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CPA Review Batch 43  May 2022 CPALE  Preweek Summary Lecture
A. TAMAYO  G. CAIGA  C. LIM  K. MANUEL  E. BUEN
TAXATION
TAX PREWEEK LECTURE
PRINCIPLES OF TAXATION
1.
(Principles of Taxation) Among the nature of taxation is that it is an inherent power being an attribute of
sovereignty. Which among the following is not among its manifestation as such inherent power?
a. Courts cannot issue an injunction to enjoin the collection of taxes.
b. There should be no improper delegation of the power to tax.
c. Taxes may be imposed even without a constitutional grant.
d. The State has the right to select the subjects and objects of taxation.
2.
(Principles of Taxation) The President of the Philippines and the Prime Minister of Japan entered into an
executive agreement in respect of a loan facility to the Philippines from Japan whereby it was stipulated
that interest on loans granted by private Japanese financial institutions in the Philippines shall not be subject
to Philippine income tax laws. What basic characteristic of taxation has been violated by this agreement?
a. Inherent limitation
c. Legislative in character
b. Theoretical justice
d. Administrative feasibility
3.
(Principles of Taxation) A fundamental rule in taxation is that, the property of one country may not be
taxed by another country. This is known as:
a. international law.
c. reciprocity.
b. international comity.
d. international inhibition.
4.
(Principles of Taxation) 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 proper 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.
Classification is allowed. It is valid when:
a) There is substantial distinction;
b) The classification is germane (relevant) to the issue;
c) The classification applies not only to existing conditions but future conditions as well;
d) The classification is applicable to all members of the same class.
5. (Principles of Taxation) The least source of our tax laws.
a. Statutes
c. Constitution
b. Court decisions
d. BIR rulings
6. (Principles of Taxation) 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.
The best test of rightful taxation is that proceeds of the tax must be used:
a) for the support of the government, or
b) for any of the recognized objects of government, or
c) to promote the welfare of the community
Instances of public purpose
a) Financing of educational activities and programs;
b) Promotion of science;
c) Erection and maintenance of roads, bridges and piers;
d) Aid for victims of a public calamity;
e) Relief of the poor and unemployed and to provide for unemployment benefits;
f) Payment of pensions and bonuses for services rendered by public officers and employees;
g) The construction of experimental stations to seek increases of efficiency in sugar production and the
improvement of living and working conditions in sugar mills or plantation.
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7.
(Principles of Taxation) Public money or property may be appropriated:
a. for the use, benefit or support of any sect, church, denomination, sectarian institution, or system of
religion.
b. for the use, benefit or support of any priest, preacher, minister, or other religious teachers, or
dignitary as such.
c. for the use, benefit or support of any priest, preacher, minister or dignitary assigned to the
armed forces, or to any penal institution, or government orphanage or leprosarium.
d. none of the choices.
No public money or property shall be appropriated, applied, paid or employed, directly or indirectly,
for the use, benefit or support of any sect, church, denomination, sectarian institution, or system of
religion, or of any priest, preacher, minister, or other religious teachers, or dignitary as such, except
when such priest, preacher, minister or dignitary is assigned to the armed forces, or to any penal
institution, or government orphanage or leprosarium [Art. VI, Sec. 29 (2)].
8.
(Principles of Taxation) A taxpayer gives the following reasons for refusing to pay a tax. Which of his
reasons is not acceptable for legally refusing to pay the tax?
a. That he has been deprived of due process of law.
b. That there is lack of territorial jurisdiction.
c. That the prescriptive period for the tax has elapsed.
d. That he will derive no benefit from the tax.
9. (Principles of Taxation) In case of ambiguity, tax laws shall be interpreted:
a. strictly against the taxpayer.
c. liberally in favor of the taxpayer.
b. liberally against the government.
d. liberally in favor of the government.
10. (Principles of Taxation) The City of Masbate passed an ordinance imposing a license fee on all motor vehicles
entering the city between the hours of 9:00 a.m. and 5:00 p.m. Owners of motor vehicles assailed the
validity of the law. Is the law valid?
a. Yes, because it was issued as a source of revenue.
b. Yes, because it is a legitimate exercise of police power.
c. No, because it discriminates against those who are not able to pay the license fee, particularly, the
low-salaried employees, and is, therefore, class legislation.
d. No, because it is not imposed by any other municipality,
TAX REMEDIES
11. (Tax Remedies) 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
In criminal tax cases involving tax offenses punishable under the Tax Code, prescription is construed
strictly against the taxpayer.
12. (Tax Remedies) Which of the following prescriptive period of assessment and collection falls under normal
or regular prescriptive period?
a. Taxpayer filed a return and the return filed is not false of fraudulent
b. Taxpayer failed to file a return
c. Taxpayer filed a false return with intent to evade tax
d. Taxpayer filed a fraudulent return with intent to evade tax
The following cases fall under exceptional prescriptive period of assessment and collection:
a. The taxpayer failed to file a return;
b. The taxpayer filed a false return with intent to evade tax;
c. The taxpayer filed a fraudulent return with intent to evade tax; or
d. The taxpayer and the Commissioner agreed in writing to waive the prescriptive period of
assessment of tax.
13. (Tax Remedies) What is the prescribed minimum percentage of compromise in case of doubtful validity of
the assessment?
a. 40% of the basic assessed tax
b. 30% of the basic assessed tax
c. 30% of the basic assessed tax
d. 10% of the basic assessed tax
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14. 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
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.
15. (Tax Remedies) An Internal Revenue Officer is allowed only how many days from the date of receipt of
an LA by the taxpayer to conduct the audit and submit the required report of investigation?
a. 30 days
c. 120 days
b. 60 days
d. 180 days
If the Revenue Officer is unable to submit his final report of investigation within 120-day period, he
must then submit a Progress Report to his Head of Office, and surrender the LA for revalidation.
16. (Tax Remedies) Which tax cases need not be covered by an LA?
I – Cases involving civil or criminal tax fraud which fall under the jurisdiction of the National Investigation
Division (NID) under the Enforcement and Advocacy Service (EAS) of the BIR
II – Policy cases under audit by the special teams in the National Office
a.
b.
Both I and II
Neither I nor II
c. I only
d. II only
17. (Tax Remedies) If the protest is denied, in whole or in part, by the Commissioner’s duly authorized
representative, the taxpayer may:
I - Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said
decision
II - Elevate his protest through request for reconsideration to the Commissioner within thirty (30) days
from date of receipt of the said decision
a. Either I or II
b. Neither I nor II
c. I only
d. II only
If the protest is denied, in whole or in part, by the Commissioner’s duly authorized
representative, the taxpayer may either:
1) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said
decision; or
2) elevate his protest through request for reconsideration to the Commissioner within thirty (30)
days from date of receipt of the said decision.
No request for reinvestigation shall be allowed in administrative appeal and only issues raised in the
decision of the Commissioner’s duly authorized representative shall be entertained by the
Commissioner.
18. (Tax Remedies) If the protest is not acted upon by the Commissioner’s duly authorized representative within
one hundred eighty (180) days counted from the date of filing of the protest in case of a request for
reconsideration; or from date of submission by the taxpayer of the required documents within sixty (60)
days from the date of filing of the protest in case of a request for reinvestigation, the taxpayer may:
I - Appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180) -day
period
II - Await the final decision of the Commissioner’s duly authorized representative on the disputed
assessment
a.
b.
Either I or II
Neither I nor II
c. I only
d. II only
If the protest is not acted upon by the Commissioner’s duly authorized representative within one hundred
eighty (180) days counted from the date of filing of the protest in case of a request for reconsideration;
or from date of submission by the taxpayer of the required documents within sixty (60) days from the
date of filing of the protest in case of a request for reinvestigation, the taxpayer may either:
1) appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180) day period; or
2) await the final decision of the Commissioner’s duly authorized representative on the disputed
assessment.
