1. Income, for tax purposes
I.
Means all income from whatever source (legal or illegal), unless specifically excluded under the
Tax Code
II.
Means all wealth which flows into the taxpayer other than return of capital.
III.
Is recognized in the year it is actually received in cash or cash equivalent.
IV.
Refer to the amount of money coming to a person or corporation within a specified time, whether
as payment of services, interest, or profits from investment.
a. I, II and III only
b. I and IV only
c. I, II, III and IV
d. None of the above
2.
a.
b.
c.
d.
The sources from which income is derived
Labor
Illegal activities
Profits derived from sale or exchange of capital assets
All of the above
3. The sources from which income is derived
A.
B.
C.
Labor
True True True
Gifts and Inheritance True False False
Use of capital
True True False
D.
False
False
False
4. In 2018, Pedro sent his sister Ana $10,000 via a telegraphic transfer through the Banko De Uro el
Pilipinas. Lorna, the bank’s remittance clerk made a mistake and credited Ana with $100,000
which she promptly withdrew. The bank demanded the return of the mistakenly credited excess,
but Ana refused. The BIR entered the picture and Investigated Ana. Would the BIR be correct if it
determines that Ana earned taxable income under these facts?
a. No, she had no Income because she had no right to the mistakenly credited funds
b. Yes, income is income regardless of the source.
c. No, it was not her fault that the funds in excess of $10,000 were credited to her.
d. No, the funds in excess of $10,000 were in effect donated to her.
5.
Which of the following is a characteristics of income?
A.
B.
C.
Increase in taxpayer’s wealth
True True
Realization of gain
True False
Return on taxpayer’s wealth
True True
D.
True
False
False
6.
a.
b.
c.
d.
Which of the following is a requisite for an income to be taxable ?
There must be gain
The gain must be realized or received
The gain must not be excluded by law from taxation
All of the above
7.
a.
b.
c.
d.
Which of the following is not an income for income tax purpose?
Gain derived from labor
Return or capital
Excess of selling price over cost of assets sold
Gift received
8.
a.
b.
c.
d.
Which of the following is not an income for income tax purposes?
Collection loans receivable
Condonation of debt for services rendered
Excess of selling price over the cost of an asset sold
None of the above
False
False
False
9.
a.
b.
c.
d.
Which of the following is not a characteristic of income?
Increase in taxpayer’s wealth
Realization or receipt of gain
Earnings constructively received.
Return of taxpayer’s wealth
10.
a.
b.
c.
d.
Which is not a valid definition of income?
Income is the return from capital invested
Income is a fund at one distinct point of time.
Income means all wealth which flows into the taxpayer other than a mere return of capital
Income means cash or its equivalent unless otherwise specified.
11. The share in the profits of a partner in a general professional partnership is regarded as received
by him and thus taxable although not yet distributed. This principle is known as
a. Actual receipt of income
b. Advance reporting of income
c. Accrual method of accounting
d. Constructive receipt of income
12.
a.
b.
c.
d.
Which of the following is considered or construed as an example of “constructive receipt”?
Retirement benefits, pensions, gratuities
Fees paid to a public official
Interest coupons that have matured and are payable but have not been cashed
Deposits for rentals to answer for damages, restricted as to use\
13. Constructive receipt occurs when the money consideration or its equivalent is placed at the
control of the person who rendered the service without restrictions by the payor. The following
are examples of constructive receipts, except
a. A security deposit to insure the faithful performance of certain obligations of the lessee to the
lessor
b. Deposit in banks which are made available to the seller of services without restrictions:
c. Issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the
seller as payment for services rendered;
d. Transfer of the amounts retained by the payor to the account of the contractor.
14. There is constructive receipt of income when:
a. Payment is credited to payee’s account
b. Payment is set aside for the payee, or otherwise made available so the payee may draw upon it at
any time, or so the payee could have drawn upon it during the taxable year if notice of intention
to withdraw had been given without substantial limitations.
c. Both “a” and “b”
d. Neither “a” nor “b”
15.
a.
b.
c.
d.
When different types of income are subjected to common tax rate, the tax system is described as
Global tax system
Gross income tax system
Scheduler tax system
Final tax system
16. Situs, for taxation purpose will depend upon various factors, including
I.
The nature of the tax and the subject matter thereof.
II.
The possible protection and benefit that may accrue both to the government and to the taxpayer.
III.
Domicile or residence
IV.
Citizenship
V.
Source of income
a. I and V only
b. I, III and IV only
c. I, III, IV and V
d. I, II, III, IV and V
17. As a rule, income from whatever source is taxable. Income from whatever source may come from:
I.
Gains and arising from exporiation of property
II.
Gambling gains
III.
Income from illegal business or from embezzlement
IV.
Recovery of receivables previously written off
V.
VI.
VII.
a.
b.
Tax refunds
Compensation for injury suffered
Gratuitous condonation of debt
I and II only
I, IV and V only
c. I, IV, V and VI only
d. I, II, III, IV and V only
18.
a.
b.
c.
d.
