T R S A: HE Eview Chool of Ccountancy

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 43  May 2022 CPALE  9 Feb 2022  6:00 PM – 9:00 PM
TAXATION FIRST PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. Which of the following is not a nonresident citizen?

D a. A citizen of the Philippines who establishes to the satisfaction of
the Commissioner the fact of his physical presence abroad with a
definite intention to reside therein.
b. A citizen of the Philippines who leaves the Philippines during the
taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis.
c. A citizen of the Philippines who works and derives income from sources
abroad and whose employment thereat requires him to be physically
present abroad most of the time during the taxable year.
d. A citizen of the Philippines who goes on a business trip abroad and
stays therein most of the time during the year.
2. First statement: The husband and wife shall compute their individual income tax
separately based on their respective total taxable income.
Second statement: If any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the spouses, the same shall
be divided equally between the spouses for the purpose of determining their
respective taxable income.
A a. Both statements are correct
b. Both statements are incorrect
c. Both statements are incorrect
d. Only the second statement is correct
3. Which of the following is not subject to tax as a corporation?

D a. Business partnerships
b. Joint stock companies
c. Insurance companies
d. General professional partnership
4. First statement: All corporations, whether domestic or foreign, shall be taxed

at 20% effectively July, 2020 if their net tax taxable income does not exceed
P5,000,000 and their total assets do not exceed P100,000,000.
Second statement: Effective January 1, 2021, non-resident foreign corporations
shall be taxed at 25% on their net income from sources within the Philippines.
B a. Both statements are correct
c. Only the first statement is correct
5. One of the following is not a requisite of a taxable income.

D a. There must be gain.
b. The gain must be realized or received.
c. The gain must not be excluded by law from taxation.
d. The gain must be that of resident or nonresident citizen.
6. A property was received as donation from Charlwin when its fair market value was
P300,000. Charlwin in turn received this property as donation from Jose when
its fair market value was P350,000. This property was purchased by Marceliano
for P200,000 and was donated to Jose. The property was sold for P500,000.
How much gain (loss) shall be recognized from the sale?

A a. P300,000
b. P200,000
c. P150,000
d. None of the choices
7. If an individual performs services for a creditor who in consideration thereof

cancels the debt, the cancellation of indebtedness may amount to a:
D a. gift.
b. capital contribution.
c. donation inter vivos.
d. payment of income.
Page 1 of 14 0915-2303213  resacpareview@gmail.com

TAXATION
ReSA Batch 43 - May 2022 CPALE Batch
09 Feb 2022  6:00 PM to 9:00 PM TAX First Pre-Board Exam
8. It is important to know the source of income for tax purposes (i.e., from within
and without the Philippines) because:
A a. some individuals and corporate taxpayers are taxed on their
worldwide income while others are taxable only upon income from
sources within the Philippines.
b. the Philippines imposes income tax only on income from sources
within.
c. some individual taxpayers are citizens while others are aliens.
d. export sales are not subject to income tax.
9. Gains, profits and income from the sale of real property are from sources
within the Philippines if:
A a. the real property sold is located in the Philippines.
b. the real property is sold in the Philippines.
c. the real property sold is located outside the Philippines.
d. the real property sold is owned by a resident citizen.
10. The term “capital asset” includes:

B a. stock in trade or other property included in the taxpayer’s inventory.
b. real property not used in the trade or business of taxpayer.
c. property primarily for sale to customers in the ordinary course of
his trade or business.
d. property used in the trade or business of the taxpayer and subject
to depreciation.
11. The widow of your best friend has just been paid P1,000,000 on account of the
life insurance policy of the deceased husband. She asks you whether she shall
declare the amount for income tax purposes or for estate tax purposes.
First advice: The proceeds of the life insurance paid to the beneficiary upon
the death of the insured are exempt from income tax and need not be declared for
income tax purposes.
Second advice: The proceeds of life insurance will have to be declared for estate
tax purposes if the designation of the beneficiary is revocable, otherwise, they
need not be declared.
A a. Both advices are right
b. First advice right; second advice wrong
c. Both advices are wrong
d. First advice wrong; second advice right
12. Ms. Elisya Montenegro entered her short story in a literary contest. She won in
the Short Story category, and received P500,000 for her prize. What was the tax
consequence of the literary prize?
B a. Exempt from income tax
b. Subject to final withholding tax
c. Subject to Section 24 (A)
d. Not subject to any internal revenue tax
13. Under this system, the amount of income tax withheld by the withholding agent is
constituted as a full and final payment of the income tax due from the payee on
the said income.
B a. Creditable withholding tax
b. Final withholding tax
c. Global tax system
d. Schedular tax system
14. Which of the following passive income is not subject to 20% final withholding
tax. As a general rule, which of the following passive income of resident citizen?
D a. Interest from any peso bank deposit
b. Yield or any other monetary benefit from deposit substitutes and
from trust funds and similar arrangements
c. Prizes (except prizes amounting to P10,000 or less)
d. Royalties on books, as well as other literary works and musical
compositions