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If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by the
Commissioner, the taxpayer may appeal to the CTA within thirty (30) days from date of receipt of the
said decision. Otherwise, the assessment shall become final, executory and demandable.
A motion for reconsideration of the Commissioner’s denial of the protest or administrative appeal, as the
case may be, shall not toll the thirty (30)-day period to appeal to the CTA.
It must be emphasized, however, that in case of inaction on protested assessment within the 180-day
period, the option of the taxpayer to either file a petition for review with the CTA within 30 days after
the expiration of the 180-day period; or await the final decision of the Commissioner or his duly
authorized representative on the disputed assessment and appeal such final decision to the CTA within
30 days after the receipt of a copy of such decision, are mutually exclusive and the resort to one bars
the application of the other.
19.
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
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.
20. (Tax Remedies) A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001, she filed a
written claim for refund. Her claim was denied by the BIR and she received the denial on March 2002. She
filed a motion for reconsideration with the BIR on March 31, 2002. On April 18, 2002, she received the
final denial of the BIR. What will be the taxpayer’s remedy?
a. File another motion for reconsideration with the BIR within 30 days after the receipt of the final denial
b. File an appeal with the Court of Tax Appeals within 30 days after the receipt of the final denial
c. File an appeal with the Court of Tax Appeals within 15 days after the receipt of the final denial
d. The taxpayer has no more remedy against the final denial
The last day to appeal to the Court of Tax Appeals is April 15, 2002 which is within two (2) yeas from
the date of payment of tax.
Claims for refund must be elevated to the CTA before the expiration of the two-year period because the
prescriptive period will not be suspended regardless of any supervening event.
21. (Tax Remedies) First statement: Within three (3) years from the date of filing of any return, statement or
declaration, the same may be modified, changed, or amended.
Second statement: The modification, change or amendment to any return, statement of declaration filed
is allowed if no notice for audit or investigation of such return, statement or declaration has in the meantime
been actually served upon the taxpayer.
a. Both statements are correct
c. Only the first statement is correct
b. Both statements are incorrect
d. Only the second statement is correct
22. (Tax Remedies) First statement: The CTA may sit en banc or in three (3) Divisions, each Division consisting
of three (3) Justices.
Second statement: Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices
for session of a Division.
a. Both statements are correct
c. Only the first statement is correct
b. Both statements are incorrect
d. Only the second statement is correct
23. (Tax Remedies) The seizure by the Government of personal property to be sold in a public sale to enforce
payment of taxes that are not voluntarily paid is called:
a. distraint.
c. forfeiture.
b. levy.
d. lien.
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Batch 43 – May 2022 CPALE Licensure Examination
INCOME TAX
(Income Tax) 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 ta xable year has exceeded the VAT threshold.
First quarter
Second quarter
Third quarter
Fourth 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
24. How much is income tax payable for the final return?
a. P574,000
b. P560,000
Total gross sales
Less: Cost of sales
Gross income
Less: Operating expenses
Taxable income
Tax due Sec. 24 (A)
2,000,000
950,000 x 32%
Less: 8% income tax payments, first 3 quarters
Tax payable
c. P340,000
d. None of the choices
P7,000,000
3,000,000
4,000,000
1,050,000
2,950,000
490,000
304,000
P 794,000
220,000
P 574,000
25 to 28 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 2021. 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. The total assets of the partnership is
P110,000,000.
25. How much is the taxable income of the partnership?
a. P5,750,000
c. P5,550,000
b. P5,570,000
d. None of the choices
Gross sales
Less: Cost of sales
Gross income
Less: Interest expense
Reduction (20% x 100,000)
Other operating expenses
Taxable income
26.
P10,000,000
2,750,000
7,250,000
200,000
(20,000)
(180,000)
(1,500,000)
P5,570,000
How much is the income tax liability of the partnership?
a.
b.
P1,725,000
P1,392,500
c.
d.
P1,665,000
None of the choices
Taxable income
Tax rate
Tax due
P5,570,000
25%
P1,392,500
For domestic corporation, effective July 1, 2020, the corporate income tax rate is 25%, However, it is
20% if the net taxable income does not exceed P5,000,000 AND total assets does not exceed
P100,000,000)
27. How much is the share in the partnership income of partner mark Tang?
a. P1,068,750
c. P 978,775
b. P1,087,625
d. None of the choices
Taxable income of the partnership
Less: Income tax
Net income after tax
Add: Interest income, net of final tax (200,000 – (200,000 x 20%)
Distributable net income
Mark Tang’s interest in the partnership
Partner’s interest in the partnership’s distributable income
P5,583,000
1,392,500
4,190,500
160,000
4,350,500
25%
P1,087,625
28. 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. P1,087,500
d. None of the choices
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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
29.
P10,000,000
2,750,000
7,250,000
2,900,000
4,350,000
25%
P1,087,500
Starting July 1, 2020, resident foreign corporations the taxable income and total assets of which do not
exceed P5,000,0000 and P100,000,000 respectively shall be taxed at:
a. 30%
c. 20%
b. 25%
d. 10%
For Non-Resident Foreign Corporation the income tax rate is 25% effective January 1, 2021.
30. (Income Tax) An international carrier doing business in the Philippines shall pay an income tax of:
a. three percent (3%) on its gross receipts.
b. two and one-half percent (2½%) on its ‘Gross Philippine Billings.’
c. two percent (2%) on its ‘Gross Philippine Billings.’
d. one and one-half percent (1½%) on its gross receipts.
In computing for “Gross Philippine Billings” of international air carriers, there shall be included the
total amount of gross revenue derived from passage of persons, excess baggage, 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.
31. (Income Tax) (Phil. CPA Adapted) Which of the following statements is incorrect?
a. Resident foreign corporations are subject to income tax based on net income from sources within
the Philippines.
b. Domestic corporations are subject to income tax based on net income from all sources.
c. Nonresident foreign corporations are subject to income tax based on gross income from sources
within the Philippines.
d. Private educational corporations are subject to income tax based on the net income
from sources within the Philippines at the tax rate of 1%.
It will be back to 10% starting July 1, 2023. If income from unrelated business exceeds 50%, the tax rate
shall be 20% or 25%
32.
For income
a.
b.
c.
d.
tax purposes, the term “corporation” shall include all the following except:
One person corporation
Partnerships no matter how created or organized
Joint-stock companies
General professional partnerships
The term “corporation” shall include one-person corporations, partnerships, no matter how created or
organized, joint stock companies, joint accounts (cuentas en participacion), associations, or insurance
companies, but does not include general professional partnerships and a joint venture or consortium
formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal
and other energy operations pursuant to an operating or consortium agreement under a service contract
with the Government.
33. (Income Tax) Which of the following will constitute a taxable income?
a. Prize won in an essay contest the recipient joined
b. The Nobel Peace Prize
c.
Prize won as most valuable amateur player in an international sports competition
d. Award not exceeding the amount set by law for being a model employee
34. (Income Tax) During an unusually strong typhoon in 2012, a warehouse was destroyed. The owner filed a
claim of P1,000,000, the book value of the warehouse, against the insurance company. The insurance
company was willing to pay P600,000. Finally, the claim was settled in 2014 for P750,000, the insurance
company paying that amount in the same year.
When would the loss of P250,000 be deductible?
a. 2012
c. 2014
b. 2013
d. None of the choices
The loss could not be deducted in 2012 inasmuch as there was still a controversy as to the amount of
the damage to be paid by the insurance company. It was only in 2014 that the transaction was closed
and completed and the actual loss finally ascertained and fixed.