Situs of taxation on income from sale of property purchased
Place of the seller
Place of the sale
Place of the buyer
As determined by the Commissioner
19.
a.
b.
c.
d.
Which of the following test of source of income is incorrect?
Interest income – residence of the debtor
Income from services – place of performance
Royalties – place of use of intangible
Gain on sale of real property – place of sale
20.
a.
b.
c.
d.
Situs of taxation on income from sale shares of a domestic corporation.
Always treated as income derived from within the Philippines
Always treated as income derived from without the Philippines
May be treated as income within or without the Philippines depending on the place of sale
May be treated as income within or without the Philippines depending where the shares the kept.
21.
a.
b.
c.
d.
Situs of taxation on income from sale shares of a foreign corporation.
Always treated as income derived from within the Philippines
Always treated as income derived from without the Philippines
May be treated as income within or without the Philippines depending on the place of sale
May be treated as income within or without the Philippines depending where the shares are kept
22. Statement 1: A gain from sale of shares of a domestic corporation shall be considered derived
from the Philippines regardless of where the shares were sold.
Statement 2: A gain from a sale of shares of a foreign corporation shall be considered derived
from the country where the corporation was created or organized.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are false
23. Pedro earned interest income from a promissory note issued to him by Juan, a resident of
California, U.S.A. Assuming that Pedro is a nonresident citizen, the interest income is
a. Subject to basic income tax
b. Subject to final tax
c. Not subject to income tax
d. Partly subject to scheduler and partly subject to final tax
24. Mr. Parker, a French citizen permanently residing in the Philippines, received several items during
the taxable year. Which among the following is not subject to Philippine income taxation?
a. Consultancy fees received for designing a computer program and installing the same in Shanghai
facility of a Chinese firm.
b. Interest from his deposits in a local bank of foreign currency earned abroad converted to
Philippine pesos.
c. Dividends received from an American corporation which derived 60% of its annual gross receipts
from Philippine sources for the past ten (10) years.
d. Gains derived from the sale of his condominium unit located in Quezon City.
25. It is important to know the source of income for tax purposes (i.e., from within or without the
Philippines) because:
26.
a. Some individual 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
27. Which of the following taxpayers is taxable on income from all sources within and outside the
Philippines?
a.
b.
c.
d.
Domestic corporations
Resident Foreign corporation
Resident citizen
Both “a” and “b”
28.
a.
b.
c.
Which of the following is NOT true about source of income?
In case of income derived from labor, source is the place where the labor is performed.
In case of income derived from use of capital, source is the place where the capital is employed
In case of profits from the sale or exchange of capital assets, source is the place or transaction
occurs.
d. None of the above
29. Which income from sources partly within and partly outside the Philippines is allocated on the
time basis?
a. Income of the international shipping corporation with vessels touching Philippine ports
b. Income of a Telegraph company with transmission from the Philippine to points abroad
c. Income from goods produced in whole or in part in the Philippines and sold in a foreign country,
or vice-versa
d. Income from personal services performed in part in the Philippines and in part abroad
30. A taxpayer is employed by a shipping company touching Philippine and foreign ports. In 2018, he
received a gross payment for his services rendered of P3,000,000. In that year, the vessels on
abroad of which he rendered services had a total stay in Philippine ports of four months. His gross
income from the Philippines was
a. P0
b. P1,000,000
c. P1,500,000
d. P3,000,000
31. Chris is a Filipino Immigrant living in the United States for more than 15 years. He is retired and he
came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays
here about a month. He regularly receives a pension from his former employer in the United
States, amounting to US$2,000 a month. While in the Philippines, with his pension pay from his
former employer, he purchased three condominium units in Makati which he is renting out for
P25,000 a month each. Does the US$2,000 pension become taxable because he is now in the
Philippines?
a. Yes, Income received in the Philippines by the non-resident citizens is taxable.
b. Yes, Income received in the Philippines or abroad by non-resident citizen is taxable.
c. No. Income earned abroad by a non-resident citizen is not taxable in the Philippines
d. No. The person is exempt from taxation being one of the exclusions from gross income
32.
a.
b.
c.
d.
All of the following are correct except one. Which is the exception?
The source of interest income is the country where the debtor resides.
The source of interest income is the country where the creditor resides.
Rents or royalties are considered derived from the country where the property is located.
Income from personal services is considered derived from the country where the services were
rendered.
33. Which of the following is considered income derived from within the Philippines?
I.
Gain on sale of personal property purchased in the Philippines and sold in Canada.
II.
Compensation received from services in the Philippines
III.
Rent income from real property located in USA
IV.
Gain on sale of shares of a foreign corporation sold in the Philippines.
a. I and II only
b. I, II and IV only
c. II and IV only
d. All of the above
34. Which of the following is not an income derived from sources within the Philippines for income
a.
b.
c.
d.
tax purposes?