TAXATION
15. Which of the following fringe benefits shall be subject to the fringe benefit
tax?
D a. Benefits given to the rank-and-file employees, whether granted under
a collective bargaining agreement or not
b. Fringe benefits required by the nature of, or necessary to the trade,
business or profession of the employer
c. Fringe benefit given for the convenience or advantage of the employer
d. Membership fees, dues and other expenses borne by the employer for
the managerial and supervisory employee in social and athletic clubs
and similar organizations
16. First statement: The fringe benefit tax is imposed only when the employer is a
corporation.
Second statement: The fringe benefit tax shall be withheld and paid by the
employer in accordance with the provision of Section 57 (A).
D a. Both statements are correct
17. De minimis benefit pertaining to monetized value of vacation and sick leave
credits paid to government officials and employees is limited to:
D a. 10 days
b. 15 days
c. 20 days
d. None of choices
18. The gross estate of this decedent shall only be comprised of properties
situated in the Philippines.
D a. Filipino residing in the Philippines
b. American residing in the Philippines
c. Filipino residing in the USA
d. American residing in the USA
19. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance is:
A a. included in the gross estate of Mr. Julian Cruz because when the
executor of the estate is a beneficiary the proceeds are included in
the gross estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the
designation of the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of
life insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life
insurance are generally not subject to estate tax.
20. Mr. Rigoberto Collado, a citizen and resident of Puerto Rico, dies during the
year. Puerto Rico does not impose transfer taxes on properties of decedent not
residing therein. He left the following properties among others:
Shares of stock, San Miguel Corporation, Manila
House and lot, Puerto Rico
Leasehold on a condominium unit, Philippines
Contract for public works, Philippines
The executor of his estate in Philippines asked you what properties are to be
included in his Philippine gross estate. What answer will you give him?
B a. Include all the properties.
b. Include contract for public works and leasehold on condominium unit
only.
c. Include all properties except shares of stock and house and lot
d. Include all properties except house and lot in Puerto Rico.

TAXATION
21. A property was transferred mortis causa. The following data were gathered from
the transaction:
Fair market value, time of transfer – P500,000
Fair market value, time of death – P300,000
Consideration received when transferred – P350,000
How much shall be included in the gross estate?

D a. P500,000
b. P300,000
c. P150,000
d. None
22. How much is the allowable standard deduction for non-resident alien decedent?
C a. Five Million Pesos (P5,000,000)
b. Three Million Pesos (P3,000,000)
c. Five Hundred Thousand Pesos (P500,000)
d. None, not allowed to deduct standard deduction
23. The following selected data were taken from the Estate of Ed Sados:
Claim against an insolvent person
(fully uncollectible) P 500,000
Claim against a person who absconded
(fully uncollectible) 300,000
Claim against an insolvent person
(20% collectible) 100,000
How much should be deducted from the gross estate?

B a. P880,000
b. P580,000
c. P100,000
d. P 80,000
24. An unmarried decedent died leaving properties he inherited 4 ½ years ago which
had fair market value of P800,000 at the time of his death (650,000 at the time
of inheritance, and unpaid mortgage of P50,000 paid by the present decedent).
Other properties in his gross estate had fair market value of P1,000,000. The
total expenses, losses indebtedness, taxes and transfer for public purpose
amounted to P300,000.
How much was the vanishing deduction?

D a. P 500,000
b. P 225,000
c. P 200,000
d. P 100,000
25. For purposes of availing of a family home deduction to the extent allowable, a
person may constitute:
B a. as many family homes as possible.
b. only one family home.
c. one family home for each spouse.
d. one family for each child.
26. One of the following is not a distinction between donation inter vivos and
donation mortis causa.
C a. Donation inter vivos takes effect during the lifetime of the grantor
while donation mortis causa takes effect after the death of the
grantor.
b. Donation inter vivos is subject to donor’s tax while donation mortis
causa is subject to estate tax.
c. Donation inter vivos requires a public document while donation mortis
causa may not require a public document.
d. Donation inter vivos is valued at fair market value at the time the
property is given while donation mortis causa is valued at the fair
market value at the time of the death of the grantor.