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35. (Income Tax) In 2018, Mr. Kenneth Lim owns a nightclub and videoke bar, with gross
sales/receipts of P2,500,000.00. His cost of sales and operating expenses are P1.000,000.00
and P600,000.00, respectively, and with non-operating income of P100,000.00.
Question 1 – Can Mr. Lim have an option to avail of the 8% income tax rate?
a. Yes, because his gross sales/receipts do not exceed the VAT threshold.
b. No, because his business income is subject to Other Percentage Tax under
Section 125 of the Tax Code, as amended.
c. Yes, because individual taxpayers are always given the option to be taxed at 8% income
tax rate.
d. No, because he is not VAT-registered.
The taxpayer is subject to 18% amusement tax under Section 125 of the Tax Code based on
gross receipts (2,500,000 x 18% = P 450,000)
Question 2 – How much is the income tax due?
a. P200,000
b. P190,000
Gross sales/receipts
Less: Cost of sales
Gross income
Less: Operating expenses
Net income from operation
Add: Non-operating income
Taxable business income
Total taxable income
Tax due
800,000
200,000 x 30%
c. P120,000
d. None of the choices
P 2,500,000
1,000,000
1,500,000
600,000
900,000
100,000
P 1,000,000
130,000
60,000
P
190,000
36 to 38 (Income Tax) 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, 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.
36. 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.
Unless the taxpayer signifies in the 1 st Quarter Return of the taxable year the intention to elect the 8%
income tax, the taxpayer shall be considered as having availed of the graduated rates under Section 24(A)
of the Tax Code, as amended, and such election shall be irrevocable. He shall also be liable to business tax.
The following cannot avail of the 8% income tax rate option:
a. A VAT-registered taxpayer, regardless of the gross sales/receipts
b. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended,
except those subject under Section 116 of the same Title
c. Partners of a General Professional Partnership (GPP) by virtue of their distributive share from GPP
which is already net of cost and expenses
The taxpayer is subject to 12% VAT based on her gross sales (P3,000,000 - 300,000 - 150,000 =
2,550,000 x 12% = P306,000)
37. How much is her total taxable income?
a. P2,913,500
b. P2,550,000
Page 7 of 23
c. P2,464,500
d. None of the choices
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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
38. How much is her tax due when she files her final tax return?
a. P338,640
b. P366,000
Total taxable income
Tax due Sec. 24 (A) 2,000,000
464,500 x 32%
Less: Payments, first 3 quarters
Tax payable
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
c. P482,320
d. None of the choices
P2,464,500
490,000
148,640
P 638,640
300,000
P 338,640
39. (Income Tax) A purely self-employed individual’s gross sales/receipts and other non-operating income do not
exceed the VAT threshold.
Case 1 – He signified his intention to avail of the 8% income tax rate on his first quarter return, he will
pay:
a. income tax on gross sales/receipts and other non-operating income in excess of P250,000 and
the percentage tax under Section 116
b. income tax on gross sales/receipts and other non-operating income in excess of
P250,000 in lieu of graduated tax rates and percentage under Section 116
c. income tax on gross sales/receipts excluding non-operating income in excess of P250,000 in lieu
of graduated tax rates and percentage under Section 116
d. percentage tax under Section 116 only in lieu of income tax.
Case 2 – He failed to signify his intention to avail of the 8% income tax rate on his first quarter return, he
will pay:
a. income tax based on graduated income tax rates and percentage tax under Section 116
if not VAT-registered
b. income tax on based on graduated income tax rates only.
c. income tax on gross sales/receipts excluding non-operating income in excess of P250,000 in lieu
of graduated tax rates and percentage under Section 116
d. Percentage tax under Section 116 only in lieu of income tax.
40. (Income Tax) Under the TRAIN, the income tax due from compensation income is:
a. based on graduated income tax rates under Section 24 (A)
b. 8% income tax rate on gross sales/receipts and other non-operating income in excess of
P250,000.
c. either graduated income tax rate or 8% income tax rate on gross sales/receipts and other nonoperating income in excess of P250,000.
d. Based on taxable income after deducting expenses and exemptions.
41. (Income Tax) Under the TRAIN, Philippine Charity Sweepstakes and Lotto winnings received by residents or
citizens shall be:
a. exempt from income tax.
b. subject to 20% final tax except Ten thousand pesos (P10,000) or less from
Philippine Charity Sweepstakes and Lotto which shall be exempt.
c. subject to 20% final tax without exception.
d. subject to 20% final tax if less than Ten thousand pesos (P10,000).
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42. (Income Tax) 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).
43. (Income Tax) First statement: On or before the end of the calendar year but prior to the payment of the
compensation for the last payroll period, the employer shall determine the tax due from each employee on
taxable compensation income for the entire taxable year in accordance with Section 24(A).
Second statement: The difference between the tax due from the employee for the entire year and the sum of
taxes withheld from January to November shall either be withheld from his salary in December of the current
calendar year or refunded to the employee not later than January 25 of the succeeding year.
a.
b.
c.
d.
Both statements are correct
Both statements are incorrect
Only the first statement is correct
Only the second statement is correct
44. (Income Tax) Which of the following statements is incorrect?
a. Considering that taxes withheld by the withholding agents are held in trust for the government
and its availability is an imperious necessity to ensure sufficient cash inflow to the National
Treasury, withholding agents shall file BIR Monthly Remittance Form (BIR Form No. 0619E and/or
0619F) every tenth (10th) day of the following month when the withholding is made, regardless
of the amount withheld.
b. For withholding agents using EFPS facility, the due date is on the fifteenth (15 th) day of the
following month.
c. Withholding agents with zero remittance are not required to use and file the same
Monthly Remittance Form.
d. None of the choices
Withholding agents with zero remittance are still required to use and file the same Monthly Remittance
Form.
For purposes of withholding tax remittance, the quarter shall follow the calendar quarter, e.g., for taxes
withheld during the quarter ending March 31, the same shall be remitted by the withholding agent on
or before April 30.
45. (Income Tax) The books of account
the gross quarterly sales, earnings,
a. P5,000,000
b. P3,000,000
are required to be audited and examined yearly by an independent CPA if
receipts or output exceed:
c. P2,500,000
d. P1,500,000
46. (Income Tax) For income tax purposes, the examination and inspection of the books of account and records
shall be made only once in a taxable year except when:
a. Fraud, irregularity or mistakes, as determined by the Commissioner
b. The taxpayer requests reinvestigation
c. Verification of compliance with withholding tax laws and regulations
d. All of the choices
47. (Income Tax) Receipt or invoice is issued, at least in duplicate, at the time the transaction is effected for
each sale or transfer of merchandise or for services rendered valued at:
a. P 50 or more.
c. P200 or more.
b. P100 or more.
d. P250 or more.
48. (Income Tax) Mr. Emilio Nario contributed campaign fund money to a political party. The political party duly
reported to the COMELEC the campaign contributions and were fully utilized during the campaign.
First statement: The campaign contribution of the donor is not subject to donor’s tax.
Second statement: The campaign contribution is not taxable to the political party.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
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As a general rule, campaign contributions are not included in the taxable income of the candidate to
whom they were given, the reason being that such contributions were given not for personal
expenditure or enrichment of the concerned candidate b u for the purpose of utilizing such contributions
for his or her campaign.
Thus, to be considered as exempt from income tax, these campaign contributions must have been
utilized to cover a candidate’s expenditures for his/her electoral campaign.
Unutilized or excess campaign funds, net of the candidate’s campaign expenditures, shall be subject to
income tax, and as such, must be included in the candidate’s taxable income in his/her Income Tax
Return (ITR) filed for the subject taxable year.