Interest derived from bonds issued by a foreign corporation
Interest on notes or other interest- bearing obligations of residents
Both “a” and “b”
Neither “a” nor “b”
35. Which of the following statements is correct with respect to valuation of income?
a. The amount of income recognized is generally the value received or which the taxpayer has a right
to receive
b. If the services were rendered at a stipulated price, in the absence of any evidence to the contrary,
such price shall be presumed to be the fair market value of the compensation received.
c. Transfer of land made by a person to another in payment of services rendered in the form of
attorney’s fees shall be considered as part of the gross income of the latter valued at either the
fair market value or the zonal valuation, whichever is higher, in the taxable year received.
d. All of the above
36. Compensation income is earned when an employer-employee relationship exists. Which of the
following income represents income earned through employee-employer relationship?
I.
Professional fees
II.
Wages
III.
Pension pay
IV.
Capital gain
a. I only
b. I and III only
c. II and III only
d. I, II, III and IV
37. Pedro is a member of the board of directors of ABC Company. During the current taxable year,
Pedro received director’s fees amounting to P300,000 from quarterly board meetings he
attended. Such fees should
a. Form part of Pedro’s gross compensation income, whether or not he is at the same time an
Employee of the corporation
b. Form part of Pedro’s gross compensation income only if he is at the same time an Employee of
the corporation
c. Both “a” and “b”
d. Neither “a” nor “b” is correct
38.
a.
b.
c.
d.
Which of the following compensation will be subject to graduated rates?
Basic salary whether o not the employee is a minimum wage earner
Basic salary only if the employee is not a minimum wage earner
13th month pay and other benefits not exceeding P30,000
Fringe benefits received by supervisory or managerial employee
39. Which of the following items that reduces salaries of employees is not an exclusion from gross
income?
a. GSIS or SSS Contributors
b. Pag-ibig Contributions
c. Labor Union Dues
d. None of the choices
40. Which of the following compensation income of an individual taxpayer is not an exclusion from
gross income:
a. Monetized vacation leaves not exceeding 10 days a year:
b. Separation pay of an employee who resigned from his employment
c. Retirement benefits of an employee under a qualified benefit plan who has worked for an
employer for at least 10 years, who at the time of retirement is not less than 50 years of age, and
who avails of the retirement for the first time
d. All of these
41. Which of the following is taxable?
a. Separation pay received by a 50-year old employee due to the retrenchment program of the
employer
b. Retirement pay received from a benefit plan registered with the BIR where at the time the
employee retired, he was 57 years of age, retiring from employment for the first time in his life,
and was employed with the employer for 8 years.
c. Social security benefit received by a balikbayan from employer abroad at age of 30
d. None of the above
42. Statement 1: Amounts received by reason of involuntary separation remain exempt from income
tax even if he official or employee at the time of separation has rendered less than ten (10) years
of service and/or below fifty (50) years of age.
Statement 2: Any amount received by an official or employee or by his heirs from the employer
due to death, sickness or other physical disability or for any cause beyond the control of the said
official or employee, such as retrenchment, redundancy, or cessation of business are exempt from
income tax.
a. Both statements are correct
b. Both statements are not correct
c. Only the first statement is correct
d. Only the second statement is correct
43. The taxpayer was retired by his employer in 2016 and paid P2,000,000 as a retirement gratuity
without any deduction for withholding tax. The corporation became bankrupt in 2018. Can the BIR
subject the P2,000,000 retirement gratuity to income tax in 2018?
1st Answer: Yes, if the retirement gratuity was paid based on a reasonable pension where the
taxpayer was 50 years old and has served the corporation.
2nd Answer : No, if the taxpayer was forced by the corporation to retire.
a. 1st and 2nd answers are correct
b. 1st answer 1 is correct but 2nd answer is wrong
c. 1st answer is wrong but 2nd answer is correct
d. 1st and 2nd answers are wrong
44. JJ, an official of Excel Corporation, asked for an earlier retirement because he was immigrating to
Canada with his girlfriend. He was paid P3,000,000 as separation pay in recognition of his valuable
services to the corporation. Paul, another official of the same company was separated for
occupying a redundant position. He was given P1,000,000 separation pay. Rene who has rendered
11 years of service and who is now P55 yrs. Old opted to retire for the first time. He received
P2,000,000 retirement pay. The total income subject to withholding tax is .
a. P1,000,000
b. P2,000,000
c. P3,000,000
d. P6,000,000
45. Which among the following is part of the taxable income of an employee?
I.
Insurance premium provided by employer on the life insurance policy of the employee where the
designated beneficiary is the relative of the employee.
II.
Insurance premium paid by employer on the life insurance policy of the employee where the
designated beneficiary is the employer.
III.
The income tax of the employee paid by the employer as part of the employee’s benefit.
IV.
The income tax of the employee advanced by the employer, deductible against future income of
the employee.
a. I only
b. I and II only
c. II and III only
d. III only
46. Statement 1: Remuneration for services constitutes compensation income even if the relationship
of employer and employee does not exist any longer at the time when payment is made between
the person in whose employ the services had been performed and the individual who performed
them.