TAXATION
27. Mr. Primitivo Primero died and was survived by his wife and two (2) children,
Faye and Faith. After getting her share in the conjugal property, the surviving
spouse renounced her share in the hereditary estate in favor of Faith to the
exclusion of Faye. Was the renunciation subject to donor’s tax?
A a. Yes, because the renunciation was made categorically in favor of
identified heir to the exclusion or disadvantage of the other co-
heirs.
b. No. because the renunciation was considered a general renunciation.
c. Yes, because , as a rule, renunciation of share in the hereditary
estate is always subject to donor’s tax.
d. No, because, as a rule, the surviving spouse cannot renounce her
share in the hereditary estate.
28. Mr. J. Santos donated P500,000 to AST Foundation, a philanthropic organization.

The organizations total administrative expenses amounted to P5,000,000 out of
its expenses of P20,000,000. How much was the exempt gift to the philanthropic
organization?
C a. P6,000,000
b. P5,000,000
c. P500,000
d. None
29. First statement: For VAT purposes, a taxable person is any person liable to pay
the VAT, whether registered or registrable in accordance with the Tax Code.
Second statement: The status of a “VAT-registered person” as a VAT-registered

person shall continue until the cancellation of such registration.
A a. Both statements are correct
30. Which of the following sales of residential property, shall be subject to VAT
beginning January 1, 2021?
A a. Sale of residential lot the value of which does not exceed P1,500,000
b. Sale of residential house and lot and other residential dwellings
with selling price of not more than P2,000,000.
c. Sale of real properties not primarily held for sale to customers or lease
in the ordinary course of trade or business
d. Sale of real property utilized for socialized housing
31. Which of the following is not included in the term “gross selling price”?
B a. Total amount of money or its equivalent paid by the purchaser
b. Value-added tax passed on by the seller to the buyer
c. Excise tax
32. Which statement is incorrect? VAT on importation of goods:

D a. is imposed on an importation for sale or for use in business.
b. is imposed on an importation for personal use.
c. shall be paid prior to removal from customs custody.
d. may not be available as input tax.
33. For VAT purposes, capital goods or properties, also known as depreciable
assets, refer to:
I – goods or properties with estimated useful life greater than one (1)
year
II – treated as depreciable assets under Section 34 (F) of the Tax Code
III – used directly or indirectly in the production or sale of taxable
goods or services
A a. Yes to I, II and III
b. Yes to II and III only
c. Yes to I and II only
d. Yes to I only

TAXATION
34. A VAT-registered person shall issue for every sale, barter or exchange of goods
or properties a:
A a. VAT invoice.
b. VAT official receipt.
c. VAT credit certificate.
d. VAT refund.
35. Which of the following shall not be considered livestock for VAT-exempt
transactions purposes?
D a. Cows
b. Bulls and calves
c. Sheep
d. Race horses
36. All of the following cooperatives enjoy VAT exemption on their sales or
receipts except:
D a. agricultural cooperatives.
b. credit and multi-purpose cooperatives.
c. non-agricultural, non-electric and non-credit cooperatives.
d. electric cooperatives.
37. Effective July 1, 2020 to June 30, 2023, the percentage tax rate on persons
exempt from VAT shall be:
A a. 1%.
b. 2%.
c. 3%.
d. 5%.
38. Mr. Jaime Rodriguez is the owner of a small variety store. His gross sales in
any one year do not exceed the VAT threshold amount. He is not VAT-registered.
The following data are taken from the books of the variety store for the quarter
ending March 31, 2020:
Merchandise inventory, December 31, 2019 P 100,000
Gross sales 450,00
Purchases from VAT-registered suppliers 350,000
How much is the percentage tax due and payable?

