which the Philippines is a signatory
d. any taxpayer who has not signed a waiver of the secrecy of bank deposits but is
before the Senate for an impeachment inquiry or with a pending case before the
courts for bribery or dereliction of duty
12. Statement 1: Assessments are presumed to be correct.
Statement 2: Assessments are discretionary on the part of the Commissioner.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
13. It is an official document that empowers a Revenue Officer (RO) to examine and scrutinize a
taxpayer’s books of accounts and other accounting records, in order to determine the
taxpayer’s correct internal revenue tax liabilities.
a. Preliminary Assessment Notice (PAN)
b. Warrant of Inspection (WOI)
c. Letter of Authority (LA)
d. Arrest Warrant (AW)
14. In which of the following cases will a PAN not be required?
a. There is deficiency income tax due.
b. There is a mathematical error in the computation of taxes.
c. In cases involving documentary stamp tax
d. When there is discrepancy between tax payable and tax due
15. Within how many days should a taxpayer reply to the PAN?
a. Ten (10) days.
b. Fifteen (15) days.
c. Twenty (20) days.
d. Thirty (30) days.
16. It is defined as the contract between the government and the taxpayer to settle the liability at
a lower amount.
a. Abatement
b. Compromise
c. Settlement
d. Remission
17. When the administration and collection costs involved do not justify the collection of the
amount due, the tax due may be:
a. Compromised
b. Abated
c. Surcharged
d. Cancelled
18. When is an amendment of a return considered substantial?
a. When there is underdeclaration exceeding 20%
b. When there is underdeclaration exceeding 25%
c. When there is underdeclaration exceeding 30%
d. When there is underdeclaration exceeding 40%
19. The Court of Tax Appeals is composed of a Presiding Justice and ____ associate Justices.
a. Seven
b. Eight
c. Nine
d. Ten
20. Which of the following is not an administrative remedy of BIR Commissioner to collect tax?
a. Distraint of personal property
b. Civil case to collect a sum of money
c. Garnishment of bank deposit
d. Levy of real property
Situational Problem No. 1: For items 21 to 25, refer to the following information:
Tim McGraw owns a chain of fifteen (15) convenience stores in Brgy. Nashville, Quezon City.
The convenience stores had an aggregate sale of Php4,800,000, as a result, Tim McGraw
registered as a VAT-registered taxpayer.
For taxable year 2021, Tim McGraw paid income taxes amounting to P320,000. His income tax
due was P600,000, and Tim McGraw was able to make prior quarter’s payments amounting to
P280,000, resulting in an income tax payable of P320,000. A month after filing his annual income
tax return on the day of the deadline, Tim McGraw saw in his records that there were
Certificates of Creditable Tax Withheld (BIR Form No. 2307) pertaining to taxable year 2021 that
were not claimed. On May 27, 2022, Tim McGraw filed an amended return and sought for the
refund of the amount of the Certificates of Creditable Tax Withheld.
The BIR denied Tim McGraw’s claim for refund on the following grounds. First, the BIR officer
stated that according to the irrevocability rule, Tim McGraw is barred from claiming refund.
Second, the amended return was filed out of time. Third, the time has lapsed for Tim McGraw
to claim for refund. Finally, the BIR officer informed Tim McGraw that the principle of estoppel
applies, and Tim McGraw can no longer amend his return later on to reflect a refund.
Tim McGraw, knowing that you are a student of tax, sought your counsel.
21. Is the BIR correct in denying the claim for refund on the ground of the application of the
irrevocability rule?
a. It cannot be determined. Reference must be had on last year’s income tax return to
determine whether the irrevocability rule applies.
b. Yes, the irrevocability rule applies specifically to overpayments of income tax.
c. No, the irrevocability rule only applies with respect to errors in computation.
d. No, there was no option to claim for tax credit in the first place.
22. When is the last day to amend Tim McGraw’s annual income tax return?
a. April 15, 2022
b. April 15, 2023
c. April 15, 2025
d. April 15, 2027
23. Statement 1: The principle of estoppel bars a taxpayer from amending his/her own return.
Statement 2: The principle of estoppel is applicable in Tim McGraw’s case because the
declaration in the income tax return amounts to a deliberate false representation in which
the BIR has made reliance.
a.
b.
c.
d.
Only Statement 1 is true.
Only Statement 2 is true.
Both statements are true.
Both statements are not true.
24. When is the last day for Tim McGraw to file a claim for refund before the Bureau of Internal
Revenue?
a. April 15, 2022
b. April 15, 2023
c. April 15, 2024
d. April 15, 2025
25. When is the last day for Tim McGraw to file a claim for refund before the Court of Tax
Appeals should the Bureau of Internal Revenue deny his claim for refund on April 2, 2024?
a. April 15, 2024
b. April 17, 2024
c. May 2, 2024
d. June 1, 2024
26. Statement 1: Income tax is a national tax.
Statement 2: Considering that the impact and incidence of taxation in income tax rests on the
same person, income tax is considered as a direct tax.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
27. Under BIR regulations, income in long-term construction contracts is recognized through:
a. Percentage of completion method only.
b. Completed contract method only.
c. Zero-profit method only.
d. Either of the above methods at the option of the taxpayer.
28. Big Hit Corporation is a domestic corporation. Which of the following items of income is
subject to tax?
I.
Gain from sale of personal property in the Philippines.
II.
Gain from sale of personal property in South Korea.
a.
b.
c.
d.
I only.
II only.
Both I and II.
Neither I nor II.
29. Assuming the taxpayer follows the calendar year, the deadline for the filing of the second
quarter Quarterly Remittance Return of Creditable Income Taxes Withheld (BIR Form No.
1601EQ) is:
a. June 30
b. July 15
c. July 31
d. August 15
Situational Problem No. 2: For items 30 to 31, refer to the following situation
Vincenzo earned the following items of income for the calendar year ending 2021:
Interest income, debtor resides in Hong Kong, payment made in the Philippines
Interest income, debtor resides in the Philippines, payment made in China
Gain from sale of real property, real property situated in America
Gain from sale of personal property, sale made in UK, property is in the
Philippines
Gain from sale of shares of stock of a domestic corporation, residence of buyer is
Taiwan, sale made in Argentina
420,000
330,000
440,000
290,000
225,000
1,705,000
30. If Vincenzo is a resident citizen, how much of his income is subject to Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000
Solution: All items of income are subject to Philippine income tax.
31. If Vincenzo is a resident alien, how much of his income is subject to Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000
Solution:
Interest income, debtor resides in the Philippines, payment made in China
Gain from sale of shares of stock of a domestic corporation, residence of
buyer is Taiwan, sale made in Argentina
Philippine income
32. Seamen are classified as:
a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien engaged in trade or business
330,000
225,000
555,000
33. Who among the following taxpayers can avail of the special income tax rate?
a. VAT registered domestic corporations
b. Non-VAT registered non-resident alien not engaged in trade or business
c. VAT-registered resident citizens
d. Non-VAT registered non-resident citizens
34. Who among the following is most likely to be classified as a mixed income earner?
a. Sakura, who is a part-time service crew at a fastfood store and a part-time saleslady at
two different department stores.
b. Tomoyo, who earns income from her freelance photography stints and is engaged on a
per-contract basis by different companies
c. Yukito, who is a full-time Vice President for Human Resources at a multinational
company and a lessor of a five-floor apartment.
d. Toya, who is still a college student and has income from his gigs with his rock band.
35. All of the following can be deducted from a purely compensation income earner’s income,
except:
a. Union dues
b. Mandatory PAGIBIG contributions
c. Private health insurance contributions
d. Mandatory SSS contributions
36. All of the following items of interest income are subject to final tax for a resident citizen
income earner, except:
a. Interest income from government securities
b. Interest income from privately issued promissory note
c. Interest income from deposits under expanded foreign currency deposit system
d. Interest income from short-term currency bank deposit
37. Which of the following gains is subject to capital gains tax?
a. Gain on sale of shares of stocks of domestic corporation by dealer of securities
b. Gain on sale of unquoted shares of stocks of domestic corporation by nondealer of
securities
c. Gain on sale of quoted shares of stocks of domestic corporation thru the facilities of
Philippine Stock Exchange
d. Gain on sale of quoted shares of stocks of foreign corporation directly to buyer
Situational Problem No. 3: For items 38 to 42, refer to the following information:
Kara sold to Mia shares of stock of a foreign corporation at a selling price of P1,000,000 with an
acquisition cost of P380,000. On the same date, Kara sold to Mia shares of a stock of a domestic
corporation at a selling price of P600,000, and an acquisition cost of P400,000.
38. If Kara is a resident citizen and is not a dealer in securities, and the shares were sold directly
to Mia, how much is the capital gains tax due of Kara from the transaction?
a.
b.
c.
d.
0
30,000
93,000
123,000
Solutions:
Selling price
Less: Acquisition cost
Net capital gain
x CGT rate
CGT due
600,000
(400,000)
200,000
15%
30,000
Only the sale of shares of a domestic corporation is subject to capital gains tax.
39. If Kara is a resident citizen and is not a dealer in securities, and the shares were sold directly
to Mia, how much of Kara’s income is subject to regular income tax?
a. 0
b. 200,000
c. 620,000
d. 820,000
Solutions:
Selling price
1,000,000
Less: Acquisition cost
Net capital gain
(380,000)
620,000
40. If Kara is a resident citizen and is a dealer in securities, and the shares were sold directly to
Mia, how much is the capital gains tax due of Kara from the transaction?
a. 0
b. 30,000
c. 93,000
d. 123,000
Discussion:
The transactions are subject to regular income tax, considering that for a dealer in securities, the
shares are presumed to be ordinary assets.
41. Which of the following statements is true?
a. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, any gain from the sale is subject to capital gains tax.
b. If Kara is a dealer in securities and she sold the shares of a domestic corporation
through the local stock exchange, the sale is subject to value-added tax.
c. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, the sale is subject to stock transaction tax.
d. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, any gain from the sale is subject to final withholding tax.
42. Statement 1: Kara’s sale of the shares of a foreign corporation will never be subject to capital
gains tax under any circumstance.
Statement 2: If Kara sold the shares of a domestic corporation through the local stock
exchange, it will always be subject to stock transaction tax.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
43. Under the CREATE Act, which of the following taxes is no longer imposed?
I.
Minimum Corporate Income Tax (MCIT)
II.
Optional Corporate Income Tax (OCIT) of 15%
III.
Improperly Accumulated Earnings Tax (IAET)
a.
b.
c.
d.
I and II only.
I and III only.
II and III only.
I, II, and III.
44. Chromatica Corporation was incorporated on 2020. SEC issued its Certificate of
Incorporation on June 30, 2020. Chromatica Corporation follows the calendar year. When
will the imposition of the minimum corporate income tax commence?
a. First quarter of 2023.
b. Third quarter of 2023.
c. First quarter of 2024.
d. Third quarter of 2024.
45. The reduced rate of 20% corporate income tax may apply to:
a. Domestic corporations
b. Resident foreign corporations
c. Domestic corporations and resident foreign corporations
d. Domestic corporations, resident foreign corporations, and non-resident foreign
corporations
46. Past service costs are
a. Claimable in full.
b. Amortized over a period of 3 years
c. Amortized over a period of 5 years
d. Amortized over a period of 10 years
47. Which of the following tax is an allowable deduction from gross income of a VAT-Registered
Taxpayer?
a.
b.
c.
d.