Statement 2: In general, fixed or variable allowances which are received by a public officer or
employee of a private entity, in addition to the regular compensation, fixed for his position or
office, is compensation subject to income tax and consequently, creditable withholding tax on
compensation income.
a. Both statements are correct
b. Both statements are correct
c. Only the first statement is correct
d. Only the second statement is correct
47. Statement 1: Representation and Transportation Allowances (RATA) granted under Section 34 of
the General Appropriations Act to certain officials and employees of the government are
considered reimbursements of the expenses incurred in the performance one’s duties rather than
as additional compensation.
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a.
b.
c.
d.
Statement 2: The excess of RATA in statement 1, if not returned to the employer,
Statement 3: COLA of minimum wage earners is exempt from income tax.
All statements are correct
All statements are incorrect
Only statement 3 is correct
Only statement 3 is incorrect
48. Juana, widow received the following during 2018:
 Received $500 ($1-P44) monthly interest income from the pension plan of his deceased husband
who served in the US Army for 20 years.
 Won a beauty contest “Miss Byuda 2018”. She received the following as prizes:
 Cash prize, P50,000
 Free-trip abroad worth P50,000
 College scholarship with international College of Business and Economics worth P100,000
 Goods worth P20,000
 P100,000 from the debtor in payment of a loan, and interest in the sum of P15,000
 Inherited from her grandmother a lot and apartment valued at P2,500,000 from which she is
receiving monthly rental of P15,000
The income subject to tax is –
a. P415,000
b. P679,000
c. P250,000
d. P515,000
49. Statement 1: The stipends received by resident physicians during their intensive training in the
residency program of a hospital are subject to creditable withholding tax on compensation
income.
Statement 2: Reasonable amounts of reimbursements/advances for travelling and entertainment
expenses which are pre-computed on a daily basis and are paid to an employee while he is on an
assignment or duty such as “per diem” need not be subject to the requirement of substantiation
and to withholding tax.
a. All statements are correct
b. All statements are incorrect
c. Only statement 3 is correct
d. Only statement 3 is incorrect
50. Statement 1: Tips or gratuities paid directly to an employee by a customer of the employer that
are not accounted for by the employee to the employer are considered as taxable income subject
to basic tax.
Statement 2: The tips described in statement 1 shall not be subject to withholding tax for the
reason that tips are not accounted for by the employee to the employer.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
51.
a.
b.
c.
d.
Which of the following statements is incorrect?
Income from business is never subject to final withholding tax
Income from exercise of profession may be exempt from income tax
Income from business may be subject to capital gains tax
Income from exercise of profession may be subject to income tax
52. A Filipino citizen is a natural person who is/has
I.
Born by birth with father and/or mother as Filipino citizens.
II.
Born before January 17, 1973 of Filipino mother who elects Philippine citizenship upon reaching
the age of majority.
III.
Acquired Philippine citizenship after birth (naturalized) in accordance with Philippine laws.
a. I only
b. I and II only
c. I and III only
d. I, II and III
53. Individual taxpayers are
I.
Natural persons with income derived within the territorial jurisdiction of a taxing authority.
II.
a.
b.
c.
d.
Natural persons classified as citizens and aliens
I only
II only
I and II
None of the above
54. Determine the correct classification of the following:
I.
Manny, a Filipino businessman, went on a business trip abroad and stayed there most of the time
during the year.
II.
Kyla, a Filipino professional singer, held a series of concerts in various countries around the world
during the current taxable year. She stayed abroad most of the time during the year.
III.
Efren, a Filipino “cue” artist went to Canada during the taxable year to train and participate in the
world cup of pool. He stayed there most of the time during the year.
A.
B.
C.
D.
I
NRC
RC
RC
RC
II
NRC
NRC
RC
RC
III
NRC
NRC
NRC
RC
55. Statement 1: Overseas Filipino Workers duly registered as such with the Philippine Overseas
Employment Administration (POEA) with valid Overseas Employment Certificate (OEC) refer to
Filipino citizens employed in foreign countries and whose salaries are paid by employers abroad
and are not borne by entities or persons in the Philippines.
Statement 2: Filipino citizen Seafares who receive compensation for services rendered abroad as a
member of the complement of a vessel engaged exclusively for international trade are considered
Overseas Filipino Workers provided they are duly registered as such with the Philippine Overseas
Employment Administration (POEA) with a valid Overseas Employment Certificate (OEC) with
Seafares Identification Record Book (SIRB) or Seaman’s Book issued by the Maritime Industry
Authority (MARINA).
A.
B.
C.
D.
Statement 1
True
False True True
Statement 2
True
False False True
56. Bu-dhoy, a Mongolian national, arrived in the Philippines on January 1, 2018 to visit his Filipina
girlfriend. He planned to stay in the country until December 31, 2020, by which time he would go
back to his legal wife and family in Mongolia. Bu-dhoy derived income during his stay here in the
Philippines. For 2018 taxable year, Bu-dhoy shall be classified as a :
a. Resident alien
b. Non-resident alien engaged in trade or business in the Philippines.
c. Non-resident alien not engaged in trade or business in the Philippines.
d. Special alien employee
57. Due to his expertise, Engr. Pedro D. Magiba ( a freelancer) was hired by a foreign petroleum
contractor in Thailand to provide technical assistance for two months from February to March. He
was hired again for the months of June-July and October-December of the same taxable year.