B a. P22,500
b. P13,500
c. P 9,000
d. P 4,500
39. The following data were provided by an air carrier:

Freight and cargo fees (cargo originating from the
Philippines in a continuous and uninterrupted flight to
Japan, passage documents sold in Japan) P5,000,000
Mail fees (mail originating from Japan in a continuous and
uninterrupted flight to the Philippines, passage documents
sold in the Philippines) 4,000,000
Advance payments for cargo originating from the Philippines
in a continuous and uninterrupted flight to Singapore
(passage documents sold in Singapore) 3,000,000
Receipts from sales of tickets to passengers originating from
the Philippines in a continuous and uninterrupted flight to
Hongkong (tickets sold in the Philippines) 2,000,000
Expenses, Philippines 1,500,000
How much is the common carrier’s tax due from the air carrier assuming it is an
international carrier doing business in the Philippines?
C a. P420,000
b. P300,000
c. P240,000
d. P210,000

TAXATION
40. Ms. N is a caterer and a videoke bar operator. In a taxable period, she had the
following data, tax not included:
Sales:
From operations of the Truluv Catering Service:
Cash sales P400,000
Accounts receivable (catering) 250,000
Credit card sales 243,000
From operations of the Dude Videoke Bar:
Cash sales 1,360,000
Payments for catering service, based on gross
receipts (80% of which are to VAT taxpayers) 60%
How much is the amusement tax payable?

A a. P357,156
b. P297,630
c. P198,420
SITUATIONAL
Ms. Leni operates a convenience store while she offers bookkeeping services to her
clients. In 2018, her gross sales amounted to P800,000.00, in addition to her receipts
from bookkeeping services of P300,000.00. She already signified her intention to be
taxed at 8% income tax rate in her 1st quarter return. How much is the income tax
liability for the yea?
41. Will she qualify to be taxed at 8%?

A a. Yes, because her total gross sales and/or gross receipts and other
non-operating income do not exceed the VAT threshold and she
signifies her intention to be taxed at 8% income tax rate in her
first quarter return.
b. No, because while her total gross sales and/or gross receipts and other
non-operating income do not exceed the VAT threshold and she
signifies her intention to be taxed at 8% income tax rate in her
first quarter return, her income comes from different sources.
c. Yes, because individual taxpayers are always given the option to be
taxed at 8% income tax rate regardless of their total gross sales
and/or gross receipts and other non-operating income.
d. No, because individual taxpayers whose total gross sales and/or
gross receipts and other non-operating income are always subject
to tax under Section 24 (A).
42. How much is her taxable income for the year?

B a. P1,100,000
b. P 850,000
c. P 800,000
d. P 300,000
43. How much is the income tax due?

B a. P88,000
b. P68,000
c. P64,000
d. P10,000
44. Assuming Ms. Leni above, failed to signify her intention to be taxed at 8% income
tax rate on gross sales in her 1st Quarter Income Tax Return, and she incurred
cost of sales and operating expenses amounting to P600,000.00 and P200,000.00,
respectively, or a total of P800,000.00. How much is the income tax?
D a. P88,000
b. P68,000
c. P64,000
d. P10,000

TAXATION
45. Using the same information in the immediately preceding number, to what
business tax will she be liable if Ms. Leni failed to signify her intention to
be taxed at 8% income tax rate on gross sales in her 1st Quarter Income Tax
Return?
B a. Value-Added Tax
b. Percentage Tax on Person Exempt From VAT
c. Amusement Tax
d. Excise Tax
SITUATIONAL
A proprietary educational institution has the following data for the calendar year
2021:
Gross receipts, related activities P 15,000,000.00
Cost of services, related activities 6,000,000.00
Allowable deductions from related activities 3,250,000.00
Gross receipts, unrelated activities 18,000,000.00
Cost of services, unrelated activities 5,000,000.00
Allowable deductions from unrelated activities 2,000,000.00
Payments, first three (3) quarters 2,000,000.00
46. How much is net taxable income from related activities?

D a. P16,750,000.00
b. P15,750,000.00
c. P11,000,000.00
d. P 5,750,000.00
47. How much is the net taxable income from unrelated activities?
C a. P16,750,000.00
b. P15,750,000.00
c. P11,000,000.00
d. P 5,750,000.00
48. What corporate tax rate will it be subject to?

A a. 25%
b. 20%
c. 10%
d. 1%
49. How much is the income tax payable?

B a. P4,187,500.00
b. P2,187,500.00
c. P1,675,000.00
d. P1,350,000,00
50. How much is the output VAT, if any?