Any candidate, winning or losing who fails to file with the COMELEC the appropriated Statement of
Expenditures required under the Omnibus Election Code shall be automatically precluded from claiming
such expenditures as deductions from his/her campaign contributions. As such, the entire amount of
such campaign contributions shall be considered as directly subject to income tax.
TRANSFER TAXES
49. (Transfer Taxes) Mr. X died. He was survived by his wife and children. The couple had exclusive and
common properties. The gross estate of Mr. X would include:
a. common and capital properties.
b. common and paraphernal properties.
c. common, capital and paraphernal properties.
d. common properties only.
The capital of the surviving spouse of a decedent shall not, for the purpose of estate tax, be deemed
part of his or her gross estate.
50. (Transfer Taxes) In the absence of a marriage settlement, or when the regime agreed upon is void, the
property relations of the spouses who married before August 3, 1988 shall be governed by:
a. conjugal partnership of gains.
b. absolute community of properties.
c. complete separation of properties.
d. none of the choices.
51. (Transfer Taxes) A resident citizen had a family home in the Philippines. He worked abroad and was
temporarily absent from his family home when he died in 2018. The executor of the estate inquired from you
whether or not to claim family home deduction from the gross estate for Philippine estate tax purposes. What
would you tell him?
a. The estate would not be allowed family home deduction because he was abroad when he died.
b. The estate would not be allowed family home deduction because he was a non-resident citizen when
he died.
c. The estate would be allowed family home deduction of P10,000,000 because actual
occupancy of the family home was not interrupted or abandoned because of his temporary
absence.
d. The estate would be allowed family home deduction of P1,000,000 because all decedents were
allowed family home deduction.
52. (Transfer Taxes) Under the TRAIN, the estate tax rate is:
a. 6% based on net estate with P250,000 exemption.
b. 6% based on net estate with no exempt amount.
c. 8% based on gross estate.
d. graduated tax rates with P200,000 exemption.
53. (Transfer Taxes) The net fruits as well as the income received during the marriage from the exclusive
properties of the spouses are classified as:
I – conjugal properties under conjugal partnership of gains.
II – community properties under absolute community of properties.
a. Only I is correct
c. Both I and II are correct
b. Only II is correct
d. Both I and II are incorrect
Conjugal partnership of
Absolute community of
gains
property
Property owned before marriage brought
into the marriage
Exclusive
Community
Income received from exclusive property
during the marriage
Exclusive
Community
Properties received as gifts or inheritance
Exclusive
Exclusive unless
during the marriage
specifically provided by
the donor, testator or
grantor that they shall
form part of the
community
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54. (Transfer Taxes) 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.
How much was the vanishing deduction?
a. P 225,000
b. P 108,333
c. P 102,900
d. P 100,000
Value to take
Less: Mortgage paid
Initial basis
Less: Proportional deduction
(P630,000/P1,800,000 X P330,000)
Final basis
Rate
Vanishing deduction
P 650,000
20,000
630,000
115,500
514,500
20%
P 102,900
55. (Transfer Taxes) Under the TRAIN Law, the estate tax return shall be supported with a statement duly
certified to by a Certified Public Account is the it shows a gross value:
a. of P5,000,000 or more.
c. exceeding P2,000,000
b. exceeding P5,000,000.
d. exceeding P200,000
56. (Transfer Taxes) In case the available cash of the estate is insufficient to pay the total estate tax due,
payment by installment shall be allowed:
a. within two (2) years from the statutory date for its payment without civil penalty and
interest.
b. within two (2) years from the statutory date for its payment with civil penalty and interest.
c. within one (1) year from the statutory date for its payment without civil penalty and interest.
d. within six (6) months from the statutory date for its payment without civil penalty and interest.
57. (Transfer Taxes)Under the TRAIN Law, the donor’s tax rate is:
a. 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 whether
the donee is a relative or a stranger.
b. 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 where the donee is a relative.
c. six percent (6%) computed on the basis of the total gifts without exemption made during the
calendar year when the donee is a stranger
d. six percent (6%) computed on the basis of the total gifts in excess of One hundred thousand
pesos (P100,000) exempt gift made during the calendar year whether the donee is a relative or a
stranger
58. (Transfer Taxes) 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 and therefore:
a. subject to donor’s tax.
b. not subject to donor’s tax.
c. subject to estate tax.
d. Choice not given.
59. (Transfer Taxes) When an indebtedness is cancelled without any service rendered by the debtor in favor of
the creditor, the forgiveness of debt will result to:
a. taxable income.
b. distribution of dividend.
c. taxable indirect donation.
d. taxable estate.
60. (Transfer Taxes) A client asked you whether or not to add the gifts made in the previous year to the gifts
made in the current year. What would your answer be?
a. The gifts made in the previous year should not be added to the gifts made in the current
year because the computation of the taxable net gifts is cumulative basis over a period of
one calendar year.
b. The gifts made in the previous year should be added to the gifts made in the current year because
the computation of the taxable net gifts is cumulative basis over several calendar years.
c. The gifts made in the previous year should not be added to the gifts made in the current year because
the BIR would have no way of knowing them anyway.
d. The gifts made in the previous year should be added to the gifts made in the current year so that the
progressive effect of donor’s tax will be felt.
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61. (Transfer Taxes) Mr. Gerardo Ireneo transfers inter vivos a personal property to his son on March 15, 2016.
His son who lives in another province let his father know that he is accepting the gift on March 31, 2016.
The personal property was delivered and received on April 15, 2016. When shall be the last day to file the
donor’s tax return and pay the donor’s tax?
a. April 14, 2016
c. May 15, 2016
b. April 30, 2016
d. None of the choices
The donor’s tax shall not apply unless and until there is a completed gift. 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. Thus, the law in
force at the time of the perfection or completion of the donation shall govern the imposition of the
donor’s tax.
62. (Transfer Taxes) A resident citizen has a property situated in Quezon City. His legal residence is in Masbate
City. While in Cebu City on a business trip, he donated his property situated in Quezon City to a relative
who is long-time resident of Cebu City. Where will the donor file the donor’s tax return?
a. Quezon City
c. Masbate City
b. Cebu City
d. Any of the three cities
Except in cases where the Commissioner otherwise permits, the return shall be filed and the tax paid
to an authorized agent bank, the Revenue District Officer, Revenue Collection Officer or duly
authorized Treasurer of the city or municipality where the donor was domiciled at the time of the
transfer, or if there be no legal residence in the Philippines, with the Office of the Commissioner.
63.
(Transfer Taxes) The decedent is a married man with a surviving spouse with the following data dies on
January 1, 2018:
Conjugal real and personal properties
P14,000,000
Conjugal family home
9,000,000
Exclusive properties
5,000,000
Conjugal ordinary deductions (including P200,000 funeral
expenses and P100,000 judicial expenses)
2,300,000
Medical expenses
500,000
The taxable net estate is:
a. P26,000,000.
b. P16,500,000.
c.P 6,000,000.
d.P 500,000.
Gross estate
Less: Deductions
Net estate before special deductions
Less: Special deductions
Family home (1/2)
Maximum
Standard deduction
Net estate after special deductions
Less: Share of surviving spouse
(1/2 x 21,000,000*)
Net taxable estate
Exclusive
P5,000,000
5,000,000
Common
P23,000,000
(2,000,000)
21,000,000*
4,500,000
10,000,000
Total
P28,000,000
(2,000,000)
26,000,000
(4,500,000)
(5,000,000)
16,500,000
(10,500,000)
P 6,000,000
64. (Transfer Taxes) (Phil. CPA Modified) Jose made the following gifts:
a. On June 1, 2017, P150,000 to Anton, his son, on account of his marriage celebrated May 1, 2017;
b. On July 10, 2017, a parcel of land worth P180,000 to his father, subject to the condition that his
father would assume the mortgage indebtedness of Jose in the amount of P40,000;
c. On September 30, 2018, P250,000 dowry to his daughter Dana, on account of her scheduled
marriage on October 25, 2018, and another wedding gift worth P120,000 on November 23, 2018.