Engr. Pedro D. Magiba is a:
a. Resident alien
b. Nonresident citizen
c. Special Filipino employee
d. None of the above
58. Statement 1: The intention with regard to the length and nature of stay of an alien determines
whether he is a resident or nonresident.
Statement 2: A foreigner who has acquired residency in the Philippines shall only become a
nonresident when he actually departs with the intention of abandoning his residency in the
Philippines.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
59. On October 2018, Mr.Bald Nha, an American basketball coach was hired as a team consultant by
one of the teams in the Philippine Basketball Association (PBA) for one conference which will last
for a period of not more than three (3) months from October to December 2018. His coming to
the Philippines was for a definite purpose. However, he was subsequently chosen to coach the
Philippine men’s basketball team for a period of two (2) years. The American mentor intends to
a.
b.
c.
d.
leave the Philippines as soon as his job is finished. For 2018 taxable year, the American coach shall
be classified as:
Resident alien
Nonresident alien engaged in trade or business.
Nonresident alien not engaged in trade or business.
Resident citizen.
60. Rihanna, an American singer, was engaged to sing for one week at the Western Philippine Plaza
after which she returned to USA. For income tax purposes, sha 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.
61. Mr. Almansor Sebastian, an Iranian and a resident of Tehran, Iran stayed in the Philippines from
Nov. 28 to Dec. 5, 2018 to watch the 2019 FIBA World Qualifying tournament held in MOA,
Paranaque, Philippines. During his stay, he bought equity investments from Alpha and Delta
Corporations ( domestic corporations). He likewise invested in a mutual fund of Banko de Isla de
Pilipinas, a local bank. Mr. Almansor Sebastian is a:
a. Resident alien
b. Nonresident alien engaged in trade or business.
c. Nonresident alien not engaged in trade or business.
d. Resident citizen
62. It is important to know the source of income for income tax purposes (i.e. from within and
without the Philippines) because:
a. Some individuals and corporate taxpayers are taxable based on their worldwide income while
others are taxable only on their 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.
63. Which of the following is correct?
I.
A citizen of the Philippines residing therein is taxable on all income derived from sources within
and without the Philippines.
II.
A non-resident citizen is taxable on income derived from sources within the Philippine only.
III.
An alien individual, whether a resident or not of the Philippines, is taxable on income derived from
sources within the Philippines only.
IV.
A seaman who is a citizen of the Philippines and who receives compensation for services rendered
abroad as a member of the complement of a vessel engage in international trade shall be treated
as an overseas contract worker.
a. I, II and III only
b. I, III and IV only
c. I, II and IV only
d. I, II, III and IV
64.
a.
b.
c.
d.
Taxable only on income from sources within the Philippines, except
Resident Citizen
Nonresident citizen
Resident alien
Nonresident alien
65. Situs of taxation is world/global taxation
A.
Resident Citizen
Resident alien
Nonresident alien engaged in trade
True
B.
True
False
True
C.
False
False
False
D.
True
False
False
True
True
66. Who of the following individual taxpayers is taxable on income derived from within and without
the Philippines?
a. Pedro, a native of Bacolod City, working as overseas contract worker in Iraq.
b. George, naturalized Filipino citizen and married to a Filipina. He had been living in Pampanga
since 1990.
c. Pao Gasul, Spanishc citizen, a resident of Madrid, Spain, spent a one (one) week vacation on
Boracay.
d. Lee Min Ho, Korean singer, held a 3-day concert in Manila.
67. Pedro Dela Cruz, nonresident citizen, arrived in the Philippines on July 1, 2018 to reside here
permanently after working as a nurse in the United States for many years. Which of the following
statements is correct with respect to his classification for income tax purposes?
a. He shall be classified as nonresident citizen for the year 2018 with respect to his income derived
from sources abroad from January 1, 2018 until the date of his arrival in the Philippines.
b. He shall be classified as nonresident citizen for the whole year of 2018.
c. He shall be classified as resident citizen for the whole year 2018.
d. He shall be classified as neither resident nor nonresident citizen for the year 2018.
68. Individual taxpayers are subject to the following income tax:
I.
Basic tax based on graduated tax table
II.
Final withholding tax on passive income derived from sources within the Philippines.
III.
Capital gains tax
IV.
Stock transaction tax of 6/10 of 1% of gross selling price
a. I and II only
b. I and III only
c. I, II and III only
d. All of the above
69. LJ, married, left the Philippines in the middle of the year on July 1, 2018 to go abroad and work
there for five (5) years. The following data were provided as of December 31, 2018:
Gross Business Income
Business Expenses
PERIOD
Phls.