D a. P3,960,000.00
b. P2,160,000.00
c. P2,160,000.00
d. None, VAT-Exempt
SITUATIONAL
The decedent is a married man with a surviving spouse with the following raw data:
Conjugal real and personal properties (including an automobile
purchased during the marriage using common fund for the
exclusive use of the surviving spouse) P 14,000,000
Conjugal family house 9,000,000
Exclusive family lot 1,000,000
Exclusive properties (including the P3,000,000 exclusive
properties of the surviving spouse) 8,000,000
Conjugal ordinary deductions (including funeral expenses of
P100,000 and judicial expenses of P200,000) 2,300,000
Exclusive ordinary deductions (excluding the P500,000 unpaid
mortgage on the exclusive property of the surviving spouse) 1,000,000
Medical expenses 200,000

TAXATION
51. Using BIR Form No. 1801, what value shall be reflected in Schedule 1A (Details
of Family Home)?
A a. P10,000,000
b. P 5,500,000
c. P9,000,000
d. P1,000,000
52. Using BIR Form No. 1801, how much shall be reflected in Line 35 (ordinary
deductions)?
C a. P3,800,000
b. P3,300,000
c. P3,000,000
d. P2,300,000
53. Using BIR Form No. 1801, how much shall be reflected in Line 37D (total special
deductions)?
B a. P15,000,000
b. P10,500,000
c. P10,000,000
d. P 6,000,000
54. Using BIR Form No. 1801, how much shall be reflected in Line 40/16 (net taxable
estate)?
B a. P4,300,000
b. P5,000,000
c. P7,300,000
d. P8,500,000
55. Using BIR Form No. 1801, how much shall be reflected in Line 18 (estate tax due)?
B a. P256,000
b. P300,000
c. P440,000
d. P515,200
SITUATIONAL
Excellent Products, Inc. processes canned fruits and canned sardines. The following
VAT-exclusive selected data for the first quarter of the 2021 calendar year are taken
from its books:
Sale of canned fruits P2,000,000
Sale of canned sardines 3,000,000
Purchase of tomatoes and onions from farmers
(for canned sardines) 500,000
Purchase of corn oil from a supplier
Purchase of fresh fish from fishermen
Purchase of fresh fruits from farmers
(for canned fruits) 200,000
Purchase of refined sugar from an agricultural
cooperative that manufactures refined sugar
(for canned fruits) 100,000
Purchase of refined sugar from a refined sugar
refinery (for canned fruits) 50,000
Purchase of packaging materials for the both products 800,000
Purchase of labels (for both products) 150,000
Total bills for trucking services in bringing
canned products to warehouse only P50,000 was paid) 100,000
Monthly VAT payments, previous two months 300,000
56. Using BIR Form No. 2550Q, what shall be reflected in Line 19A (Total
Sales/Receipts)?
A a. P5,000,000
b. P3,000,000
c. P2,000,000

TAXATION
57. Using BIR Form No. 2550Q, what shall be reflected in Line 19B (output tax due)
using 12% rate?
A a. P600,000
b. P500,000
c. P360,000
d. P240,000
58. Using BIR Form No. 2550Q, what shall be reflected in Line 20D (presumptive
input tax), if any?
C a. P56,000
b. P32,000
c. P20,000
d. None. Not allowed
59. Using BIR Form No. 2550Q, what shall be reflected in Line 24 (total allowable
input tax)?
A a. P182,000
b. P176,000
c. P162,000
d. P156,000
60. Using BIR Form No. 2550Q, what shall be reflected in Line 27 (Tax Still
Payable) using 12% rate?
D a. P418,000
b. P370,000
c. P346,000
d. P118,000
SITUATIONAL
Mr. Nguyen Gandaipen, a non-resident Thai, during the current year donates on January
15, 2022 a brand-new car in the Philippines valued at P1,200,000 and house and lot in
Thailand valued at P2,500,000 to his legitimate son who is getting married in the
Philippines. The son agrees to pay the unpaid tax of P120,000 on the car and the
unpaid mortgage of P500,000 on the house and lot.
61. Using BIR Form No. 1800, what shall be reflected in line 27 (Total Gifts In This
Return)?
C a. P3,700,000
b. P2,500,000
c. P1,200,000
62. Using BIR Form No. 1800, what shall be reflected in line 33 (total deductions
allowed)?
B a. P130,000.
b. P120,000.
c. P10,000.
d. none.
63. Using BIR Form No. 1800, what shall be reflected in line 38/14 (total net gift
subject to tax)?
D a. P2,830,000
b. P1,200,000
c. P1,080,000
d. P 830,000
64. Using BIR Form No. 1800, what shall be reflected in line 18 (tax payable)?
D a. P214,200
b. P142,800
c. P64,800
d. P49,800

TAXATION
65. Where shall the donor file the donor’s tax return?
C a. Revenue District Office having jurisdiction over the place in the
Philippines where the son is getting married
b. Revenue District Office having the jurisdiction over the place in the
Philippines where the son’s wife resides
c. Philippine Embassy or Philippine Consulate in Thailand
SITUATIONAL
The following items (66 – 70) are considered BONUS ITEMS for purposes of determining the score of the
TAX First Pre-Board Exam. The given information for these items were uploaded only around 7:35 PM of
February 9. Some examinees have already submitted the Google Quiz form before 7:35 PM of February 9
while some examinees were able to learn about the uploaded information only AFTER submitting the form.
Ube Paspas Bus is a common carrier by land. It is VAT-registered. During quarter
ending March 31, 2021, it has the following gross receipts:
Transport of passengers P1,000,000
Transport of goods 1,500,000
Transport of cargoes 500,000
66. How much is the common carrier’s tax payable?