Stock transaction tax
Real property tax
Value added tax
Estate tax
48. Up to what extent may wagering losses be claim as deductions?
a. Up to 100% of wagering gains
b. Up to 25% of wagering gains
c. Up to 50% of wagering gains
d. Up to 75% of wagering gains
49. Estate tax is imposed on:
a. The death of the decedent
b. The making of the will of a decedent
c. The transfer of properties by the decedent to the heirs, legatees, or devisees.
d. The duration of the life of the decedent
50. Reciprocity primarily affects the taxability of
a. Tangible personal property located without the Philippines.
b. Tangible personal property located within the Philippines.
c. Intangible personal property located without the Philippines.
d. Intangible personal property located within the Philippines.
51. What is the rule in relation to claims against insolvent persons?
a. The amount that is collectible must be included in the gross estate of the decedent, and
the amount that is uncollectible may be claimed as a deduction from gross estate
b. The amount that is collectible need not be included in the gross estate of the decedent,
and the amount that is uncollectible may be claimed as a deduction from gross estate
c. The full amount of the receivable must be included in the gross estate of the
decedent, and the amount that is uncollectible may be claimed as a deduction from
gross estate
d. The full amount of the receivable need not be included in the gross estate of the
decedent, and the amount that is uncollectible may be claimed as a deduction from gross
estate
52. In the absence of any agreement, the default property regime is:
a. Absolute community of property
b. Conjugal partnership of gains
c. Complete separation of property
d. Ang sa’yo ay akin at ang akin ay akin pa rin regime
53. What is the amount of the standard deduction from gross estate?
a. P500,000
b. P5,000,000
c. P10,000,000
d. P1,000,000
Situational Problem No. 4: For items 54 to 55, refer to the following information:
Gemma obtained six life insurance policies, each having different terms. When Gemma died on
October 19, 2017, the following were paid out:
Life insurance with Lea, her sister, as a revocable beneficiary
Life insurance with her estate as a irrevocable beneficiary
Life insurance with Gemmina, her daughter, as a irrevocable
beneficiary
Life insurance with a friend Georgina as a revocable beneficiary
Life insurance with executor Ghemwhelyn as a revocable
beneficiary
P 5,210,000
6,340,000
5,700,000
3,570,000
6,770,000
P 27,590,000
54. How much of the proceeds shall be part of the gross estate?
a. 15,550,000
b. 18,320,000
c. 21,890,000
d. 27,590,000
Solutions:
Life insurance with Lea, her sister, as a revocable beneficiary
Life insurance with her estate as a irrevocable beneficiary
Life insurance with Ghemwhelyn, a stranger, as a revocable beneficiary
Life insurance with executor as a revocable beneficiary
5,210,000
6,340,000
3,570,000
6,770,000
21,890,000
55. Which of the following statements is correct with respect to the liability for the payment of
estate tax.
a. Gemmina and Ghemwelyn are solidarily liable for the payment of estate tax
b. Gemmina and Ghemwelyn are jointly liable for the payment of estate tax
c. Gemmina is primarily liable for the payment of estate tax, while Ghemwelyn is
solidarily liable.
d. Ghemwelyn is primarily liable for the payment of estate tax, while Gemmina is
subsidiarily liable.
56. Donor’s tax credit
a. Seeks to avoid international double taxation.
b. Seeks to decrease donor’s tax payable by removing items already subjected to income
tax.
c. Can be claimed by all individual donors.
d. Can only be claimed by a non-resident alien donor.
57. Debts attached to properties donated are deductible from gross gift if:
a. Assumed by the donor.
b. Assumed by the donee.
c. Paid by the donor before donation.
d. Paid by the donee before donation.
58. Donations to which of the following institutions are exempt from donor’s tax?
I.
Educational institution
II.
Cultural institution
III.
Religious institution
a.
b.
c.
d.
I and II only.
I and III only.
II and III only.
I, II, and III.
59. What is the donor’s tax rate for taxable donation made by an individual to his or her
relative?
a. 2%-15%
b. 30%
c. 5%
d. 6%
60. Which of the following taxpayers is barred from cancelling its optional VAT registration?
a. International common carriers
b. Operators of amusement places
c. Export-oriented enterprises
d. Radio and television franchisees
61. Gross receipts is the appropriate VAT base for all of the following, except:
a. Sale of services
b. Lease of properties
c. Sale of securities
d. Importation
62. Consignment of goods are transactions deemed sale:
a. If actual sale is not made within sixty (60) days following the date such goods were
consigned
b. If actual sale is not made within ninety (90) days following the date such goods were
consigned
c. If actual sale is not made within thirty (30) days following the date such goods were
consigned
d. If actual sale is not made within one hundred twenty (120) days following the date such
goods were consigned
63. Which of the following is an export-oriented enterprise?
a. Demi Corporation. Its export sales exceed 50% of the total annual production of the
preceding taxable year.
b. Ariana Corporation. Its export sales exceed 70% of the total annual production of the
preceding taxable year.
c. Miley Corporation. Its export sales exceed 50% of the total annual production of the
three preceding taxable year.
d. Selena Corporation. Its export sales exceed 70% of the total annual production of the
three preceding taxable year.
64. Lydia Mila is engaged in the sale of chicken in various forms. The following are Lydia Mila’s
sales:
Live chickens
Fighting cocks
Fresh chicken meat
Cut chicken meat
Boiled chicken meat
Roasted chicken meat
Smoked chicken meat
Salted chicken meat
Chicken nuggets
Chicken cubes
Chicken hotdog
Total
P 8,510,000
300,000
210,000
7,700,000
2,220,000
510,000
5,310,000
4,640,000
2,130,000
4,970,000
4,500,000
P 41,000,000
How much are the VAT-exempt sales?
a. 8,720,000
b. 16,350,000
c. 29,100,000
d. 29,400,000
Solutions:
Live chickens
Fresh chicken meat
Cut chicken meat
Boiled chicken meat
Roasted chicken meat
Smoked chicken meat
Salted chicken meat
Total
8,510,000
210,000
7,700,000
2,220,000
510,000
5,310,000
4,640,000
29,100,000
65. In order to claim input VAT from purchases of services, the proper documentation is:
a. VAT invoice
b. VAT official receipt
c. VAT statement of account
d. VAT delivery receipt
66. Which of the following sale of medicine is subject to VAT?
a. Sale of drugs and medicines prescribed for diabetes
b. Sale of drugs and medicines prescribed for flu
c. Sale of drugs and medicines for high cholesterol
d. Sale of drugs and medicines for hypertension
67. Who is the taxpayer for tax on winnings?
I.
Owner of the winning horse
II.
Holder of the winning ticket
a.
b.
c.
d.
I only.
II only.
Both I and II.
Neither I nor II.
68. All of the following are subject to 18% amusement tax, except:
a. Cockpits
b. Cabarets
c. Day clubs
d. Jai-alai
69. In general, the percentage tax return is required to be filed:
a. Within ten (10) days from the close of the taxable quarter
b. Within fifteen (15) days from the close of the taxable quarter
c. Within twenty (20) days from the close of the taxable quarter
d. Within twenty five (25) days from the close of the taxable quarter
70. Which of the following is an excisable article?
a. Milk
b. Coffee
c. Energy drink
d. Distilled water
ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
TAXATION
First Pre-Board Examination
February 16, 2021(Tuesday)
06:00 PM to 09:00 P.M.
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following questions.
Mark only one answer for each item by shading the box corresponding to the
letter of your choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED.
Use pencil no. 2 only.
1. (Estate Tax) Mr. Faustino Santos, testator, appointed Mr. Generoso Cruz as the
executor of the estate. Mr. Santos was a citizen of Argentina and a resident of
Buenos Aries, Argentina.
He was in Manila visiting his son when he died.
He
owned a Mercedes sports car and had several bank deposits in the USA.
The
executor asked you whether or not the car and the bank deposits in the USA will
still have to be declared as part of the Philippine gross estate of Faustino
Santos. Argentina does not impose transfer taxes of any kind. What answer will
you give him?
a. The car and the bank deposits in the USA have to be declared as part of the
Philippine gross estate because the decedent was in Manila at the time of his
death and, as such, properties wherever situated are included in the gross
estate.
b. The car and the bank deposits in the USA need not be declared as part of the
Philippine gross estate because when Mr. Santos died he was a non-resident
alien.
c. The car and the bank deposits in the USA have to be declared as part of the
Philippine gross estate only when the decedent specified in his will and
testament that such properties must form part of his gross estate.
d. The car and the bank deposits in the USA need not be declared as part of the
Philippine gross estate because Argentina does not impose transfer tax of any
kind.
2. (Estate Tax) The amounts withdrawn from the deposit accounts of a decedent
subjected to the 6% final withholding tax imposed under Section 97 of the
NIRC, shall be:
a. excluded from the gross estate for purposes of computing the estate tax.
b. included from the gross estate for purposes of computing the estate tax.
c. claimed as tax credit against estate tax due.
d. claimed as deduction from the gross estate.
3. (Estate Tax) A property was transferred mortis causa.
gathered from the transaction:
Fair market value, time of transfer –
Fair market value, time of death –
Consideration received when transferred –
The following data were
P500,000
P300,000
P350,000
How much shall be included in the gross estate?
a.
P500,000
c. P150,000
b.
P300,000
d. None of the choices
4. (Estate Tax) The following data pertain to a decedent who is a married man with a
surviving spouse died on February 1, 2019:
Conjugal real personal properties
P 10,000,000
Conjugal personal properties (including P800,000 bank
deposit which was withdrawn and subjected to 6% final
withholding tax)
4,800,000
Exclusive family home
30,000,000
Conjugal ordinary deductions claimed (including P200,000
funeral expenses and P300,000 judicial expenses)
2,500,000
The taxable net estate is:
a.
P42,000,000.
b.
P32,000,000.
c.
d.
P27,000,000.
P21,000,000.
ReSA: The Review School of Accountancy
Page 2 of 16
5. The decedent is a resident unmarried head of family with the following data:
Real and personal properties
P14,000,000
Family home
30,000,000
Ordinary deductions
Unpaid real estate tax
2,000,000
The taxable net estate is:
a.
P 42,000,000.
b.
P 32,000,000.
c.
d.
P 27,000,000.
P 23,000,000.
6. The decedent is a married man with a surviving spouse with the following data:
Conjugal real properties
P 6,000,000
Conjugal family house
1,000,000
Exclusive family lot
400,000
Other exclusive properties
4,500,000
Conjugal ordinary deductions
1,500,000
Exclusive ordinary deductions
500,000
The taxable net estate is:
a.
P 9,900,000.
b.
P 3,750,000.
c.
d.
P 3,500,000.
P 1,250,000.
7. Using the same data in the preceding number, how much is the estate tax payable?
a.
P 594,000
c. P 210,000
b.
P 225,000
d. P 75,000
8. (Estate Tax) Under the TRAIN, when is the time for filing of the estate tax
return?
a. Thirty (30) days from the decedent’s death
b. Two (2) months from the decedent’s death
c. Six (6) months from the decedent’s death
d. One (1) year from the decedent’s death
9. (Estate Tax) Which of the following statements is incorrect in connection with
cash installment payment of estate tax?
a. The cash installments shall be made within two (2) years from the date of
filing of the estate tax return.
b. The estate tax return shall be filed within one year from the date of
decedent’s death.
c. The frequency (i.e., monthly, quarterly, semi-annually or annually), deadline
and amount of each installment shall be indicated in the estate tax return,
subject to the prior approval by the BIR.
d. In case of lapse of two years without the payment of the entire tax due, the
remaining balance thereof shall be due and demandable without the applicable
penalties and interest.