How much were the total net gifts subject to tax as of November 23, 2018?
a. P370,000
c. P120,000
b. P250,000
d. None of the choices
Gross gift, November 23, 2018
Add: Prior gift, September 30, 2018
Total taxable gifts, November 23, 2018
Less: Exempt gift
Total net gift subject to tax
P 120,000
250,000
P 370,000
250,000
P120,000
BUSINESS TAXES
65. Beginning January 1, 2021, the VAT exemption shall apply to the following, except which one?
a. sale of real properties not primarily held for sale to customers or held for lease in the ordinary course
of trade or business
b. sale of real property utilized for socialized housing
c. sale of house and lot, and other residential dwellings with selling price of not more than Two
million pesos (P2,000,000)
d. sale of residential lot valued at Two million five hundred thousand pesos (P2,500,000)
and below
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66. (Business Taxes) This refers to any person who is required to register under the provisions of the Tax Code
but failed to register.
a. VAT-registered person
c. VAT-exempt person
b. VAT-registrable person
d. None of the choices
67. (Business Taxes) This refers to transactions in certain goods, properties, or services which are not subject
to value-added tax, even if such goods, properties or services are sold by a VAT-registered person, and
regardless of the annual gross sales or receipts derived therefrom.
a. Transaction-specific exemption
b. Entity-specific exemption
c. Implied exemption
d. Exemption by tokenism
68. (Business Taxes) Kris Company, service provider, presented to you the following income statement in line
with the same company’s audit of the financial statements:
KRIS COMPANY
INCOME STATEMENT
For the Year Ended December 31, 2018
Sales
Cost of Goods Sold
Gross profit
Operating expenses:
Selling
Administrative
Net income
P10,350,000
7,050,000
P3,300,000
P675,000
1,050,000
1,725,000
P1,575,000
Your audit disclosed the following information:
•
Accounts receivable decreased P540,000 during the year.
•
Prepaid expenses increased P255,000 during the year.
•
Accounts payable to suppliers of merchandise decreased P412,500 during the year.
•
Accrued expenses payable decreased P150,000 during the year.
•
Administrative expenses include depreciation expense of P90,000.
•
Inventories decreased by P450,000.
Question 1 - What is the total amount of cash received from customers during the year?
a.
P10,980,000
c. P10,350,000
b.
P10,477,500
d. None of the choices
Sales, accrual basis
Add: Decrease in accounts receivable
Amount of cash received
Question 2 – How much is output tax?
a.
P1,306,800
b.
P1,257,300
Amount of cash received
Tax rate
Output tax
P10,350,000.00
540,000.00
P10,890,000.00
c.
d.
P1,242,000
P1,177,200
P10,890,000.00
12%
P 1,306,800.00
Question 3 - What is the total basis of input tax on supplies and operating expenses (purchase of services)
during the year?
a.
P9,052,500
c. P7,012,500
b.
P8,640,000
d. None of the choices
Cost of sales
Less: Decrease in inventory
Purchases of goods, accrual basis
P7,050,000.00
450,000.00
Total operating expenses, accrual basis
Add (Deduct):
Increase in prepaid expenses
Decrease in accrued expense
Depreciation expense (non-cash expense)
Cash payments for purchase of services
Total
P1,725,000.00
P6,600,000.00
255,000.00
150,000.00
( 90,000.00)
2,040,000.00
P8,640,000.00
Question 4 - What is the input tax during the year?
a.
P1,086,300
c. P841,500
b.
P1,036,800
d. None of the choices
Total
Tax rate
Input taxes
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P8,640,000.00
12%
P1,036,800.00
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Question 5 – Assuming the taxpayer is seller of goods, how much is the output tax for the year?
a.
P1,306,800
c. P1,242,000
b.
P1,257,300
d. None of the choices
Sales, accrual basis
Tax rate
Output tax
P10,350,000
12%
P 1,242,000
69. (Business Taxes) Ms. Consuelo Dimagulo receives a package of goods from her sister who lives in California,
United States of America. Ms. Consuelo will use the goods for personal purposes. She is not VAT-registered.
Which of the following statements is correct in connection with the receipt of a package?
a. Ms. Consuelo shall be subject to VAT on importation.
b. Ms. Consuelo shall not be subject to VAT on importation because she is not VAT-registered.
c. Ms. Consuelo shall not be subject to VAT on importation but shall be subject to VAT on sales.
d. None of the choices.
70. (Business Taxes) Any person who elects to optionally register under the VAT system, other than franchise
grantees of radio and/or television broadcasting, shall not be allowed to cancel his registration for the next:
a. 5 years.
c. 2 years.
b. 3 years.
d. 1 year.
71. (Business Taxes) Which of the following transactions in the course of trade or business requires actual
payment of VAT before an input tax is allowed as tax credit from the output tax?
a. Purchase of services
b. Transactions deemed sale
c. Domestic purchase of goods for use as raw materials supplied in the sale of services
d. Domestic purchase of goods for use in trade or business for which deduction for depreciation or
amortization is allowed under the Tax Code
72. (Business Taxes) A VAT-registered domestic carrier operating air, land and sea transport equipment acquired
vehicles for use in its operation to transport goods and cargoes. The domestic carrier:
a. can claim input taxes on the said acquisitions.
b. cannot claim input taxes on the said acquisitions.
c. can claim input taxes only on the acquisitions of air and sea transport vehicles.
d. can claim input taxes only on the acquisition of land transport vehicles.
No depreciation (and input taxes) shall be allowed for yachts, helicopters, airplanes and/or aircrafts,
and land vehicles which exceed P2,400,000, 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.
(Sec. 3 C, Revenue Regulations No. 12-2012)
73. (Business Taxes) Starting January 1, 2018, in proper cases, the Commissioner of Internal Revenue shall
grant a tax credit certificate or refund for creditable input taxes within how many days from the date of
submission of complete documents in support of the application filed?
a. 130 days
c. 120 days
b. 125 days
d. 90 days
74. (Business Taxes) If the input tax inclusive of input tax carried over from the previous quarter exceeds the
output tax, the excess input tax shall be:
a. credited in every quarter but not to exceed seventy percent (70%) of the output tax.
b. carried over to the succeeding quarter or quarters.
c. disregarded because carry over is no longer allowed under the new regulations.
d. deducted from income tax due.
75. (Business Taxes) An export sale of orchids and other ornamental plants of a VAT-registered person is:
a. subject to 12% VAT.
c. exempt from VAT.
b. subject to 0% VAT.
d. none of the choices
Orchids and other ornamental plants are agricultural non-food products and therefore subject to
12% VAT, hence, exports shall be zero-rated.
76. (Business Taxes) Ihaw-Ihaw sa Kanto sells roasted chicken to customers who eat inside its restaurant and
to those who take out the roasted chicken.
Fist statement: The sale of roasted chicken to customers who eat in its restaurant is subject to VAT.
Second statement: The sale of roasted chicken to customers who take them out is exempt from VAT.
a.
b.
c.
d.
Only the first statement is correct.
Only the second statement is correct.
Both statements are incorrect.
Both statements are correct.