D a. P 120,000
b. P 90,000
c. P 60,000
d. P 30,000
67. When shall the Percentage Tax Return be filed?

A a. April 25, 2021
b. April 24, 2021
c. April 21, 2021
d. April 15, 2021
68. How much is the Value-Added Tax?

B a. P 360,000
b. P 240,000
c. P 120,000
d. None. VAT threshold not exceeded
69. When shall the Quarterly VAT be filed?

A a. April 25, 2021
b. April 24, 2021
c. April 21, 2021
d. April 15, 2021
70. Assuming it is not VAT-registered, how much shall be the total percentage
taxes?
C a. P90,000
b. P60,000
c. P50,000
d. P30,000
- END –

TAXATION
ANSWERS & SOLUTIONS/CLARIFICATIONS
6. Selling price P500,000

Less: Basis (basis to the last owner who did not acquire the 200,000*
property by donation)
Gain from sale P300,000
23. Claim against an insolvent person (fully uncollectible P500,000

Claim against an insolvent person (80% x 100,000) 80,000
Total P580,000
24. Value to take P 650,000

Less: Mortgage paid 50,000
Initial basis 600,000
Less: Proportional deduction (P600,000/P1,800,000 X P300,000) 100,000
Final basis 500,000
Rate 20%
Vanishing deduction P 100,000
28. The gift was exempted because the administrative expenses of the donee-institution did not
exceed 30% of the total expenses (5,000,000/P20,000,000 = 25%).
38. Gross sales P450,000

Tax rate 3%
Percentage tax 13,500
Effective July 1, 2020 until June 30, 2023, the rate shall be 1%.
39. Freight and cargo fees (cargo originating from the Philippines in a continuous
and uninterrupted flight to Japan, passage documents sold in Japan) P5,000,000
Advance payments for cargo originating from the Philippines in a continuous
and uninterrupted flight to Singapore (passage documents sold in Singapore) 3,000,000
Gross receipts 8,000,000
Tax rate 3%
Common carrier’s tax P 240,000
40. Cash sales P1,360,000

Gross receipts (Dude Videoke Bar) P1,984,200
Tax rate 18%
Amusement tax P 357,156
42. Gross sales – Convenience store P800,000.00

Gross receipts - Bookkeeping 300,000.00
Total gross sales/receipts 1,100,000.00
Less: Amount allowed as deduction 250,000.00
Taxable income P850,000.00
43. Taxable income P850,000.00

Tax rate 8%
Tax due P 68,000.00
44. Gross sales – Convenience store P 800,000.00

Gross receipts - Bookkeeping 300,000.00
Total gross sales/receipts 1,100,000.00
Less: Cost of sales 600,000.00
Gross income 500,000.00
Less: Operating expenses 200,000.00
Taxable income P 300,000.00
Tax due 250,000.00 Exempt
50,000.00 x 20% 10,000.00 P 10,000.00
Aside from income tax, Ms. Leni is likewise liable to pay business tax.

TAXATION
45. Effective January 1, 2018 to December 31, 2022

If the taxable income is:
Over But not over The tax shall be Plus Of excess over
P 250,000 0%
P 250,000 400,000 20% P 250,000
400,000 800,000 P 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,419,000 35% 8,000,000
Related activities Unrelated activities Total

Gross receipts P15,000,000.00 P18,000,000.00 P33,000,000.00
Less: Cost of services 6,000,000.00 5,000,000.00 11,000,000.00
Gross income 9,000,000.00 13,000,000.00 22,000,000.00
Less: Allowable deductions 3,250,000.00 2,000,000.00 5,250,000.00
Net taxable income (46)P 5,750,000.00 (47) P11,000,000.00 16,750,000.00
Tax rate* (48) 25%
Income tax due 4,187,500.00
Less: Payments, first 3 quarters 2,000,000.00
Income tax payable (49)P2,187,500.00
51. Conjugal family house P9,000,000