10. (Estate Tax) Mr. Primitivo Primero died and was survived by his wife and two (2)
children, Faye and Faith. After getting her share in the conjugal property, the
surviving spouse renounced her share in the hereditary estate in favor of Faith
to the exclusion of Faye. Was the renunciation subject to donor’s tax?
a. Yes, because the renunciation was made categorically in favor of identified
heir to the exclusion or disadvantage of the other co-heirs.
b. No. because the renunciation was considered a general renunciation.
c. Yes, because , as a rule, renunciation of share in the hereditary estate is
always subject to donor’s tax.
d. No, because, as a rule, the surviving spouse cannot renounce her share in the
hereditary estate.
11 to 13 are based on the following: A resident decedent, single, died February 14,
2018. The estate’s decedent showed the following:
Real property in the Philippines
P4,000,000.00
Personal property outside the Philippines
2,000,000.00
Proceeds of life insurance upon the life of
decedent,
decedent’s
estate
designated
as
irrevocable beneficiary
1,000,000.00
Proceeds of life insurance, decedent’s spouse
designated as irrevocable beneficiary
500,000.00
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
Page 3 of 16
ReSA: The Review School of Accountancy
Medical expenses one year prior to decedent’s
death (including unpaid amount of P400,000)
Funeral expenses (only P100,000 paid)
Claims against the estate
700,000.00
250,000.00
1,000,000.00
11. (Estate Tax) How much was the taxable net estate?
a.
P4,300,000.00
c. P1,000,000.00
b.
P4,100,000.00
d. None of the choices
12. (Estate Tax) How much was estate tax payable?
a.
P443,000.00
c. P60,000.00
b.
P388,000.00
d. None of the choices
13. (Estate Tax) How
purposes?
a.
P6,000,000.00
b.
P2,700,000.00
much
were
the
c.
d.
total
deductible
items
for
estate
tax
P1,700,000.00
None of the choices
14. (Donor’s Tax) Under the TRAIN, the donor’s tax for each calendar year shall
be:
a. six percent (6%) computed on the basis of the total gifts made during
the calendar year.
b. six percent (6%) computed on the basis of the total gifts in excess of
Thee hundred thousand pesos (P300,000) exempt gift made during the
calendar year.
c. six percent (6%) computed on the basis of the total gifts including
those made in the previous calendar year in excess of Two hundred fifty
thousand pesos (P250,000) exempt gift made during the calendar year.
d. six percent (6%) computed on the basis of the total gifts in excess of
Two hundred fifty thousand pesos (P250,000) exempt gift made during the
calendar year.
15. (Donor’s Tax) First statement:
The computation of the donor’s tax is on a
cumulative basis over a period of one calendar year.
Second statement:
Husband and wife are considered as separate and distinct
taxpayers for purposes of the donor’s tax.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
16. (Donor’s Tax) Patricia donated P110,000.00 to her friend Kimberly who was getting
married. Patricia gave no other gift during the calendar year. What is the
donor's tax implication on Patricia’s donation?
a. The P100,000.00 portion of the donation is exempt since given in consideration
of marriage.
b. A P10,000.00 portion of the donation is exempt being a donation in
consideration of marriage.
c. Patricia shall pay a 6% donor's tax on the P110,000.00 donation.
d. The P110,000.00 donation is exempt from donor's tax.
17. (Donor’s Tax) Mr. Gerardo Ireneo transfers inter vivos a personal property to his
son on March 15, 2018. His son who lives in another province let his father know
that he is accepting the gift on March 31, 2018.
The personal property was
delivered and received on April 15, 2018. When shall be the last day to file the
donor’s tax return and pay the donor’s tax to avoid penalties?
a.
April 14, 2018
c. May 15, 2018
b.
April 30, 2018
d. None of the choices
18. to 20. are based on the following: The following donations during the
calendar year 2018 are made to relatives:
Date
January 30, 2018
March 30, 2018
August 15, 2018
Amount
P 2,000,000
1,000,000
500,000
18. (Donor’s Tax) How much is the tax due on the gift made on January 30, 2018?
a.
P 204,000
c. P 80,000
b.
P 105,000
d. P 50,000
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
ReSA: The Review School of Accountancy
Page 4 of 16
19. (Donor’s Tax) How much is the tax due on the gift made on March 30, 2018?
a.
P 204,000
c. P 60,000
b.
P 124,000
d. P 50,000
20. (Donor’s Tax) How much is the tax due on the gift made on August 15, 2018?
a.
P 204,000
c. P 80,000
b.
P 124,000
d. P 30,000
21. to 22. are based on the following: Mr. Jose Mapagbigay donated P500,000 to the
City of Manila and P100,000 to his best friend who graduated summa cum laude.
21. (Donor’s Tax) For donor’s tax purposes, how much should be the gross gifts?
a.
P 600,000
c. P 400,000
b.
P 500,000
d. None of the choices
22. (Donor’s Tax) For donor’s tax purposes, how much should be the deductions?
a.
P 500,000
c. P 100,000
b.
P 400,000
d. None of the choices
23. (Donor’s Tax) On one date, Lara made donations of property in the Philippines to a
non-stranger, and of property outside the Philippines to a stranger. In taking a
credit for the foreign donor’s tax paid, the credit shall be against the
Philippine donor’s tax on the:
a. donation to the non-stranger plus that to the stranger.
b. donation to the non-stranger.
c. donation to the stranger.
d. none of the options given.
24. (Donor’s Tax) On June 10, 2018 Mr. Paolo Sao donated P50,000 cash to his favorite
grandson who is getting married on June 16, 2018. For donor’s tax purposes the
exempt dowry shall be:
a.
P50,000.
c. P5,000.
b.
P10,000.
d. none.
25. (VAT) Mr. Andres, VAT-registered real estate dealer, transferred a parcel of land
held for sale to his son as gift on account of his graduation. For VAT purposes,
the transfer is:
a. not subject to VAT because it is a gift.
b. subject to VAT because it is a deemed sale transaction.
c. not subject to VAT because it is subject to gift tax.
d. subject to VAT because it is considered an actual sale.
26. (VAT) Sale of orchids and other ornamental plants is:
a.
subject to 12% VAT.
c. exempt from VAT.
b.
subject to 0% VAT.
d. none of the choices
27. (VAT) A VAT-registered taxpayer has the following transactions
particular month:
a. Sale of two (2) adjacent condominium units, P2,500,000
b. Sale of one (1) residential lot, P1,500,000
c. Sale of one (1) parking lot in the condominium, P500,000
d. Sale of fresh fruits, vegetable and fish, P2,000,000
He approaches you to ask how much shall be subject to VAT.
be?
a.
P4,500,000
c. P500,000
b.
P3,000,000
d. None of the choices
during
a
What will your answer
28. (VAT) A lessor leases his 15 residential units for P14,500 per month and the
other 15 residential units for P15,500 per month. During the taxable year, his
accumulated gross receipts amounted to P5,400,000. How much is the output VAT?
a.
P648,000
c. P313,200
b.
P334,800
d. None of the choices
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
Page 5 of 16
ReSA: The Review School of Accountancy
29 to 30 are based on the following: (VAT) The Anong Pizza Na, VAT-registered issued
the following official receipt to a customer who was with a senior citizen:
Ordered by a senior citizen
Parma pizza
Mango basil
Ordered by the non-senior citizen
House salad
Beef rendang
Avocado smoothie
Total sales (VAT inclusive)
P880.00
180.00
420.00
590.00
190.00
P1,060.00
1,200.00
P2,260.00
29. (VAT) How much is the VAT-exempt sale?
a.
P2,017.85
c. P946.43
b.
P1,060.00
d. None of the choices
30. (VAT) How much is the sales discount for senior citizen?
a.
P403.57
c. P189.29
b.
P212.00
d. None of the choices
31 to 34 are based on the following: A VAT subject real estate dealer sells a
residential lot on January 15, 2018. The following information are made available on
the terms of the sale:
Gross selling price
P
3,000,000
Initial payments on January 15, 2018
(consisting of down payment and installments
in the year of sale)
900,000
Balance to be paid in equal installment,
installments starting February 15, 2018
2,100,000
The zonal value of the residential lot was P2,800,000.
31. (VAT) Does the sale qualify under installment plan?
a. Yes, because the sale has initial payments and, therefore, qualify under
installment plan.
b. No, because the initial payments exceed 25% of the selling price.
c. Yes, because the initial payments include installments in the year of sale.
d. No, because the initial payments exceed 25% of the zonal value.
32. (VAT) What is the tax base for VAT purposes?
a.
P3,000,000
c. P2,100,000
b.
P2,800,000
d. None of the choices
33. (VAT) How much was the output tax on January 15, 2018 using 12% VAT rate?
a.
P 360,000
c. P 108,000
b.
P 300,000
d. None
34. (VAT) How much was the output tax on February 15, 2018 using 12% VAT rate?
a.
P 360,000
c. P 108,000
b.
P 300,000
d. None
35. (VAT) If a VAT-registered person issues a VAT invoice or VAT official receipt for
a VAT-exempt transaction, but fails to display prominently on the invoice or
receipt the words “VAT-exempt sale”, the transaction shall:
a. still be exempt from value-added tax.
b. become taxable and the issuer shall be liable to pay VAT thereon.
c. be effectively subject to zero percent.
d. be considered erroneous transaction and must be disregarded.
36. (VAT) Suppose the accounting period adopted by the taxpayer is fiscal year ending
October 2018, when is the due date for the filing of his monthly VAT declarations
for the first and second month of the first fiscal quarter?
a. November 20, 2018 and December 20, 2018
b. August 20, 2018 and September 20, 2018
c. November 20, 2017 and December 20, 2017
d. December 20, 2017 and January 20, 2018
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
Page 6 of 16
ReSA: The Review School of Accountancy
37 to 39 are based on the following: (VAT) A taxpayer is engaged in VAT-subject
transactions but his annual gross sales do not exceed the VAT threshold. Hence, he
did not register under VAT system. However, during the current year, his quarterly
gross sales follow:
First quarter
Second quarter
Third quarter
Fourth quarter
P1,000,000
1,000,000
1,000,000
1,000,000
37. (VAT) Which of the following statements is correct?
I – The taxpayer is required to update his registration
non-VAT to VAT taxpayer in the fourth quarter.
II - The taxpayer is required to update his registration from
VAT to VAT taxpayer until taxpayer is liable to VAT.
III - VAT shall be imposed prospectively.
IV
Percentage
tax
due
on
the
non-VAT
portion
of
sales/receipts shall be collected without penalty,
timely paid on the due date immediately following
month/quarter when taxpayer ceases to be a non-VAT.
a.
b.
c.
d.
from
nonthe
if
the
I, II, III and IV are correct
I, II and III are correct
Only I and II are correct
Only III and IV are correct
38. (OPT) How much is the percentage tax due?
a.
P480,000
c. P90,000
b.
P120,000
d. None of the choices
39. (VAT) How much is the VAT due?
a.
P480,000
b.
P120,000
c.
d.
P90,000
None of the choices
40. (OPT) Who of the following is not subject to tax on winnings under Section 126?
a. Person who wins in horse races
b. Winners from double, forecast/quinella and trifecta bets
c. Winners in cockfighting
d. Owners of winning race horses
41 to 44 are based on the following: (OPT) Vanderwoodsen, VAT-registered, is a radioTV broadcasting franchise grantee.