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77 to 80 are based on the following: (Business Taxes) ECB, non-VAT registered lessor of residential and
commercial units had the following data for the first and second quarters of 2018:
First
quarter
Gross receipts from lease of residential units
With monthly rental of P13,000 per unit
With monthly rental of P18,000 per unit
Gross receipts from lease of commercial units
Input tax paid from VAT suppliers
P2,500,000
1,000,000
2,300,000
150,000
Second
quarter
P2,300,000
1,200,000
2,400,000
120,000
77. How much is the business tax of ECB for the first quarter?
a.
P396,000
c. P174,000
b.
P246,000
d. P 99,000
78. How much is the business tax of ECB for the first quarter?
a. P708,000
c. P312,000
b. P432,000
d. P108,000
79. How much is the business tax of ECB for the second quarter of 2018 assuming he registered as a VAT
taxpayer at the start of the second quarter 2018?
a. P708,000
c. P432,000
b. P588,000
d. P312,000
80. Assuming ECB is VAT-registered taxpayer instead of Non-VAT registered taxpayer, how much is the
business tax due for the first quarter of 2018?
a. P696,000
c. P396,000
b. P546,000
d. P246,000
77. A
Gross receipts from lease of residential unit with 18,000 monthly rental
Gross receipts from lease of commercial units
Total (exceeds VAT threshold of 3,000,000)
Tax rate
Output VAT
1,000,000
2,300,000
3,300,000
12%
396,000
78. B
Gross receipts from lease of residential unit with 18,000 monthly rental
Gross receipts from lease of commercial units
Total
Tax rate
Output VAT
1,200,000
2,400,000
3,600,000
12%
432,000
79. D
Gross receipts from lease of residential unit with 18,000 monthly rental
Gross receipts from lease of commercial units
Total
Tax rate
Output VAT
Less: Input tax
VAT due
1,200,000
2,400,000
3,600,000
12%
432,000
120,000
312,000
80. D
Gross receipts from lease of residential unit with 18,000 monthly rental
Gross receipts from lease of commercial units
Total
Tax rate
Output VAT
Less: Input tax
VAT due
1,000,000
2,300,000
3,300,000
12%
396,000
150,000
246,000
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81 to 84 are based on the following: Inlabada, VAT-registered company is engaged in the laundry business.
During the first quarter of 2018, the following information were made available:
Net revenue, first quarter 2018
P1,000,000
Receivables from customers, January 1, 2018
224,000
Receivables from customers, March 31, 2018
336,000
Creditable withholding VAT, first quarter 2018
5,000
VAT purchases other than capital goods, first quarter 2018
300,000
VAT purchases, capital goods, first quarter 2018 (all in January 2018)
1,200,000
Receivable balances are all income related and are exclusive of VAT. Revenue and purchases are VAT exclusive.
Capital goods are estimated to have a useful life of 10 years.
81. Compute item 19B (Output tax) of BIR Form No. 2550Q
a. P132,000
c. P108,000
b. P120,000
d. P106,560
82. Compute item 22 (Total available input tax) of BIR Form No. 2550Q
a. P185,000
c. P43,200
b. P180,000
d. P36,000
83. Compute the deferred input tax as of March 31, 2018?
a. P141,600
c. P136,800
b. P140,400
d. None
84. Compute item 23C (Input tax allocated to exempt sales) of BIR Form No. 2550Q
a. P13,000 closed to expense
b. P11,000 closed to expense
c. P2,200 closed to income
d. None of the choices
81. D
Receivables, January 1, 2018 (224,000 – 24,000)
Add: Revenue, first quarter 2018
Total
Less: Receivables, March 31, 2018 (336,000 – 36,000)
Gross receipts
Tax rate
Output tax (Item 19B)
82. C
Input tax on VAT purchases other than capital goods, first quarter
Input tax on VAT purchases, capital goods, first quarter 2018
(all in January 2018)
(1,200,000 x 12% = 144,000 divided by 60 x 3)
Total available input taxes (Line 22)
2018 (300,000 x 12%)
83. D
Output tax (Line 19B)
Total available input taxes (Line 22)
Net VAT payable
Less: Creditable VAT withheld
VAT payable/(Overpayment)
P 200,000
1,000,000
1,200,000
300,000
900,000
12%
P108,000
P 36,000
7,200
P 43,200
P106,560
43,200
63,360
5,000
P58,360
85. Effective July 1, 2020 until June 30, 2023, the percentage tax rate on Persons Exempt from VAT shall be:
a. 5%
c. 2%
b. 3%
d. 1%
86. (Business Taxes) 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
87. (Business Taxes) Stinging Bee Tony is a Filipino world boxing champion. He will defend his crown in Manila
against the Thai challenger, Fermin Buntonghininga. The boxing exhibition is promoted by Nginateng
Promotions wholly owned by Filipinos. You are asked by the promoters whether or not the boxing exhibition
shall be subject to amusement tax in the Philippines. What will your answer be?
a. The boxing exhibition is subject to Philippine amusement tax because only one of the contenders
is a Filipino.
b. The boxing exhibition is subject to Philippine VAT because boxing involves professional boxers
rendering service using physical faculty.
c. The boxing exhibition is not subject to Philippine amusement tax because one of the
contenders is a Filipino, involves world championship and is promoted by a corporation
wholly owned by Filipinos.
d. The boxing exhibition is not subject to Philippine amusement tax if a special law is passed
exempting such exhibition from the tax.
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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.
88. (Business Taxes) An individual taxpayer holds shares of stock as investment which he bought from a
publicly-listed company for P500,000. The shares are listed and traded in the local stock exchange but the
corporation is not compliant with the mandatory minimum public ownership. He sold them for P750,000.
To what tax shall the gain be subject?
a. ½ of 1% percentage tax
b. Capital gains tax
c. Value-added tax
d. Not subject to any tax
89. (Business Taxes) Which of the following is incorrect? The percentage tax is:
a. a tax on a sale of sale of services.
b. imposed on a sale of goods.
c. imposed together with the value-added tax.
d. imposed together with the excise tax.
90. (Business Taxes) It shall be the duty of every stock broker who effected the sale subject to the tax
imposed under Section 127 (A) to collect the tax and remit the same within:
a. twenty (20) days after the end of the quarter.
b. ten (10) working days after the end of the month.
c. five (5) days from the date of collection.
d. five (5) banking days from the date of collection.
91. (Business Taxes) In 2018, Hope, a dealer in securities, sells P1,500,000 worth of shares she holds as
investment. The shares sold are acquired for P1,400,000 and are listed and traded in the local stock
exchange. How much is the business tax due on the sale?
a. P 12,000
c. P7,500
b. P 9,000
d. None
Gross selling price
Tax rate
P 1,500,000
.006
Stock transactions tax
P
9,000
While the seller is a dealer in securities, the shares sold are held by her as investment and not as
inventories. Hence, the sale is subject to stock transactions tax. If the shares sold are held as
inventories, the transaction shall be subject to value-added tax.
Before January 1, 2018, the rate was ½ of 1%.