Exclusive family lot 1,000,000
Total P10,000,000
52. Conjugal ordinary deductions (2,300,000 – 300,000) P2,000,000

Exclusive deductions 1,000,000
Total P3,000,000
53. Standard deduction P5,000,000

family home
Family house (1/2 x 9,000,000) 4,500,000
Family lot (full) 1,000,000
Total 5,500,000
Maximum 10,000,000
Lower 5,500,000
Total P10,500,000
Exclusive Common Total

34 Gross estate P6,000,000 P23,000,000 P29,000,000
35 Less: Ordinary deductions 1,000,000 2,000,000 3,000,000
36 Estate after ordinary deductions 5,000,000 21,000,000 26,000,000
37 Less: Special deductions
37A Standard deduction 5,000,000
37B Family home 5,500,000
37C Others (specify) -
37D Total special deductions 10,500,000
38 Net estate 15,500,000
39 Less: Share of surviving spouse (1/2 x
21,000,000*) 10,500,000
40/16 Net taxable estate 5,000,000 (54)
17 Applicable tax rate 6%
18 Estate tax due P 300,000 (55)
56. Sale of canned fruits P2,000,000

Sale of canned sardines 3,000,000
Total P5,000,000
57. Gross sales P5,000,000

Tax rate 12%
Output tax P600,000
58. Presumptive input tax on purchase of tomatoes and onions (500,000 x 4% = P20,000))

TAXATION
59. Presumptive input tax on purchase of tomatoes and onions (500,000 x 4%) P20,000
Passed-on VAT on purchase of corn oil (300,000 x 12%) 36,000
Passed-on VAT on purchase of refined sugar from sugar refinery (50,000 x 12%) 6,000
Passed-on VAT on purchase of packaging materials (800,000 x 12%) 96,000
Passed-on VAT on purchase of labels (150,000 x 12%) 18,000
Passed-on VAT on trucking services (50,000 x 12%) 6,000
Total P182,000
60. 19B Output tax P600,000

24 Total allowable input tax 182,000
25 Net VAT payable 418,000
Less: 26A Monthly VAT payments, previous two months 300,000
27 Tax Still Payable P118,000
61. Car, Philippines P1,200,000
62. Unpaid tax on car assumed by the donee P120,000
63. 27 Total Gifts In This Return P1,200,000

Less: Deductions
Unpaid tax on car assumed by the donee
33 Total Deductions Allowed 120,000
34 Total net gifts in this return 1,080,000
Add: 35 Total prior net gifts during the calendar year -
36 Total net gifts 1,080,000
37 Less: Exempt gift 250,000
38/14 Total net gift subject to tax P 830,000
64. 38/14 Total net gift subject to tax 830,000

15 Applicable donor’s tax rate 6%
16 Total donor’s tax due 49,800
Less: 17Tax credit/payments -
18 Tax payable P49,800
Add:19 Penalties -
20 Total amount payable P49,800
65. 27 Total Gifts In This Return P1,200,000

Less: Deductions
Unpaid tax on car assumed by the donee
33 Total Deductions Allowed 120,000
34 Total net gifts in this return 1,080,000
Add: 35 Total prior net gifts during the calendar year -
36 Total net gifts 1,080,000
38/14 Total net gift subject to tax 830,000
16 Total donor’s tax due 49,800
Less: 17Tax credit/payments -
18 Tax payable P49,800
Add:19 Penalties -
20 Total amount payable P49,800
66. Gross receipts (transport of passengers) P1,000,000

Tax rate 3%
Common carrier’s tax P 30,000
68. Gross receipts (transport of goods) P1,500,000

Gross receipts (transport of cargoes 500,000
Total 2,000,000
Tax rate 12%
Value-added tax P 240,000
70. Common carrier’s tax (transport of passengers)

(1,000,000 x 3%) P30,000
Percentage on Persons Exempt from VAT (transport of goods and cargoes)
(2,000,000 x 1%) 20,000
Total P50,000