The previous year, its gross receipts did not
exceed P 10,000,000. In the first month of the current year, it had the following
data:
Gross receipts, sale of airtime
P2,000,000
Payments received from user of radio station’s
communications facilities for overseas communications
500,000
Rentals of office spaces
3,500,000
Business expenses
700,000
41. (OPT) How much was the franchise tax due?
a.
P 75,000
c. P 50,000
b.
P 60,000
d. None of the choices
42. (OPT) How much was the overseas communications tax?
a.
P 250,000
c. P 75,000
b.
P 200,000
d. P 50,000
43. (VAT) How much is output VAT, if any?
a.
P720,000
c. P420,000
b.
P660,000
d. None of the choices
44. (OPT) Can the franchise grantee register under the VAT system?
a. Yes. Franchise grantees of radio and/or television broadcasting
gross receipts of the preceding year do not exceed P10,000,000
the business covered by the law granting the franchise may
registration.
b. No. Franchise grantees of radio and/or television broadcasting
gross receipts of the preceding year do not exceed P10,000,000
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
whose annual
derived from
opt for VAT
whose annual
derived from
ReSA: The Review School of Accountancy
c.
d.
Page 7 of 16
the business covered by the law granting the franchise cannot opt for VAT
registration.
Yes. As a rule, it is mandatory for franchise grantees of radio and/or
television broadcasting whose annual gross receipts of the preceding year do
not exceed P10,000,000 to register under the VAT system.
No. It is unwise to register because the taxpayer cannot claim input tax
credits.
45. (OPT) A proprietor of bowling alleys has the following gross receipts during the
month of July, 2018:
Gross receipts from bowling operation
P2,000,000
Gross receipts from sale of food and drinks inside the
bowling alley
1,000,000
Gross receipts from rental of stalls inside the bowling alley
500,000
How much is the amusement tax?
a.
P1,050,000
b.
P630,000
c.
d.
P525,000
None of the choices
46. (OPT) Which of the following statements is incorrect?
a. The percentage taxes are basically on sale of services.
b. The percentage taxes are generally paid monthly.
c. The percentage taxes may be shifted to customers or clients.
d. An isolated transaction not in the course of trade or business will not result
in a liability for a percentage tax.
47. (IND) A nonresident alien individual who shall come to the Philippines and stay
therein for an aggregate period of more than 180 days during the calendar year
shall be deemed a “nonresident alien doing in the Philippines”:
a. regardless of whether or not he is actually engaged in business in the
Philippines.
b. only when he is actually engaged in business in the Philippines.
c. when his income does not come from the performance of personal services in the
Philippines.
d. when he comes to the Philippines for a definite purpose which in its nature
would require an extended stay and to that end makes his home temporarily in
the Philippines, although it may be his intention at all times to return to
his domicile abroad.
48. (IND) Under the TRAIN, the term ‘taxable income’ as applied to individuals means:
a. the pertinent items of gross income specified in the Tax Code, less
deductions if any, authorized for such types of income by the Tax Code or
other special laws.
b. the pertinent items of gross income specified in the Tax Code, less
deductions including personal exemptions, if any, authorized for such
types of income by the Tax Code or other special laws.
c. the pertinent items of gross income specified in the Tax Code.
d. the pertinent items of gross income specified in the Tax Code excluding
salaries received from employment.
49 and 50 are based on the following: (IND) Ms. Cyril is employed in MAFD Corporation
and is also a part-time real estate agent for a real estate broker. In addition to
the SMW of ₱180,000 she received from her employer, she likewise received ₱75,000 as
commissions from her real estate dealings for the year 2018.
49. (IND) How much is the exempt income?
a.
P255,000
c.
b.
P180,000
d.
P75,000
None of the choices
50. (IND) How much is the taxable income?
a.
P255,000
c. P75,000
b.
P180,000
d. None of the choices
51. (IND) To be considered physically present abroad most of the time during the
taxable year, a contract worker must have been outside the Philippines for not
less than:
a.
180 days
c. 185 days
b.
183 days
d. 190 days
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
ReSA: The Review School of Accountancy
Page 8 of 16
52. (IND) Denzell Wetta, an American management expert is hired by a Philippine
corporation to assist in its organization and operation for which he has to stay
in the Philippines for 5 months.
He came to the Philippines for this definite
purpose but the nature of his job may require him to extend his stay and live
temporarily in the Philippines. The American management expert intends to leave
the Philippines as soon as his job is done.
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.
53. (IND) First statement:
The husband and wife shall compute their individual
income tax separately based on their respective total taxable income.
Second statement:
If any income cannot be definitely attributed to or
identified as income exclusively earned or realized by either of the spouses, the
same shall be divided equally between the spouses for the purpose of determining
their respective taxable income.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
54. Ms. Allyza is employed in JBC Corporation, She the following for the
current year:
Statutory minimum wage,
inclusive of the 13th month pay
Overtime pay
Night-shift differential
Commission from the same employer
Total
(IND) How much is the exempt amount?
a.
P260,000
c.
b.
P240,000
d.
P175,000
40,000
25,000
20,000
P260,000
P20,000
None of the choices
55 and 56 are based on the following: A married resident citizen has five (5)
qualified dependent children. The following information pertains to his income and
expenses in the year 2018:
Salary, net of P20,000 withholding tax
P
380,000
Interest income, bank deposit-BPI, Manila
50,000
Yield from money market placement,
State Investment House, Manila
30,000
Rent expense, apartment house
36,000
Health insurance premium paid
5,000
55. (IND) How much is the taxable compensation income?
a.
P400,000
c. P250,000
b.
P336,000
d. P230,000
56. (IND) How much is the tax due?
a.
P80,000
b.
P30,000
c.
d.
None, exempt from tax
None of the choices
57 and 58 are based on the following: A single resident citizen has two (2) qualified
dependent children. During a particular year, he earns and spends the following:
Gross income from practice of profession
P 250,000
Expenses in connection with the practice
of profession
50,000
Hospitalization insurance premium paid
2,000
57. (IND) How much is the taxable net income?
a.
P250,000
c. P100,000
b.
P200,000
d. P 98,000
58. (IND) How much is the tax due?
a.
P50,000
b.
P40,000
c.
d.
None, exempt from tax
None of the choices
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
ReSA: The Review School of Accountancy
Page 9 of 16
59. (Excise Tax) Which of the following is an example of ad valorem excise tax?
a. Excise tax on Cigarettes Packed by Hand
b. Excise tax on Cigarettes Packed by Machine
c. Excise tax on petroleum products
d. Excise tax on alcoholic products
60 and 61 are based on the following: To improve her body shape Paz Seksi decided to
undergo procedure and sought the services of Body Beautiful, a clinic operated
outside the hospital and owned by Bello Medical Group, Inc. Body Beautiful charged
Ms. Pax Seksi the amount of P112,000 (inclusive of 12% VAT but exclusive of 5% excise
tax) for the service rendered.
60. (Excise Tax) How much is the excise tax?
a.
P5,250.00
c. P4,761.90
b.
P5,000.00
d. None of the choices
61. (Excise Tax) How much is the VAT?
a.
P12,600.00
c.
b.
P12,000.00
d.
P10,714.29
None of the choices
62. (Corp) Aliw Service Corporation, registered with BIR in 2010, has the following
data for the year 2018:
Gross receipts
P
1,000,000
Discounts given
100,000
Returns and allowances
150,000
Salaries of personnel directly involved in the
supply of services
300,000
Fees of consultants directly involved in the
supply of services
50,000
Rental of equipment directly used in the
supply of services
70,000
Operating expenses
420,000
How much is the income tax due and payable?
a.
P 27,000
c. Zero
b.
P 6,600
d. None of the choices
63 and 44 are based on the following: XYZ Corporation is a foreign corporation
engaged in business in the Philippines. During the year 2018, its income and expenses
are shown below:
Gross income, Philippines
P
20,000,000
Business expenses, Philippines
5,000,000
Gross income, South Korea
70,000,000
Business expenses, South Korea
3,000,000
Interest income on dollar deposit,
PNB-Manila, Philippines
500,000
Yield on money market placement in South Korea
1,000,000
63. (Corp) How much is the Philippine income tax due and payable using 30% income tax
rate?
a.
P6,000,000
c. P4,500,000
b.
P5,250,000
d. None of the choices
64. (Corp) Assuming the corporation is not engaged in business in the Philippines, how
much is the final withholding tax in the Philippines?
a.
P6,000,000
c. P4,500,000
b.
P5,250,000
d. None of the choices
65. (Sources of Income) It is important to know the source of income for 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 Philippines 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.
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
ReSA: The Review School of Accountancy
Page 10 of 16
66. (Sources of Income) Which of the following shall be treated as derived entirely
from sources without the Philippines?
a. Gains, profits and income derived from the purchase of personal property
within and its sale without the Philippines
b. Gains, profits and income derived from the purchase of personal property
without and its sale within the Philippines
c. Gain from the sale of shares of stock in a domestic corporation regardless of
where the said shares are sold
d. All of the choices
67. (Gross Income) Which of the following is not taxable?
a. Living quarters or meals furnished to an employee for the convenience of the
employer
b. Tips or gratuities paid directly to an employee by a customer of the employer
which are not accounted for by the employee to the employer
c. Pensions, retirement and separation pay, in general
d. Fixed or variable transportation, representation and other allowances which
are received by a public officer or employee or officer or employee of a
private entity, in addition to the regular compensation fixed for his position
or office, in general
68. (Gross Income) Which of the following statements is incorrect?
a. Gains, profits, and income are to be included in the gross income for the
taxable year in which they are received by the taxpayer, unless they are
included when they accrue to him in accordance with approved method of
accounting followed by him.
b. If a person sues in one year on a pecuniary claim or for property, and money
or property is recovered on a judgment therefore in a later year, income is
realized in that year, assuming the money or property would have been income
in the earlier year if then received.
c. Bad debts or accounts charged off because of the fact that they were
determined to be worthless, which are subsequently recovered, whether or not
by suit, constitute income for the year in which recovered, regardless of the
date when amounts were charged off.
d. None of the choices.
69. (Gross Income) A property was received as donation from Charlwin when its fair
market value was P300,000. Charlwin in turn received this property as donation
from Jose when its fair market value was P350,000. This property was purchased by
Marceliano for P200,000 and was donated to Jose.
The property was sold for
P500,000.
How much gain (loss) shall be recognized from the sale?
a.
P 300,000
c. P 150,000
b.
P 200,000
d. None of the choices
70. (Fringe) Which of the following fringe benefits shall not be subject to the fringe
benefit tax?
a. Benefits given to the rank and file employees, whether granted under a
collective bargaining agreement or not
b. Fringe benefits required by the nature of, or necessary to the trade, business
or profession of the employer
c. Fringe benefit given for the convenience or advantage of the employer
d. All of the choices
END OF EXAMINATION
NOTE: Solutions to selected items are found on the next page (Page 11).
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
Page 11 of 16
ReSA: The Review School of Accountancy
1.
2.
3.
4.
5.
6.
7.
8.
9.