92 to 94 (Business Taxes) A domestic common carrier with Certificate of Public Convenience (CPC) has the
following data for the year 2018:
Gross receipts
P3,000,000
Cost of services
1,000,000
Operating expenses
500,000
92. Assuming the domestic common carrier is by land, how much is the common carrier’s tax?
a. P90,000
c. P45,000
b. P60,000
d. None of the choices
Gross receipts
Tax rate
Common carrier’s tax
P3,000,000
__
3%
P 90,000
93. Assuming the domestic common carrier is by air, VAT-registered, how much is the Value-Added Tax?
a. P360,000
c. Not subject to VAT
b. P240,000
d. None of the choices
Gross receipts
P3,000,000
Tax rate
12%
Value-added tax
P 360,000
94. Assuming the entity is allowed to transport passenger but does not have a CPC, how much is the
percentage tax, if any?
a. P90,000
c. P45,000
b. P60,000
d. None of the choices
Gross receipts
Tax rate
Common carrier’s tax
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P3,000,000
3%
P 90,000
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95. (Additions to Tax) Mr. A has been assessed deficiency income tax of P1,000,000, exclusive of interest and
surcharge, for taxable year 2018. The tax liability has remained unpaid despite the lapse of June 30, 2020,
the deadline for payment stated in the notice and demand issued by the Commissioner. Payment was made
by the taxpayer on February 10, 2021. How much is the total amount due on February 10, 2021?
a. P1,498,530.15
c. P1,103,215.08
b. P1,395,315.07
d. None of the choices
Basic tax due (income tax)
P1,000,000.00
Add: 25% surcharge for late payment
(25% x 1,000,000)
250,000.00
Interest on deficiency from April 16, 2019 to June 30, 2020
(1,000,000 x 12% x 442/365 days)
145,315.07
395,315.07
Total amount due, June 30, 2020
1,395,315.07
Add: Interest on delinquency from July 1, 2020 to February 10, 2021
(1,395,315.07 x 12% x 225/365 days)
103,215.08
Total amount due, February 10, 2021
P1,498,530.15
Upon the effectivity of the TRAIN Law, in no case shall the deficiency and delinquency interest prescribed
be imposed simultaneously.
96. (Additions to Tax) X Company has been assessed deficiency income tax of P1,000,000, exclusive of interest
and surcharge, for taxable year 2015. The tax liability has remained unpaid despite the lapse of June 30,
2017, the deadline for payment stated in the notice and demand issued by the Commissioner. Payment was
made by the taxpayer only on February 10, 2018. How much is the total amount due on February 10, 2018?
a. P1,762,962.67
c. P1,491,643.83
b. P1,662,140.76
d. None of the choices
Basic tax due (income tax)
Add: 25% surcharge for late payment (25% x 1,000,000)
Interest on deficiency from April 16, 2016 to June 30, 2017
(1,000,000 x 20% x 441/365 days)
Total amount due, June 30, 2017
Add: 20% interest on deficiency from July 1, 2017 to December 31,
2017 (1,000,000 x 20% x 184/365 days)
20% interest on delinquency from July 1, 2017 to December 31,
2017 (1,491,643.83 x 20% x 184/365 days)
P1,000,000.00
250,000.00
241,643.83
491,643.83
1,491,643.83
100,821.91
150,390.39
12% interest on delinquency from January 1, 2018 to February
10, 2018 (1,491,643.83 x 12% x 41/365 days)
20,106.54
Total amount due, February 10, 2018
271,318.84
P1,762,962.67
In cases where the tax liabilities or deficiency taxes became due before the effectivity of the TRAIN
Law on January 1, 2018, and where the full payment will only be accomplished after the effectivity
date, the interest rates shall be applied as follows:
Period
Applicable Interest Type and Rate
For the period up to December 31, 2017
Deficiency and/or delinquency interest at 20%
For the period January 1, 2018 until full
Deficiency and/or delinquency interest at 12%
payment of the tax liability
The double imposition of both deficiency and delinquency interest under Section 249 of the Tax Code
prior to its amendment will still apply in so far as the period between the date prescribed for payment
until December 31, 2017.
97. (Reconciliation) The following data are taken from the Statement of Income and Expenses of CPL
Corporation, domestic corporation, for the current year:
Net income per books
P800,000
Capital gains tax on shares of domestic corporation
22,500
Final tax on interest on bank deposit
20,000
Net capital loss
30,000
Dividend from domestic corporation
80,000
Interest on Philippine currency bank deposit
100,000
Capital gain on shares of stock of domestic
150,000
Allowance for bad debts
50,000
Based on the above information, how much is the taxable income?
a. P592,500
c. P420,000
b. P440,000
d. None of the choices
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1 Net income (Loss) per Books
Add: Non-Deductible Expenses/Taxable Other Income
2 Capital gains tax on shares of stock of domestic
3 Final tax on interest on bank deposit
4 Net capital loss
5 Allowance for bad debts
6 Total (Sum of Items 1 to 5)
Less: A) Non-Taxable Income and Income Subject to Final Tax
6 Dividend from foreign corporation
7 Interest on Philippine currency bank deposit
8 Capital gain on shares of stock of domestic
B) Special/Other Allowable Deductions
9
10
11 Total (Sum of Items 6 to 10)
12 Net Taxable Income /(Loss) (Item 6 Less Item 11)
P800,000
22,500
20,000
30,000
50,000
922,500
(80,000)
(100,000)
(150,000)
(330,000)
P592,500
98. (Reconciliation) From the following data, compute the income tax still due from a domestic corporation
engaged in merchandising business. For the calendar year 2018, the net income per books (after tax) is
P850,000, after considering among others:
Interest income from bank deposit
P 5,500
Inter-corporate dividends
5,000
Gain from sale of shares in a domestic corporation
7,000
Net capital loss
2,500
Bad debts written off
6,500
Write-off of inventories lost due to spoilage or expiry
12,000
Depreciation on appraised value of property
15,000
Surcharge and compromise paid in relation to the late filing of ITR
80,000
Contribution to a government exclusively for public purpose
50,000
Contribution to Government’s priority program in education
10,500
Quarterly income tax payments
65,000
Provision for bad debts
8,000
The net income per books should be reconciled with the provisions of the Tax Code, meaning, items which
are not taxable must be excluded, and items which are not deductible are to be added back.
How much is the net taxable net income?
a. P1,952,500
c. P1,014,500
b. P1,032,500
d. P1,008,500
1 Net income (Loss) per Books
Add: Non-Deductible Expenses/Taxable Other Income
2 Capital gains tax on shares of stock of domestic
3 Final tax on interest on bank deposit
4 Net capital loss
5 Provision for bad debts
6 Write-off of inventories lost due to spoilage or expiry
7 Depreciation on appraised value of property
8 Surcharge and compromise paid in relation to the late filing of ITR
9 Quarterly income tax
10 Total (Sum of Items 1 to 9)
Less: A) Non-Taxable Income and Income Subject to Final Tax
11 Interest on Philippine currency bank deposit
12 Intercorporate dividend
13 Capital gain on shares of stock of domestic corporation
B) Special/Other Allowable Deductions
14 Bad debts written off
15 Total (Sum of Items 11 to 15)
16 Net Taxable Income /(Loss) (Item 10 Less Item 15)
P 850,000
2,500
8,000
12,000
15,000
80,000
65,000
1,032,500
( 5,500)
( 5,000)
(7,000)
( 6,500)
(24,000)
P1,008,500
DOCUMENTARY STAMP TAXES
99. A tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, right or property incident thereto.
a. Documentary stamp tax
c. Local tax
b. Excise tax
d. Some other taxes
100. Documentary stamp tax is:
a. An excise tax.
b. An Ad valorem tax
c. A Local tax
d. A percentage tax.
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DST is in nature of an excise tax levied on the exercise by person of certain privileges conferred by
law for the creation, revision, or termination of specific legal relationship through the execution of
specific instruments
DSTs are levied independently of the legal status of the transactions giving rise thereto.
They must be paid upon the issuance of the instruments, without regard to whether the contracts
which gave rise to them are rescissible, void, voidable, or unenforceable.
Whenever one of the parties to the taxable transaction is exempt from the DST, the other party who
is not exempt shall be the one directly liable for the tax.