Abroad
Phls.
Abroad
Jan. 1 to June 30
P300,000
P200,000
P100,000
P50,000
July 1 to Dec. 31
600,000
400,000
150,000
50,000
a.
b.
c.
d.
His taxable income is:
P800,000
P950,000
P1,100,000
P600,000
70. Based on the above problem, but assuming he arrived from abroad on July 1, 2018 to permanently
resettle in the Philippines, after working abroad for 5 years, his taxable income as of December 31,
2018 is:
a. P750,000
b. P1,000,000
c. P1,100,000
d. P600,000
71.
a.
b.
c.
d.
If he did not leave Philippines at all, LJ’s taxable income is:
P750,000
P950,000
P1,150,000
P600,000
72. Chris is a Filipino immigrant living in the United States for more than 15 years. He is retired and he
came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays
here about a month. He regularly receives a pension from his former employer in the United
States, amounting to US$2,000 a month. While in the Philippines with his pension pay from his
former employer, he purchased three condominium units in Makati which he is renting out for
P25,000 a month each. Does the US$2,000 pension become taxable because he is now in the
Philippines?
a. Yes, income received in the Philippines by the non-resident citizens is taxable
b. Yes, income received in the Philippines or abroad by non-resident citizend is taxable.
c. No, income earned abroad by non-resident citizens are not taxable in the Philippines.
d. No, the person is exempt from taxation being one of the exclusions from gross income.
73. Floyd, an American citizen who is married to a beautiful Filipina owns a building in the United
States and leases the same to businesses owned by Filipino residents. Floyd has his residence in
a.
b.
c.
d.
the Philippines and all his children are studying in top Philippine universities. Which of the
following statements is true regarding the rental income?
Taxable in the Philippines because he had his residence in the Philippines
Taxable in the Philippines because his wife is a resident citizen and they are all residents of the
Philippines.
Taxable in the Philippines because he derives his income from Filipino resident lessees.
Exempt in the Philippines because Floyd is resident alien. As such, he is taxable only on income
derived from sources within the Philippines.
The next four (4) questions are based on the following data:
Carlo, married, with two dependent children, received the following income:
Business income, Philippines
P1,000,000
Business income, Hongkong
200,000
Interest, peso deposit, MBTC
100,000
Interest, US$ deposit, BDO ($10,000 x P42)
420,000
Interest, deposit in Hongkong (HK$10,000 x P5)
50,000
Prize (TV) won in a local lottery
50,000
PCSO/Lotto winnings
2,000,000
Prize won in contest in U.S.
300,000
Lotto winning in U.S.
100,000
Dividend, domestic company
600,00
74. Determine the taxable net income assuming he is:
RC
NRC
RA
NRA-ETB
a.
P80,000
b.
180,000
c. 1,558,000
d. 1,650,000
P180,000
80,000
908,000
1,000,000
P830,000
1,000,000
908,000
1,000,000
75. Determine the total final tax assuming he is:
RC
NRC
RA
a. P553,000
P490,000
P150,000
b. 121,500
90,000
121,500
c. 131,000
90,000
90,000
d. P553,000
P490,000
P550,000
P180,000
1,000,000
908,000
1,000,000
NRA-ET
P687,000
150,000
90,000
P687,500
76. Assuming the taxable year is 2017, determine the taxable net income assuming he is :
RC
NRC
RA
NRA-ETB
a. P80,000
P180,000
P830,000
P180,000
b. 180,000
80,000
1,000,000
1,000,000
c. 1,550,000
900,000
900,000
900,000
d. 1,650,000
1,000,000
1,000,000
1,000,000
77. Assuming the taxable year is 2017, determine the total final tax assuming he is:
RC
NRC
NRAET
NRA-ET
a. P553,000
P490,000
P550,000
P150,500
b. 121,500
90,000
150,000
687,500
c. 131,000
90,000
90,000
90,000
d. 142,000
90,000
150,000
150,000
78. The term “Corporation” shall include:
I.
Partnership, no matter how created or organized
II.
Joint Stock companies
III.
Joint accounts (ceuntas en particiapcion)
IV.
Associations
V.
Insurance companies
VI.
Mutual fund companies
VII.
Regional operating headquarters of multinational corporations
a.
b.
c.
d.
I and II only
I, II and III only
I, II, III and V only
All of the above
79. ______ are constituted when a group of individuals, acting jointly, establish and operate business
enterprise under an artificial name, with an invested capital divided into transferable shares, an
elected board of directors and other corporate characteristics, but operating without formal
government authority.
a. Joint stock companies
b. Joint account companies
c. Associations
d. None of the above
80. ______ is constituted when one interests himself in the business of another by contributing
capital thereto, and sharing in the profits or losses in the proportion agreed upon. They are not
subject to any formality and may be privately contracted orally or in writing.
a. Joint stock companies
b. Joint account
c. Associations
d. None of the above
81. ______ it includes all organizations which have substantially the salient features of a corporation
to be taxable as a “corporation”.
a. Joint stock companies
b. Joint account
c. Associations
d. None of the above
82.
a.
b.
c.