B
A
D
D
C
D
D
D
D
10. A
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
C
C
A
D
A
D
C
B
C
D
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
A
A
A
D
B
A
C
D
C
C
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
B
A
A
D
B
D
A
C
B
C
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
D
D
B
A
D
D
A
A
B
C
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
B
A
A
B
A
B
B
C
D
B
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
A
B
C
A
A
A
A
D
A
D
SUPPORTING COMPUTATIONS
4. D
Gross estate
Less: Deductions
Net estate before special
deductions
Less: Special ded
Family home
Maximum
Standard deduction
Net estate after special
deductions
Less: Share of surviving
spouse (1/2 x
12,000,000*)
Net taxable estate
Exclusive
Common
P30,000,000
P14,000,000
30,000,000
(2,000,000)
12,000,000*
Total
P44,000,000
(2,000,000)
42,000,000
30,000,000
10,000,000
10,000,000)
(5,000,000)
27,000,000
(6,000,000)
P
21,000,000
5. C
Gross estate
Less: Deductions
Estate after deductions
Less: Family home deduction (maximum)
Standard deduction
Taxable net estate
(
10,000,000
5,000,000
P44,000,000
2,000,000)
42,000,000
15,000,000
P27,000,000
6. D
Gross estate
Less: Deductions
Net estate before
special deductions
Less: Special ded
Family house(1/2)
Family lot (full))
Total
Maximum
Standard deduction
Exclusive
P4,900,000
500,000
4,400,000
Common
P7,000,000
Total
P9,900,000
1,500,000)
(2,000,000)
5,500,000*
9,900,000
500,000
400,000
900,000
10,000,000
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
(900,000)
(5,000,000)
Page 12 of 16
ReSA: The Review School of Accountancy
Net estate after
special deductions
Less: Share of
surviving spouse
(1/2 x
5,500,000*)
Net taxable estate
4,000,000
P
7. D
Net taxable estate
Tax rate
Tax payable
P
P
(2,750,000)
1,250,000
1,250,000
6%
75,000
11. C
Real property in the Philippines
Personal property outside the
Philippines
Proceeds of life insurance upon the life
of decedent, decedent’s estate
designated as irrevocable beneficiary
Total taxable gross estate
Less: Deductions
Claims against the estate
Net estate before special deductions
Less: Special deduction
Standard deduction
Taxable net estate
P4,000,000.00
2,000,000.00
1,000,000.00
P7,000,000.00
(1,000,000.00)
6,000,000.00
(5,000,000.00)
P1,000,000.00
12. C
Estate tax payable (1,000,000 x 6%)
13. A
Answer: A
Claims against the estate
Standard deduction
Total
18. B
January 30, 2018
Total net gifts
Less: Exempt gift
Total net gifts subject to tax
Applicable Donor’s Tax Rate
Total donor’s tax
19. C
March 30, 2018
Total net gifts in this return
Add: Total Prior net gifts during the calendar year
Total net gifts
Less: Exempt gift
Total net gifts subject to tax
Applicable donor’s tax rate
Total donor’s tax due
Less: Payments for prior gifts during the calendar
year
Tax payable
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
P60,000.00
P
1,000,000.00
5,000,000.00
P6,000,000.00
P2,000,000
250,000
1,750,000
6%
P105,000
P1,000,000
2,000,000
3,000,000
(250,000)
2,750,000
6%
165,000
105,000
P60,000
ReSA: The Review School of Accountancy
Page 13 of 16
20. D
August 15, 2018
Total net gifts in this return
Add: Total Prior net gifts during the calendar
year
Total net gifts
Less: Exempt gift
Total net gifts subject to tax
Applicable donor’s tax rate
Total donor’s tax due
Less: Payments for prior gifts during the calendar
year
Tax payable
29. C
Answer: C
Parma pizza
Mango basil
Total VAT-exempt sales
Less: VAT included in the VAT-exempt sale (1,060.00 x
12/112)
VAT-exempt sale
30. C
Answer: C
VAT-exempt sale
Sales discount rate
Sales discount to senior citizen
P500,000
3,000,000
3,500,000
(250,000)
3,250,000
6%
195,000
165,000
P30,000
P880.00
180.00
1,060.00
113.57
P 946.43
P 946.43
20%
P189.29
31. B
Answer: B
Reference: Section 3, Revenue Regulations No. 4-2007
The initial payments over the selling price exceed 25%
(900,000/3,000,000 = 30%). This is a sale on a deferred payment basis
not on the installment plan.
32. A
Answer: A
Reference: Section 3, Revenue Regulations No. 4-2007
In case of sale of real property on a deferred-payment basis not on the
installment plan, the transaction shall be treated as cash sale which
makes the entire selling price taxable in the month of sale. Hence, the
tax base is selling price or fair market value whichever is higher.
33. A
Answer: A
Reference: Section 3, Revenue Regulations No. 4-2007
P3,000,000 x 12% = P360,000
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
ReSA: The Review School of Accountancy
Page 14 of 16
34. D
Answer: D
Reference: Section 3, Revenue Regulations No. 4-2007
The initial payments over the selling price exceed 25%.
a deferred payment basis not on the installment plan.
This is a sale on
In case of sale of real property on a deferred-payment basis not on the
installment plan, the transaction shall be treated as cash sale which
makes the entire selling price taxable in the month of sale.
Payments
subsequent to “initial payments” shall no longer be subject to output VAT,
in the case of sale on a deferred payment basis.
38. C
Answer: C
First quarter
Second quarter
Third quarter
Total gross sales
Tax rate
Percentage tax
39. B
Answer: B
Gross sales (fourth quarter)
Tax rate
Value-Added Tax
42. D
Gross payments received
Tax rate
Overseas communications tax
43. B
Answer: B
Gross receipts, sale of airtime
Rentals of office spaces
Total gross receipts
Tax rate
Output tax
45. D
P1,000,000
1,000,000
1,000,000
3,000,000
3%
P
90,000
P1,000,000
12%
P
120,000
P500,000
10%
P50,000
P 2,000,000
3,500,000
5,500,000
12%
P 660,000
Operators of bowling alleys are not subject to amusement tax.
49. B
The minimum wage of P180,000 is exempt from tax even if she has
received commission from her real estate business.
50. C
The P75,000 commission is taxable income.
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
Page 15 of 16
ReSA: The Review School of Accountancy
54. B
Answer: B
Reference: Section 6, Revenue Regulations No. 11-2018
Basic statutory minimum wage
Overtime pay
Night-shift differential
Total
55. A
Answer: A
Gross compensation income (P380,000 + P20,000)
P175,000
40,000
25,000
P240,000
P400,000
56. B
Answer: B
Taxable compensation income
Tax due under Section 24 (A)
250,000
150,000 x 20%
P400,000
Exempt
P30,000
57. B
Answer: B
Gross professional income
Less: Expenses
Taxable net income
P250,000
(50,000)
P250,000
58. C
Effective January 1, 2018, the first P250,000 taxable income is exempt
from tax.
60. B
Answer: B
Gross receipts, net of VAT (112,000/1.12)
Tax rate
Excise tax
P100,000.00
5%
P 5,000.00
61. A
Answer: A
Gross receipts, net of VAT
Add: Excise tax
Total
Tax rate
VAT
62. B
Answer: B
Gross receipts
Less: Discounts
Returns and allowances
Net receipts
Less: Cost of services
Salaries of personnel
Fees of consultants
Rental of equipment
P100,000.00
5,000.00
105,000.00
12%
P12,600.00
P1,000,000
100,000
150,000
300,000
50,000
70,000
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
250,000
750,000
420,000
Page 16 of 16
ReSA: The Review School of Accountancy
Gross income
Less: Operating expenses
Net operating loss
Regular corporate income tax
Minimum corporate income tax (330,000 x 2%)
Tax due and payable
330,000
420,000
(P90,000)
P6,600
P6,600
63. C
Gross income, Philippines
Less: Business expenses, Philippines
Taxable net income
Tax due (30% x 15,000,000)
P20,000,000
(5,000,000)
P15,000,000
P4,500,000
64. A
Gross income, Philippines
Tax rate
Final withholding tax
P20,000,000
30%
P60,000,000
69. A
Answer: A
Selling price
Less: Basis (basis to the last owner who did not
acquire the property by donation)
Gain from sale
*Less than the FMV of P300,000 at the time received as donation.
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)
P500,000
200,000*
P300,000
ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
TAXATION
Final Pre-Board Examination
May 02, 2021 (Sunday)
08:00 A.M. to 11:00 A.M.
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following
questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the sheet provided.
STRICTLY NO ERASURES ARE ALLOWED. Use pencil no. 2 only.
1. Excise tax on certain articles is an example of:
a. an indirect tax.
c. a local tax.
b. a direct tax.
d. a transfer tax.
Answer: A
2. Which
a.
b.
c.
d.
one of the following is not a characteristic of the State’s power to tax?
It is inherent in sovereignty.
It is legislative in character.
It based on the ability to pay.
It is subject to constitutional and inherent limitations.
Answer: C
Characteristics (or Nature) of the State’s Power to Tax
a. It is inherent in sovereignty, hence, it may be exercised although
not expressly granted by the Constitution.
b. It is legislative in character, hence, only the legislature can
impose taxes (high prerogative of sovereignty).
c. It is subject to Constitutional and inherent limitations, hence, it
is not an absolute power than can be exercised by the legislature
anyway it pleases.
3. (Adapted) First statement: Symbiotic relation is the reason why the government
could impose taxes on the income of the resident citizens derived from sources
outside the Philippines.
Second statement: Jurisdiction is the reason why citizens must provide support
to the State so the latter could continue to give protection.
a.
b.
c.
d.
Both
Both
Only
Only
statements are correct
statements are incorrect
the first statement is correct
the second statement is correct
Answer: B
The first statement refers to jurisdiction while the second statement
refers to symbiotic relationship (reciprocal duties).
4. An annual tax of P1,000 was imposed upon all residents of the Philippines, who
are above 21 years of age, with a gross income of P250,000, whether or not they
send their children to public schools, for the purpose of raising funds in
order to improve public school buildings. The tax is:
a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
Answer: C
5. A law was passed by Congress which granted tax amnesty to those who have not
paid income taxes for a certain year without at the same time providing for the
refund of taxes to those who have already paid them. The law is:
a. valid because there is a valid classification.
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |2
b. not valid because those who did not pay their taxes are favored over
those who have paid their taxes.
c. valid because it was Congress which passed the law and it did not
improperly delegate the power to tax.
d. not valid because only the President with the approval of Congress may
grant amnesty.
Answer: A
6. In case of conflict between tax laws and
principles (GAAP):
a. both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. tax laws shall prevail over GAAP.
d. the issue shall be resolved by the court.
generally
accepted
accounting
Answer: C
7. “Schedular system of income taxation” means:
a. all types of income are added together to arrive at gross income.
b. separate graduated rates are imposed on different types of income.
c. capital gains are excluded in determining gross income.
d. compensation income and business/professional income are added together
in arriving at gross income.
Answer: B
The opposite of “scheduler system of income taxation” is called “global
system of income taxation” which is described in choice letter d. above.
8. The least source of our tax laws.
a. Statutes
c. Constitution
b. Court decisions
d. BIR rulings
Answer: D
9. The fair market value of real properties located in each zone or area, shall be
subject to automatic adjustment once every how many years through rules and
regulations issued by the Secretary of Finance based on the current Philippine
valuation standards?
a. 3 years
c. 7 years
b. 5 years
d. 10 years
Answer: A
Reference: Section 6 (E), NIRC, as amended under TRAIN
10. A decedent dies on January 1, 2019.
2019. When is the last day to make a
a. January 1, 2023
c.
b. June 1, 2022
d.