101. Except as provided by rules and regulations promulgated by the Secretary of Finance, upon recommendation
of the Commissioner, the tax return prescribed in this Section shall be filed within how many days after the
close of the month when the taxable document was made, signed, issued, accepted, or transferred, and the
tax thereon shall be paid at the same time the aforesaid return is filed?
a. 30 days
c. 15 days
b. 20 days
d. 10 days
102. A real property was sold for P3,495,700. How much is the documentary stamp tax, if any?
a. P52,440.00
c. P52,420.50
b. P52,425.00
d. None of the choices
On P1,000
3,494,700/1,000 = 3,494.70 or 3,495 x 15
Total
P 15
52,425
P52,440
For each additional One thousand pesos (P1,000), or fractional part thereof in excess of One
thousand pesos (P1,000) of such consideration or value, Fifteen pesos (P15.00).
103. A stockholder in JMI Corporation sold his shares of stock for P500,000. How much is the documentary stamp
tax, if any?
a. P7,500
c. P3,750
b. P5,000
d. None of the choices
Documentary stamp tax (500,000/200 x P1.50) = P3,750
EXCISE TAXES
104. 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. Excise tax
c. Documentary stamp tax
b. Percentage tax
d. Local taxes
'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.'
105. Which of the following articles shall not be subject to specific excise tax?
a. Excise tax on cigarette packed by hand
b. Excise tax on processed gas
c. Excise tax on automobiles
d. Excise tax on domestic or imported coal and coke notwithstanding any incentives granted in
any law or special law
These are examples of specific excise tax:
1) Excise tax on Cigarettes Packed by Hand
2) Excise tax on Cigarettes Packed by Machine
3) Excise tax on petroleum products
4) Excise tax on mineral products
5) Excise tax on sweetened beverages
106. Which of the following articles shall not be subject to ad valorem excise tax?
a. Excise tax on cigarette packed by hand
b. Excise tax on non-essential services
c. Excise tax on automobiles
d. Excise tax on alcoholic products
These are examples of ad valorem tax:
1) Excise tax on alcoholic products
2) Excise tax on cigars
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c. Excise tax on automobiles
d. Excise tax on non-essential services
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107. 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 P50,000 (inclusive of 12% VAT but exclusive of 5% excise tax) for
the service rendered.
Question 1 – How much is the excise tax?
a. P4,464.42
b. P2,232.14
Gross receipts, net of VAT (50,000/1.12)
Tax rate
Excise tax
c. P1,339.28
d. None of the choices
P44,642.85
_
5%
P 2,232.14
Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at
wholesale in the place of production or through their sales agents to the public shall constitute the
gross selling price
Question 2 – How much is the VAT?
c. P5,625.00
d. P5,357.14
Gross receipts, net of VAT
Add: Excise tax
Total
Tax rate
VAT
c. P4,687.50
d. None of the choices
P44,642.85
2,232.14
46,874.99
12%
P5,625.00
Question 3 - How much is the total amount to be collected from Ms. Paz Seksi?
a. P52,500.00
c. P46,877.99
b. P50,267.85
d. None of the choices
Gross receipts, net of VAT
Add: Excise tax
VAT
Total
P44,642.85
2,232.14
5,625.00
P52,500,00
REAL PROPERTY TAX
108. (Real Property Tax) A commercial land located is located in one of the cities in Metro Manila. Its fair market
value is P10,000,000.
Question 1 – How much is the basic real property tax, if any?
a. P150,000
c. P50,000
b. P100,000
d. None of the choices
Fair market value
Multiplied by assessment level
Assessed Value
Tax rate
Basic real property tax
P10,000,000
__
50%
5,000,000
___
2%
P
100,000
The assessment level of commercial land, industrial land and mineral land is 50%. The basic RPT
in Metro Manila is not exceeding 2%. SEF is 1%.
109. Real Property Tax) An agricultural land is located in the province. Its fair market value is P2,000,000.
Question 1 – How much is the basic real property tax, if any?
c. P16,000
c. P4,000
d. P 8,000
d. None of the choices
Fair market value
P2,000,000
Multiplied by assessment level
__
40%
Assessed Value
800,000
Tax rate
___
1%
Basic real property tax
P
8,000
The assessment level of agricultural land is 40%. The basic RPT in the province is not
exceeding 1%. SEF is 1%.
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SENIOR CITIZENS/PERSONS WITH DISABILITIES
110. (Senior Citizens) 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
111. (Senior Citizen/PWD) In the purchase of goods and services which have promotional discount, the senior
citizen or PWD can avail of:
a. the promotional discount or the senior citizen/PWD discount, whichever is:
higher.
b. the promotional discount or the senior citizen/PWD discount, whichever is:
lower.
c. the promotional discount only.
d. both the promotional discount and the senior citizen/PWD discount.
112. (Person With Disability) 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.
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.
113.
(Senior Citizen) A Company that hires senior citizen 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.
Conditions for the allowance of additional deduction:
a. The employment shall have to continue for a period of at least six (6) months
b. The annual taxable income of the senior citizen does not exceed the poverty level
BARANGAY MICRO BUSINESS ENTERPRISES (BMBEs)
114.
BMBE)
a.
b.
c.
d.
One of the following is not qualified to register as Barangay Micro Business Enterprise (BMBE).
Bakery with total assets not exceeding P3,000,000
Motor shop with total assets not exceeding P3,000,000
A CPA practitioner with total assets not exceeding P3,000,000
Farm producing agricultural products with total assets not exceeding P3,000,000
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).
“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.
115.
(BMBE) BMBEs shall be exempt from:
a. Income tax.
b. SSS contribution.
c. Philhealth contribution.
d. None of the choices.
The BMBEs shall be exempt from the coverage of the Minimum Wage Law: Provided, That all
employees covered under the Act shall be entitled to the same benefits given to any regular
employee such as social security and healthcare benefits.
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DOUBLE TAXATION AGREEMENTS DTAs)
116. Which of the following is not a relief from double taxation?
a. Tax credit
b. Allowance of deduction for foreign taxes
c. Tax treaties
d. Not reporting income or transactions in foreign countries
The taxpayer must secure a ruling from the Bureau of Internal Revenue (BIR) through the International
Tax Affairs Division (ITAD) that he may avail himself of preferential rates under existing tax treaties.
117. First statement: To avail of tax treaty benefits the taxpayer must secure a ruling from the Bureau of
Internal Revenue (BIR) through the International Tax Affairs Division (ITAD) that he may avail himself of
preferential rates under existing tax treaties.
Second Statement: In case of conflict between the provisions of a tax treaty and domestic law, the provisions
of the tax treaty generally prevail over the provisions of the domestic law.
a.
b.
c.
d.
Both statements are correct
Both statements are incorrect
Only the first statement is correct
Only the second statement is correct
SPECIAL ECONOMIC ZONES
118. First statement: An ECOZONE may contain any or all of the following: industrial estates (IEs), export
processing zones (EPZ), free trade zones and tourist /recreational centers.
Second statement: For purposes of the income tax holiday, it shall be the date specified in the Registration
Agreement or the date when the particular ECOZONE export enterprise actually begins production of the
registered product for commercial purposes, whichever comes first, irrespective of phases or modules or
schedule of development.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
119. A tax rate equivalent to 5% effective July 1, 2020 based on gross income, in lieu of all national and local
taxes can be availed by the following except which one?
a. export enterprise
b. domestic market enterprise with a minimum investment capital of P500,000,000.00
c. domestic market enterprise under the Strategic Investment Priority Plan engaged in activities
that are classified as critical
d. None of the choices
120. Export enterprise and domestic market enterprise under the Strategic Investment Priority Plan engaged in
activities that are classified as critical can avail of which one of these?
A. Income Tax Holiday of 4 to 7 years, depending on location and industry priorities
B. Special corporate income rate or enhanced deduction for 10 years
a. A only
c. Both A and B
b. B only
d. Neither A nor B
END
THOT: “When seeking God’s best for us becomes our focus- contentment, joy and peace replace
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anxiety.” -Tamthewise
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