Which of the following is not treated as corporation?
General professional partnership
A joint venture or consortium formed for the purpose of undertaking construction projects.
A joint or consortium for engaging in petroleum, coal, geothermal and other energy operations
pursuant to an operating consortium agreement under a service contract with the government.
d. All of the above
83. Statement 1: Partnerships no matter how created or organized, are taxable as corporations for
income tax purposes.
Statement 2: Associations and mutual fund companies, for income tax purposes, are excluded in the
definition of corporations.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
84. Which of the following is not a taxable corporation?
a. Ana, Lorna Fe agreed to contribute their money into a common fund to engage in the business of
buying and selling consumer goods. Their total investment amount to P300,000 and they did not
bother to register their business with the DTI and the SEC.
b. Pedro, Juan and Luna, all certified public accountants, agreed to contribute their money,
property and industry to a common fund with the sole intention of jointly exercising their
common profession. They have registered with the SEC.
c. Victorious Bus Company and California Bus Company owns separate franchises to operate a public
utility covering the area of Northern Luzon. To achieve maximum efficiency of utilizing their assets
and to avoid the negative effects of competition, the two companies agreed to pool their
resources together and operate as a single company.
d. Rody and Allan, lawyer and certified public accountants, respectively, agreed to contribute their
money, property and industry to a common fund to render service of business process
outsourcing
85.
a.
b.
c.
Which is not a characteristic of corporate income tax:
Progressive tax
Direct tax
General tax
d. National tax
86. Which of the following is subject to income tax?
a. SSS and GSIS
b. Philippine Health Insurance Corporation (PHIC)
c. Local Water Districts
d. Philippine Amusement and Gaming Corporation (PAGCOR)
87.
a.
b.
c.
d.
One of the following is exempt from income tax
Proprietary educational institutions
Private cemeteries
Government educational institutions
Mutual savings bank
88. Statement 1: Corporations exempt from income tax are not subjected to income tax on incomes
received which are incidental or necessarily connected with the purposes for which they were
organized and operating
Statement 2: Corporations exempt from income tax are subject to income tax on income of whatever
kind and character from any of their properties (real or personal) or from any other activity
conducted for profit, regardless of the disposition of such income.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
89. Which of the following statements is incorrect? “Joint Stock Companies” are constituted when a
group of individuals, acting jointly, establish and operate business enterprise
a. Under an artificial name.
b. With an invested capital divided into transferable shares.
c. An elected board of directors, and other corporate characteristics.
d. Operating with formal government authority.
90. A “Joint Account” is constituted when one interests himself in the business of another by/and
I.
Contributing capital thereto.
II.
Sharing in the profits or losses in the proportion agreed upon.
III.
They are not subject to any formality
IV.
It may be privately contracted orally or in writing
a. I and II only
b. I, II and III only
c. I, II, III and IV only
d. None of the above
91. Statement 1: Joint ventures, regardless of the purpose by they were created, are generally exempt
from corporate income tax.
Statement 2: The share of co-venturer corporation in the net income of tax exempt joint venture
or consortium is subject to corporate income tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
DC, RFC and NRFC
92. Which of the following statements is correct?
I.
The term “domestic”, when applied to a corporation, means created or organized in the
Philippines or under the laws of a foreign country as long as it maintains a Philippine branch.
II.
A corporation which is not domestic may be resident (engaged in business in the Philippines) or
nonresident corporation (not engaged in business in the Philippines).
III.
Resident foreign corporations are subject to income tax based on net income from sources within
the Philippines.
a. I only
b. II only
c. II and III only
d. I, II and III
93. Statement 1: Non-resident foreign corporation applies to a foreign corporation engaged in trade
or business within the Philippines.
Statement 2: Resident foreign corporation applies to a foreign corporation not engaged in trade or
business in the Philippines.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
94.
a.
b.
c.
d.
Which of the following is taxable on income from all sources, within and without?
Domestic Corporations
Resident Foreign Corporations
Non-resident Foreign Corporations
All of the above
95.
a.
b.
c.
d.
The term applies to a foreign corporation engaged in trade or business in the Philippines.
Resident foreign corporation
Nonresident foreign corporation
Multinational corporation
Petroleum contractor
96.
a.
b.
c.
d.
Which of the following does not have the benefit of claiming deductions in computing income tax?
Domestic Corporations
Resident Foreign Corporations
Non-resident Foreign Corporations
All of the choices
97. Which of the following corporations shall pay a tax equal to thirty percent (30%) of the gross
income received during each taxable year from all sources within the Philippines?
a. Domestic Corporation
b. Resident foreign corporation
c. Nonresident foreign corporation
d. None of the choices
98. Aside from the ordinary corporate income tax of 30%, what other tax(es) may be imposed on
corporations under the Philippine income tax laws?
a. Minimum corporate income tax
b. Passive income tax
c. Capital gains tax
d. All of the above
Passive Incomes subject to FWT; Capital Gains subject to CGTs
99. Statement 1: Passive incomes are subject to separate and final tax rates.
Statement 2: Passive incomes are included in the computation of taxable net income from
business operations of a corporation.