The estate tax return is filed on June 1,
valid assessment?
July 1, 2022
September 1, 2022
Answer: A
The due date for filing the estate tax return in this case is January 1,
2020 (within one year after death.) Since the return is filed on June 1,
2019 which is before the period prescribed by law, the three (3)-year period
shall be counted from the due date. (January 1, 2020)
11. Notwithstanding any contrary provision of R.A. No. 1405 and other general or
special laws, the Commissioner of Internal Revenue is authorized to inquire
into bank deposit:
Case 1 – of a decedent to determine his gross estate.
Case 2 – of any taxpayer who has filed an application for compromise of his
tax liability by reason of financial incapacity provided there is
waiver of his privilege under R.A. No. 1405 or under other general
or special laws.
a.
b.
c.
d.
True in both cases
False in both cases
True only in the first case
True only in the second case
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |3
Answer: A
Reference: Section 6 (F), NIRC, as amended
12. Which of the following cases may not be compromised?
a. Delinquent accounts
b. Cases under administrative protest after issuance of the Final Notice of
Assessment to the taxpayer still pending in the BIR
c. Civil tax cases being disputed before the courts
d. Criminal violations involving criminal tax fraud.
Answer: D
Reference: Section 2, Revenue Regulations No. 30-2002
13. The following are instances when penalties and/or interest imposed on the
taxpayer may be abated or cancelled on the ground that the imposition thereof
is unjust and excessive, except when the:
a. filing of the return or payment of the tax is made at the wrong venue.
b. taxpayer’s mistake in payment of his tax is due to erroneous written
official advice of a revenue officer.
c. assessment is brought about or a result of the taxpayer’s non-compliance
with the law due to a difficult interpretation of the said law.
d. taxpayer is declared insolvent or bankrupt.
Answer: D
14. First statement: In civil tax cases involving collection of internal revenue
taxes, prescription is construed strictly against the government and liberally
in favor of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable
under the Tax Code, prescription is construed strictly against the government.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
Answer: C
References:
CIR vs. Goodrich Phils., Inc. G.R. 104171, Feb. 24, 1999
Lim vs. CA, G.R. 48134-37, Oct. 18, 1990
In criminal tax cases involving tax offenses punishable under the Tax Code,
prescription is construed strictly against the taxpayer.
15. Which of the following statements is not correct?
a. A tax refund is in the nature of a tax exemption which must be construed
strictissimi juris against the taxpayer.
b. Tax refund refers to the actual reimbursement of the erroneously or
illegally collected taxes.
c. Tax refund may be utilized in the payment of internal revenue taxes,
excluding withholding taxes, for which the taxpayer is directly liable.
d. Illegally assessed or collected taxes arose when payments are made under
duress or assessment thereof having been rendered by a person who has no
power to assess the tax at all.
Answer: C
16. First statement: The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but the veto shall
not affect the item or items to which he does not object.
Second statement: The President shall have the power to veto any particular
item or items in a bill that penalizes crimes, but the veto shall not affect
the item or items to which he does not object.
a.
b.
c.
d.
1st statement is correct, 2nd statement is wrong
1st statement is wrong, 2nd statement is correct
Both statements are wrong
Both statements are correct
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |4
Answer: A
The President shall have the power to veto any particular item or items in
an appropriation, revenue, or tariff bill, but the veto shall not affect
the item or items to which he does not object [Art. VI, Sec. 27 (2)].
17.
Warrant of levy as distinguished from warrant of distraint.
a. It is on real property owned by and in possession of the taxpayer.
b. It is on personal property owned by and in possession of the taxpayer.
c. It is on property owned by the taxpayer but in the possession of a third party,
d. It does not required advertisement.
Answer: A
18. If at any time prior to the consummation of the sale all proper charges are
paid to the officer conducting the sale, the goods or effects distrained:
a. shall be restored to the owner.
b. shall no longer be restored to the owner.
c. shall be brought to the Revenue District Officer.
d. shall be brought to the Regional District Officer.
Answer: A
Reference: Section 210, NIRC, as amended
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. - If
at any time prior to the consummation of the sale all proper charges are
paid to the officer conducting the sale, the goods or effects distrained
shall be restored to the owner.
19. A written notice informing a Taxpayer that the findings of the audit conducted
on his books of accounts and accounting records indicate that additional taxes
or deficiency assessments have to be paid.
a. Notice of Informal Conference
b. Preliminary Assessment Notice
c. Letter of Authority
d. Formal Assessment Notice
Answer: A
In order the to expedite the processing of Letter Notice (LN) cases, the
issuance of Notice for Informal Conference may immediately commence, even
without prior issuance of Letters of Authority, as required in certain
situations, as prescribed in the existing RMOs on the LN system.
20. For requests for reconsideration, the taxpayer shall submit all relevant
supporting documents in support of his protest within how many days from date
of filing of his letter of protest, other-wise, the assessment shall become
final?
a. Sixty (60) days
c.
Twenty (20) days
b. Thirty (30) days
d.
None of the choices
Answer: D
References: Section 228, NIRC, as amended
Section 3.1.5, Revenue Regulations No. 12-99
as amended under Revenue Regulations No. 18-2013
The term “relevant supporting documents” refer to those documents
necessary to support the legal and factual bases in disputing a tax
assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting
documents shall not apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the
taxpayer is barred from disputing the correctness of the issued
assessment by introduction of newly discovered or additional evidence,
and the FDDA shall consequently be denied.
21. If the taxpayer is adversely affected by the resolution of the CTA in Division
on his Motion for Reconsideration, he may file a petition for review with the
CTA en banc within how many days?
a. Sixty (60) days
c. Twenty (20) days
b. Thirty (30) days
d. Fifteen (15) days
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |5
Answer: D
Reference: Section 11, Republic Act No. 1125
22 to 25 are based on the following: In 2018, Ms. Glai Espenilla Bangug, a
financial comptroller of EB Company, earns annual compensation of P1,500,000,
inclusive of 13th month and other benefits in the amount of P80,000 and
mandatory SSS contribution of P3,500 and Philhealth contribution of P2,000.
Aside from her employment income, she owns a convenience store, VATregistered, with gross sales of P3,000,000.
Sales discount amounts to
P300,000; sales returns and allowances amount to P150,000. Her cost of sales
and operating expenses are P1,000,000 and P600,000 respectively and with nonoperating income of P100,000.
Payments for the first three (3) quarters
amount to P300,000.
22. Can she avail of the 8% income tax rate?
a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT-registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the
VAT threshold.
Answer: B
23. How much is her total taxable income?
a. P2,913,500
b. P2,550,000
c. P2,464,500
d. None of the choices
Answer: C
Total compensation income
Less: Non-taxable 13th month and other benefits
Mandatory SSS contribution
Mandatory Philhealth contribution
Taxable compensation income
Gross sales
Less: Sales discount
Sales returns and allowances
Net sales
Less: Cost of sales
Gross income
Less: Operating expenses
Net income from operation
Add: Non-operating income
Total taxable income
P1,500,000
80,000
3,500
2,000
3,000,000
( 300,000)
( 150,000)
2,550,000
(1,000,000)
1,550,000
600,000
950,000
100,000
85,500
1,414,500
1,050,000
P2,464,500
24. How much is her tax due when she files her final tax return?
a. P338,640
c. P482,320
b. P366,000
d. None of the choices
Answer: A
Total taxable income
Tax due Sec. 24 (A) 2,000,000
464,500 x 32%
Less: Payments, first 3 quarters
Tax payable
25. How much is the output VAT, if any?
a. P306,000
b. P342,000
P2,464,500
490,000
148,640
P
P
c. P360,000
d. None of the choices
Answer: A
Gross sales
Less: Sales discount
Sales returns and allowances
Net sales
Tax rate
Output VAT
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P3,000,000
(300,000)
(150,000)
2,550,000
12%
P 306,000
638,640
300,000
338,640
Page |6
Effective January 1, 2018 up to December 31, 2022
If the taxable income is:
Over
But not over
The tax shall be
P 250,000
0%
P
250,000
400,000
20%
400,000
800,000
P
30,000
800,000
2,000,000
130,000
2,000,000
8,000,000
490,000
8,000,000
2,419,000
Plus
Of excess over
P
250,000
400,000
800,000
2,000,000
8,000,000
25%
30%
32%
35%
26 to 31 are based on the following: Ms. Queenie Matusalem signified her
intention to be taxed at 8% income tax rate on gross sales in her first
quarter return. However, her gross sales during the taxable year has exceeded
the VAT threshold.
First
Second
Third
Fourth
quarter
quarter
quarter
quarter
Total sales
P500,000
P1,000,000
P1,500,000
P4,000,000
Cost of sales
300,000
500,000
700,000
1,500,000
Operating expenses
100,000
200,000
250,000
500,000
26.
How much is the income tax due for the first quarter?
a. P40,000
c. Zero
b. P20,000
d. None of the choices
Answer: B
Gross sales
Less: Exempt amount
Tax amount
Tax rate
Tax due
27.
How much is the income tax payable for the second quarter?
a. P100,000
c. P20,000
b. P 80,000
d. None of the choices
Answer: B
Gross sales, first quarter
Add: Gross sales, previous quarters
Total gross sales
Less: Exempt amount
Tax amount
Tax rate
Tax due
Less: Payments, previous quarter
Tax payable
28.
P1,000,000
500,000
1,500,000
250,000
1,250,000
8%
100,000
20,000
P
80,000
How much is the income tax payable for the third quarter?
a. P220,000
c. P120,000
b. P150,000
d. None of the choices
Answer: C
Gross sales, third quarter
Add: Gross sales, previous quarters
Total gross sales
Less: Exempt amount
Tax amount
Tax rate
Tax due
Less: Payments, previous quarter
Tax payable
29.
P500,000
250,000
250,000
8%
P 20,000
P1,500,000
1,500,000
3,000,000
250,000
2,750,000
8%
220,000
100,000
P 120,000
How much is income tax payable for the final return?
a. P574,000
c. P340,000
b. P560,000
d. None of the choices
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |7
Answer: A
Total gross sales
Less: Cost of sales
Gross income
Less: Operating expenses
Taxable income
Tax due Sec. 24 (A)
Less: 8% income
quarters
Tax payable
30.
tax
P7,000,000
3,000,000
4,000,000
1,050,000
2,950,000
2,000,000
950,000 x 32%
payments, first 3
490,000
304,000
P
574,000
P1,500,000
3%
P
45,000
How much is output VAT for the fourth quarter, if any?
a. P840,000
c. P120,000
b. P480,000
d. None of the choices
Answer: B
Gross sale (7,000,000 – 3,000,000)
Tax rate
Output VAT
32.
794,000
220,000
How much is the percentage tax under Section 116 for the third quarter?
a. P210,000
c. Not subject to Sec. 116
b. P 45,000
d. None of the choices
Answer: B
Gross sales, third quarter
Tax rate
Percentage tax under Sec. 116
31.
P
P4,000,000
12%
P 480,000
An alien employee of an offshore banking unit has the following income for
the year 2018:
Salary received from offshore banking unit (OBU)
P10,000,000
Honoraria and allowances received from the OBU
5,000,000
Interest income from a domestic bank on his peso deposits
50,000
Capital gain from sale of shares in a domestic corporation
100,000
How much is the tax from his gross income in the Philippines?
a. P4,860,000
c. P1,500,000
b. P2,250,000
d. None of the choices
Answer: A
Taxable compensation income (10,000,000 + 5,000,000)
P15,000,000
Tax due Section 24 (A)
8,000,000
P2,410,000
7,000,000 x 35% 2,450,000
P 4,860,000
Notes:
1) Starting January 1, 2018, all employees of RHQs/ROHQs/OBUs, and Petroleum
Service Contractors and Subcontractors shall be subject to regular income
tax rate under Section 24 (A)(2)(a) of the Tax Code, as amended, without
prejudice to the application of preferential tax rates under existing
international tax treaties, if warranted.
2) The interest income on peso deposits and the capital gain from sale of shares of
stock in a domestic corporation shall be subject to different rates of tax [See
Section 24 (B) (1) and Section 24 (C).]
33. Under the TRAIN, the books of accounts shall be audited and examined yearly
by independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which
shall contain, among others, information lifted from certified balance
sheets, profit and loss statements, schedules listing income-producing
properties and the corresponding income therefrom and other relevant
statements if the:
a. gross annual sales, earnings, receipts or output exceed Three million
pesos (P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three
million pesos (P3,000,000).
c. gross annual sales, earnings, receipts or output amount to Three
million pesos (P3,000,000) or more.
d. gross quarterly sales, earnings, receipts or output exceed One
Hundred Fifty Thousand (P150,000).
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
Page |8
Answer: A
34 and 35 are based on the following: Assume that “Mr. Era”, resident citizen,
bought shares of stock in 2017 at a cost of P100,000. He donated these shares to
“Mr. Aio”, a close resident alien friend, on January 1, 2017, during which time,
the said shares has a fair market value of P 1,000,000 and on the basis of such
fair market value, “Mr. Era” paid the corresponding donor’s tax. “Mr. Aio”, the
donee, sold the shares on February 1, 2018 for a consideration of P 2,000,000.
34. How much is the capital gain (loss) from sale of shares of stock?
a. P1,900,000
c. P950,000
b. P1,000,000
d. P500,000
Answer: A
Selling price
Less: Value in the hands of the donor
Capital gain
P2,000,000
100,000
P1,900,000
35. How much was the capital gains tax, if any?
a. P285,000
c. P185,000
b. P205,000
d. None of the choices
Answer: A
Capital gain
Tax rate
Capital gains tax
P1,900,000
15%
P 285,000
36 to 39 are based on the following: Mr. Mark Tang is a partner of Tang Dayag
Caiga Company, a business partnership. He owns 25% interest. The gross sales of
Tang Dayag Caiga Company amounted to P10,000,000.00 for taxable year 2018. The
recorded cost of sales and operating expenses of the partnership were
P2,750,000.00 and P1,500,000.00, respectively. It had also incurred an interest
expense of P200,000 in connection with asset acquisition and interest income from
bank deposit amounting to P100,000.
36. How much is the taxable income of the partnership?
a. P5,750,000
c. P5,550,000
b. P5,583,000
d. None of the choices
Answer: B
Gross sales
Less: Cost of sales
Gross income
Less: Interest expense
Reduction (33% x 100,000)
Other operating expenses
Taxable income
P10,000,000
2,750,000
7,250,000
200,000
(33,000)
(167,000)
(1,500,000)
P5,583,000
37. How much is the income tax liability of the partnership?
a. P1,725,000
c. P1,665,000
b. P1,674,900
d. None of the choices
Answer: B
Taxable income
Tax rate
Tax due
P5,583,000
30%
P1,674,900
38. How much is the share in the partnership income of partner Mark Tang?
a. P1,058,775
c. P978,775
b. P1,018,775
d. None of the choices
Answer: A
Taxable income of the partnership
Less: Income tax
Net income after tax
Add: Interest income, net of final tax (200,000 x 20%)
Distributable net income
Mark Tang’s interest in the partnership
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P5,750,000
1,674,900
4,075,100
160,000
4,235,100
25%
Page |9
Partner’s interest in the partnership’s distributable income
P
1,058,775
39. Assuming the partnership avails of the Optional Standard deduction, how
much is the tax liability of the partnership?
a. P1,725,000
c. Zero
b. P1,305,000
d. None of the choices
Answer: B
Gross sales
Less: Cost of sales
Gross Income
Less: Optional standard deduction (40% x 7,250,000)
Taxable income
Tax rate
Tax due and payable
P10,000,000
2,750,000
7,250,000
2,900,000
4,350,000
30%
P 1,305,000
40. Your client dies on July 14, 2018. You are appointed as administrator.
You withdraw from his bank deposit P100,000 because the estate needs cash
to settle some obligations. What is the consequence of your withdrawal from
the decedent’s bank deposit?
a. subject to final withholding tax of 6%
b. subject to creditable withholding tax of 6%
c. Not subject to withholding tax
d. Subject to penalty and interest because such withdrawal is not allowed.
Answer: A
41. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance is:
a. included in the gross estate of Mr. Julian Cruz because when the executor
of the estate is a beneficiary the proceeds are included in the gross
estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the designation
of the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of life
insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life
insurance are generally not subject to estate tax.
Answer: A
42 and 43 are based on the following: A resident decedent left the following
properties:
Real properties
P10,000,000
Personal properties excluding bank deposit
15,000,000
Bank deposit (P1,000,000 was withdrawn from the account
after the decedent died)
3,000,000
42.
The gross estate of the decedent was:
a. P28,000,000
b. P27,000,000
c. P26,000,000
d. P25,000,000
Answer: B
Real properties, Philippines
Personal properties excluding bank deposit
Bank deposit (P3,000,000 – P1,000,000)
Gross estate
P10,000,000
15,000,000
2,000,000
P27,000,000
43. The final withholding tax on amount withdrawn was:
a. P200,000
c. P60,000
b. P100,000
d. None of the choices
Answer: C
Amount withdrawn
Rate
Final withholding tax
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P1,000,000
6%
P
60,000
P a g e | 10
44 and 45 are based on the following: An unmarried decedent died leaving
properties he inherited 4 ½ years ago which had fair market value of P800,000 at
the time of his death (P650,000 at the time of inheritance, and unpaid mortgage
of P50,000, P20,000 of which paid by the present decedent before he died). Other
properties in his gross estate had fair market value of P1,000,000.
The total
expenses, losses, indebtedness, taxes and transfer for public purpose amounted to
P300,000.
44. How much was the vanishing deduction?
a. P 225,000
b. P 108,333
c. P 102,900
d. P 100,000
Answer: C
Value to take
Less: Mortgage paid
Initial basis
Less: Proportional deduction
(P630,000/P1,800,000 X P330,000)
Final basis
Rate
P 650,000
20,000
630,000
Vanishing deduction
P 102,900
115,500
514,500
20%
45. Assuming that the inherited property had no unpaid mortgage when received by
the present decedent. It was the present decedent who mortgaged the property
for P50,000 when he already owned it.
He paid the mortgage indebtedness
before he died. How much was the vanishing deduction?
a. P 508,333
c. P 208,333
b. P 225,000
d. P 108,333
Answer: D
Value to take
Less: Mortgage paid
Initial basis
Less: Proportional deduction (650,000/1,800,000 x 300,000)
Final basis
Rate
Vanishing deduction
P 650,000
650,000
108,333
541,667
20%
P 108,333
46 and 47 are based on the following: The decedent is a resident unmarried head
of family who died on March 1, 2018. He left the following properties,
obligations and expenses:
Real and personal properties
P14,000,000
Family home
30,000,000
Ordinary deductions
Unpaid real estate tax
2,000,000
Medical expenses
600,000
46.
The taxable net estate if he dies in 2018 is:
a. P42,000,000.
c. P27,000,000.
b. P32,000,000.
d. P23,000,000.
Answer: C
Reference: Section 8, Revenue Regulations No. 12-2018
Gross estate
Less: Deductions
Estate after deductions
Less: Family home
Standard deduction
Taxable net estate
47. Continuing
estate tax
a. March
b. March
P44,000,000
2,000,000
42,000,000
(10,000,000)
(5,000,000)
P27,000,000
the preceding number, the estate tax return shall be filed and the
paid on or before what date to avoid penalties:
1, 2019
c. September 1, 2018
1, 2021
d. None of the choices
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P a g e | 11
Answer: A
48. On March 1, 2018, Ms. Samira Aquino donated a piece of land to her best
friend, Mar Roxas. She also donated to a non-profit religious organization.
The donation to her friend was a piece of land which had an assessed value of
P1,000,000 and zonal value of P800,000 at the time of donation. The donations
to a non-profit religious organization were cash amounting to P200,000 and an
automobile with a purchase price of P700,000. The piece of land was encumbered
with an unpaid mortgage of P300,000 which was not assumed by the donee. In
addition, the donee agreed to pay the applicable donor’s tax of P210,000.
How much was the total deductions?
a. P1,410,000
b. P1,200,000
c. P 900,000
d. None of the choices
Answer: C
Gifts to a non-profit religious organization (200,000 + 700,000)
P 900,000
49 and 50 are based on the following: During the current year, Jose Tugas who
resides in 158 R. Papa Street, Sampaloc Manila and with TIN 135-567-890-006 made
the following gifts:
Date
Donee
Amount of donation
June 1, 2018
Anton, his son, on P150,000 cash
account
of
his
marriage celebrated
June 1, 2018
July 10, 2018
His friend Carlos
P400,000 a second-hand motor vehicle
September 30, 2018
His daughter Dana
P450,000 cash dowry, on account of
her scheduled marriage on October 25,
2018
November 23, 2018
His father
A parcel of land worth P180,000,
subject to the condition that his
father would assume the mortgage
indebtedness of Jose in the amount of
P40,000;
49. Using Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on
line 14 for the return to be filed on November 23, 2018?
a. P1,140,000
c. P140,000
b. P 890,000
d. None of the choices
Answer: B
25 Personal property (From Part V Schedule A)
26 Real property (From Part V Schedule B)
27 Total gifts in this return
Less: Deductions allowed (Sum of items 28 to 32)
28 Mortgage assumed by the donee
34 Total net gifts in this return (Item 27 less Item 28)
35 Add: Total net gifts during the calendar year (Item 36 of
return previously filed with the year)
June 1, 2018
150,000
July 10, 2018
400,000
September 30, 2018
450,000
36 Total net gifts (Sum of Items 34 and 35)
37 Less: Exempt gift
38 Total net gifts subject to tax (Item 36 less Item 37)
P
180,000
180,000
40,000
140,000
1,000,000
1,140,000
250,000
P 890,000
50. Using the Donor’s Tax Return (BIR Form No. 1800), how much will be reflected
on line 18?
a. P53,400
c. (P6,600)
b. P 8,400
d. None of the choices
Answer: B
14 Total net gifts subject to tax (From Part IV Item 38)
15 Applicable donor’s tax rate
16 Total donor’s tax due (Item 14 x Item 15)
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P890,000
6%
53,400
P a g e | 12
17 Less: Tax credit/payments
17A Payments for prior gifts during the taxable year
(1,000,000 – 250,000 x 6%)
18 Tax payable/Overpayment ((Item 16 less Item 17A)
P
45,000
8,400
51 to 54 are based on the following: Your client, Antonio Manuel, is engaged in
various transactions that are subject to percentage taxes. His address is 143 S.
Loyola Street, Sampaloc, Manila.