A
B
C
D
Statement 1
True
False
True
False
Statement 2
True
False
False
True
100. The following passive income received by a domestic corporation shall be subject to 20% final
withholding tax, except:
a. Interest income from peso bank deposit
b. Yield from deposit substitutes
c. Dividend income from another domestic corporation
d. Royalties
101. Interest income on bank deposit or investment with maturity period of at least five (5) years
received by a corporation is subject to:
Domestic
Res. Foreign Corp.
Non-resident Foreign Corp.
a.
20%
20%
30%
b. Exempt
Exempt
Exempt
c.
20%
20%
Exempt
d.
20%
Exempt
Exempt
102. Interest income received from a depository bank under expanded foreign currency deposit
system prior to 2018 shall be subject to:
DC
RFC
NRFC
a.
20%
20%
20%
b. 7 ½ %
7½%
Exempt
c.
d.
15%
15%
15%
7½%
Exempt
Exempt
103. Interest income received from a depository bank under expanded foreign currency deposit
system beginning January 1, 2018 or upon effectivity of the TRAIN LAW shall be subject to:
DC
RFC
NRFC
a. 20%
20%
20%
b. 7 ½ %
7½%
Exempt
c. 15%
15%
Exempt
d. 15%
7½%
Exempt
104. Royalty income received by a corporation prior 2018 shall be subject to:
DC
RFC
NRFC
a. 20%
20%
30%
b. 7 ½ %
7½%
Exempt
c. 15%
15%
Exempt
d. 15%
7½%
Exempt
105. Royalty income received by a corporation beginning January 1, 2018 or upon effectivity of the
TRAIN Law shall be subject to:
DC
RFC
NRFC
a. 20%
20%
30%
b. 7 ½ %
7½%
Exempt
c. 15%
15%
Exempt
d. 15%
7½%
Exempt
106. Royalty income from books received by a corporation prior to 2018 shall be subject to:
DC
RFC
NRFC
a. 10%
10%
30%
b. 20%
20%
30%
c. 15%
15%
Exempt
d. 15%
7½%
Exempt
107. Royalty income from books received by a corporation beginning January 1, 2018 or upon
effectivity of the TRAIN Law shall be subject to:
DC
RFC
NRFC
a. 10%
10%
30%
b. 20%
20%
30%
c. 15%
15%
Exempt
d. 15%
7½%
Exempt
108. During the 2018, a domestic corporation derived the following items of revenues:
A. Gross receipts from a trading business, P500,000
B. Interests from money placements in the banks, P30,000
C. Dividends from its stock investments in domestic corporations, P20,000
D. Gains from stock transactions through the Philippine Stock Exchange, P50,000
E. Proceeds under an insurance policy on the lost of goods, P100,000
How much should the corporation report as taxable income?
a. P500,000
b. P550,000
c. P600,000
d. P650,000
109. Lenovo, Inc., a resident corporation, has earned the following income during the year:
DIVIDEND INCOME FROM:
 Microsoft, a non-resident foreign corporation
P500,000
 Intel, a resident foreign corporation (ratio of Philippine
income over world income for the past 3 years is 40%)
400,000
 Panday, a domestic corporation
300,000
INTEREST INCOME FROM:
 Current account, BDO
 Savings deposit, ABN-AMRO bank, UK
 FCDU deposits
ROYALTY INCOME from various domestic corporations
600,000
700,000
800,000
100,000
The total final tax on passive income assuming the taxable year is 2017:
a. P200,000
b. P260,000
c. P328,000
d. P1,088,000
110. Assume the same data in the immediately preceding number, except that the taxable year was
2018. The total final tax on passive income for 2018 should be:
a. P200,000
b. 260,000
c. P328,000
d. P1,088,000
111. Lenovo, Inc., a resident foreign corporation, has earned the following income during 2018:
Dividend income from:
Microsoft, a non-resident corporation
P500,000
Intel, a resident foreign corporation
400,000
Panday, a domestic corporation
300,000
Interest income from:
Current account, BDO
600,000
Savings deposit, ABN-AMRO bank, UK
700,000
US dollar deposit (FCDU) – BPI Makati
800,000
Royalty income from various domestic corporations
100,000
Additional information:
 The ratio of Microsoft’s gross income in the Philippines over worldwide income for the past three
years is 40%.
 The ratio of Intel’s gross income in the Philippines over worldwide income for the past three years
is 60%.
 The ratio of Panday’s gross income in the Philippines over worldwide income for the past three
years is 80%.
How much is the total income tax expense of Lenovo?
a. P200,000
b. P400,000
c. P320,000
d. P272,000
112. Assuming Lenovo is a domestic corporation, how much is its total income tax expense?
a. P200,000
b. P560,000
c. P680,000
d. P740,000
a. P45,000