The TIN is 143-678-910-005. He is under RDO
032. Email ad is Antoman@gamil.com.
The following data for the first quarter of the current year are presented for
your perusal.
Answer the questions by filling up the line in the actual
Quarterly Percentage Tax Return (2551Q).
Gross receipts, sale of gas and water
P1,500,000
Expenses, sale of gas and water
200,000
Gross receipts, rentals of office spaces, net of 3% withholding tax 727,500
Expenses, rental of office spaces
150,000
Gross receipts, life insurance premiums
800,000
Expenses, life insurance business
100,000
51.
Using line 14 of BIR Form 2551 Q, how much is total tax due?
a. P68,500
c. P30,000
b. P46,000
d. None of the choices
Answer: A
Alpha numeric
tax code (ATC)
PT 060
PT 010
PT 120
Total tax due
Taxable amount
P1,500,000
750,000
800,000
Rate
2%
3%
2%
Tax due
P30,000
22,500
16,000
P68,500
52. Assuming your client filed the return and paid the tax on July 25 and it was
found out that it was due to willful neglect, using line 20, how much is the
surcharge?
a. P36,305
c. P17,125
b. P34,250
d. None of the choices
Answer: B
Total tax due
Surcharge rate
Surcharge for willful neglect
P68,500
50%
P34,250
53. Using the same information in the preceding number, using line 21, how much is
the interest?
a. P8,220
c. P2,055
b. P3,425
d. None of the choices
Answer: C
Interest on delinquency (April 25 to July 25)
(68,500 x 12% x 3/12)
P2,055
54. Using line 24, how much is the total amount payable excluding compromise
penalty?
a. P104,805
c. P82,305
b. P 85,730
d. None of the choices
Answer: C
14 Total tax due (From schedule 1 item 7)
Less: Tax credit/payment (attach proof)
15 Creditable percentage tax per BIR Form No.
2307
Tax still payable
Add: Penalties
20 Surcharge
21 Interest
Total amount payable
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P68,500
22,500
46,000
34,250
2,055
P82,305
P a g e | 13
55 and 56 are based on the following: VAT and Percentage Taxes are based on the
following: In the year 2018, Mr. Nicko Macariola has the following transactions:
Gross receipts, trucking business
P1,500,000
Gross receipts, lease of residential units
(monthly rental is P20,000 per unit)
2,500,000
Gross receipts, practice of accountancy
1,000,000
Sale of four (4) residential lots at P1,500,000 each to
four (4) individual buyers
6,000,000
Sale of three (3) parking spaces at P500,000 each
1,500,000
55. How much is the VAT-exempt gross receipts, assuming the taxpayer is
registered?
a. P8,500,000
c. P3,500,000
b. P6,000,000
d. None of the choices
Answer: B
Sale of four (4) residential lots at P1,500,000 each to four
(4) individual buyers
56. How much is total
registered?
a. P8,500,000
b. P7,500,000
VAT-subject
amount,
assuming
the
VAT-
P6,000,000
taxpayer
is
not
VAT-
c. P6,500,000
d. None of the choices
Answer: C
Gross receipts, trucking business
Gross receipts, lease of residential units
Gross receipts, practice of accountancy
Sale of three (3) parking spaces at P500,000 each
Vatable gross amount
P1,500,000
2,500,000
1,000,000
1,500,000
P6,500,000
57. In 2018 a stockholder of a closely held corporation owns 100,000 shares before
the IPO. The cost of the share is P1,000,000. During the IPO, the shares are
selling at P12 per share. After the IPO, the outstanding shares of the closely
held corporation are 1,000,000 shares and are now selling at P14 per share at
the local stock exchange.
Your friend asks for your advice whether to sell his shares during the IPO
through the local stock exchange or sell after the IPO not through the local
stock exchange. What advice will you give him?
a. Sell during the IPO because he will pay lesser tax.
b. Sell after the IPO but directly to a buyer so that he will pay lesser
tax.
c. Sell any time because there is no advantage as far as taxes due are
concerned.
d. Sell it below cost after the IPO directly to a buyer so he will not be
subject to tax on capital gain.
Answer: D
Sell during
IPO
Gross selling price
Less: Cost
Gross selling price/net capital gain
Rate
Tax due
Ratio = 100,000 shares/1,000,000 shares
P1,200,000
P1,200,000
4%
P 48,000
Sell
directly to
buyer after
IPO
P1,400,000
1,000,000
P 400,000
15%
P 60,000
10%
58. VAT and Percentage Taxes The VAT on importation of goods which are
subsequently used or sold in the course of trade or business by a VATregistered importer shall be treated as:
a. expense.
c. tax credit.
b. inventoriable cost.
d. none of the choices.
Answer: C
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P a g e | 14
59 and 60 are based on the following: ABC Corporation, VAT-registered real estate
dealer, sold a residential lot on July 2, 2018 for P1,500,000. The down payment
was P200,000. The zonal value of the subject property at the time of sale amounted
to P2,000,000.
59. Would the sale qualify under installment plan?
a. Yes, because the initial payment did not exceed 25% of the selling price.
b. No, because the amount of the initial payments were not known.
c. Yes, because the sale had initial payments and, therefore, qualified
under installment plan.
d. No, because, as a rule, sale of real property would always be considered
sale under cash basis.
Answer: A
Initial payment/selling price (300,000/1,500,000 = 29%) does not exceed 25%.
60. How much was the output tax on the installment payment?
a. P3,600
c. P2,000
b. P2,400
d. None
Answer: D
Sale of residential lot valued at P1,500,000 and below is exempt from VAT
under the TRAIN.
61. Mr. Florence Binaluyo donates a piece of land to the City of Masbate.
The
fair market value per BIR of the piece of land is P2,000,000 and its value per
Tax Declaration is P1,800,000. How much is the documentary stamp tax, if any?
a. P30,000
c. None, exempt from DST
b. P27,000
d. None of the choices
Answer: C
Transfers exempt from donor’s tax under Section 101(a) and (b) of the
Tax Code shall be exempt from the tax imposed under this Section.
62. On every original issue, whether on organization, reorganization or for any
lawful purpose, of shares of stock by any association, company or corporation,
the documentary stamp tax is:
a. One peso and fifty centavos (P1.50) on each Two hundred pesos (P200),
or fractional part thereof, of the par value of such stock.
b. Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
c. Three pesos (P3.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
d. Fifteen pesos (P15.00) on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of stock
Answer: B
63. These are taxes on goods manufactured or produced in the Philippines for domestic
sales or consumption or for any other disposition and to things imported as well as
services performed in the Philippine, which tax shall be in addition to the valueadded tax.
a. Percentage Taxes
b. Income Tax
c. Documentary Stamp Taxes
d. Excise Taxes
Answer: D
64. Which of the following articles shall be subject to specific excise tax?
a. Excise tax on alcoholic products
b. Excise tax on automobiles
c. Excise tax on non-essential services
d. Excise tax on sweetened beverages
Answer: D
65. A residential building located in one of the cities in Metro Manila has a fair
market value of P10,000,000. The city ordinance fixed the actual assessment
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P a g e | 15
level at 60%. How much is the basic real property tax, excluding the Special
Educational Fund (SEF)?
a. P120,000
c. P30,000
b. P 60,000
c. None of the choices
Answer: A
Fair market value
Multiplied by assessment level
Assessed Value
Tax rate
Basic real property tax
P10,000,000
60%
6,000,000
2%
P 120,000
66. Unless otherwise provided in the Local Government Code, the tax period of all
local taxes, fees and charges shall be:
a. calendar year.
b. fiscal year.
c. either calendar year or fiscal year at the option of the taxpayer.
d. neither calendar year nor fiscal year at the option of the LGU.
Answer: A
67. Case 1: The City of Masbate passed an ordinance granting senior citizens free
movie viewing on certain days.
Case 2: The City of Masbate passed an ordinance limiting the discount given
to senior citizens at 15% instead of 20%.
a.
b.
c.
d.
Only
Both
Only
Both
Case 1 is
cases are
Case 2 is
cases are
valid.
valid.
valid.
not valid.
Answer: A
68. The following data are taken from the books of a VAT-registered manufacturer
of cigarettes:
Gross sales
P4,900,000
Sales returns
500,000
Sales discount, determinable at the time of sale
100,000
Excise tax
150,000
Value-Added Tax
540,000
Local tax passed-on to customers
100,000
For local business tax purposes, the taxable amount is:
a. P5,000,000
c. P3,710,000
b. P4,500,000
d. None of the choices
Answer: C
Gross sales (4,900,000 + 100,000)
Less: Sales returns
Sales discount
Excise tax
Value-Added Tax
Taxable amount
P5,000,000
500,000
100,000
150,000
540,000
1,290,000
P3,710,000
69 and 70 are based on the following: A PEZA-registered entity engage as an export
enterprise provided you with the following information for the current taxable
year:
Export sales
P45,500,000
Direct costs
27,000,000
Administrative expenses
5,650,000
Marketing expenses
2,720,000
Other operating expenses
1,330,000
Incidental losses
320,000
Additional information:
a. Domestic sales at P24,500,000 with direct cost at P14,700,000
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)
P a g e | 16
b. Other expenses related to the domestic sale incurred amounted to
P3,206,400
c. PEZA Letter of Authority No. 18-ERD-LS-FP/EE-0001 provides domestic sales
limitation at 30%
69. What is the entity’s total income tax for the year?
a. P 925,000
c. P2,903,080
b. P1,978,080
d. None of the choices
Answer: C
Gross sales (export)
Less: Direct costs
Gross income
Tax rate
Tax due
Share of the National Government (3% x 18,500,000)
Share of the local government (2% x 18,500,000)
P45,500,000
27,000,000
18,500,000
5%
P
925,000
P
555,000
P
370,000
Gross sales (domestic)
Less: Direct costs (domestic sales)
Gross income (domestic sales)
Less: Deductible expenses
Taxable income
Normal corporate income tax (6,593,600 x 30%)
Minimum corporate income tax (9,800,000 x 2%)
Tax due (higher)
P24,500,000
14,700,000
9,800,000
3,206,400
P 6,593,600
P 1,978,080
P
196,000
P 1,978,080
Income tax on export sales
Income tax on domestic sales
Total
P
925,000
1,978,080
P 2,903,080
70. What is the entity’s income tax if the PEZA Letter of Authority No. 18-ERD-LSFP/EE-0001 provides domestic sales limitation at 30% as a condition for fiscal
incentives?
a. P4,522,080
c. P1,978,080
b. P2,903,000
d. None of the choices
Answer: A
Gross sales (45,500,000 + 24,500,000)
Less: Direct costs (27,000,000 + 14,700,000)
Gross income
Less: Deductible expenses
Administrative expenses
Marketing expenses
Other operating expenses
Incidental losses
Other expenses related to the domestic
sale
Taxable income
Normal corporate income tax (15,073,600 x 30%)
Minimum corporate income tax (28,300,000 x 2%)
Tax due (higher)
P70,000,000
41,700,000
28,300,000
5,650,000
2,720,000
1,330,000
320,000
3,206,400
13,226,400
P15,073,600
P 4,522,080
P
566,000
P 4,522,080
Domestic sales over total sales is 35% (24,500,000/70,000,000).
Since the PEZA-registered entity is an export enterprise subject to 5%
special tax regime but did not comply with the condition for fiscal
incentive, all the entity’s income shall be subject to the normal corporate
income tax of 30% under the Tax Code.
END OF EXAMINATION
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)