lOMoARcPSD|4784205
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CPA Review Batch 43  May 2022 CPALE  23 April 2022  8:00 – 11:00 AM
TAXATION FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. A citizen who has been previously considered as nonresident citizen and who arrives
in the Philippines at any time during the taxable year to reside permanently in the
Philippines shall likewise be treated as a nonresident citizen for the taxable year
in which he arrives in the Philippines with respect to his:
a. income derived from sources abroad until the date of his arrival in
the Philippines.
b. income derived from sources within the Philippines.
c. income derived from sources abroad until the last day of the calendar
year.
d. income derived from sources within and outside the Philippines.
2. First statement: The husband and wife shall compute their individual income tax
separately based on their respective total taxable income.
Second statement: If any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the spouses, the same shall
be divided equally between the spouses for the purpose of determining their
respective taxable income.
a. Both statements are correct
3. There shall be levied, collected and paid for each taxable year upon the income
received by every alien individual employed by regional or area headquarters and
regional operating headquarters established in the Philippines by multinational
companies from such regional or area headquarters and regional operating
headquarters, a tax equal to:
a. Twenty-five percent (25%) of such gross income.
b. Twenty percent (20%) of such gross income.
c. Fifteen percent (15%) of such gross income.
d. Regular income tax rate under Section 24 (A) (2) (a) of the Tax Code.
4. Ms. Cora Fiel, an alien employed in PetrolEx Corporation that is a Petroleum Service
Contractor, received compensation income of P 5,000,000.00 for 2018. She is
married and has four (4) minor children. How much is the tax due?
a. P 1,450,000
b. P 1,402,000
c. P 750,000
5. The MCIT shall be imposed upon a domestic corporation or a resident foreign

corporation:
I - whenever such corporation has a zero or negative taxable income;
II - when the amount of minimum corporate income tax is greater than the normal
income tax due from such corporation.
a. Both I and II are correct
b. Neither I nor II is correct
c. Only I is correct
d. Only II is correct
6. Aliw Service Corporation, registered with BIR in 2018, has the following data for
the year 2021:
Gross receipts P1,000,000
Discounts given 100,000
Returns and allowances 150,000
Salaries of personnel directly involved in
the supply of services 300,000
Fees of consultants directly involved in
the supply of services 50,000
Rental of equipment directly used in the
supply of services 70,000
Operating expenses 420,000

lOMoARcPSD|4784205
TAXATION
23 April 2022  8:00 AM to 11:00 AM TAX Final Pre-Board Exam
How much is the income tax due and payable?

a. P 27,000
b. P 6,600
c. Zero
7. The recovery of the account previously written off would constitute taxable income
only if in the year of recognition of being worthless, the write-off resulted in a
reduction of a taxable income.
a. Reciprocity rule
b. Equity of the incumbent rule
c. Tax benefit rule
d. Materiality rule
8. One of the following is considered an income for income taxation.

a. Advance in the value of the person or a corporation
b. Increase in book value of real property and other fixed assets of a
corporation as a result of their re-appraisal
c. Net increase in the value of livestock or increase of its inventory
d. Items of gross income which have been credited or set apart for the
taxpayer without restriction
9. Excise tax on certain articles is an example of:

a. An indirect tax.
b. A direct tax.
c. A local tax.
d. A transfer tax.
10. An annual tax of P1,000 was imposed upon all residents of the Philippines, who are
above 21 years of age, with a gross income of P250,000, whether or not they send
their children to public schools, for the purpose of raising funds in order to
improve public school buildings. The tax is:
a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
11. A law was passed by Congress which granted tax amnesty to those who have not paid
income taxes for a certain year without at the same time providing for the refund
of taxes to those who have already paid them. The law is:
a. valid because there is a valid classification.
b. not valid because those who did not pay their taxes are favored over
those who have paid their taxes.
c. valid because it was Congress which passed the law and it did not
improperly delegate the power to tax.
d. not valid because only the President with the approval of Congress
may grant amnesty.
12. In case of conflict between tax laws and generally accepted accounting principles
(GAAP):
a. both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. tax laws shall prevail over GAAP.
d. the issue shall be resolved by the court.
13. The fair market value of real properties located in each zone or area, shall be subject
to automatic adjustment once every how many years through rules and regulations
issued by the Secretary of Finance based on the current Philippine valuation
standards?
a. 3 years
b. 5 years
c. 7 years
d. 10 years

lOMoARcPSD|4784205
TAXATION
14. Which of the following cases may not be compromised?

a. Delinquent accounts
b. Cases under administrative protest after issuance of the Final
Notice of Assessment to the taxpayer still pending in the BIR
c. Civil tax cases being disputed before the courts
d. Criminal violations involving criminal tax fraud.
15. The following are instances when penalties and/or interest imposed on the taxpayer
may be abated or cancelled on the ground that the imposition thereof is unjust and
excessive, except when the:
a. Filing of the return or payment of the tax is made at the wrong
venue.
b. Taxpayer’s mistake in payment of his tax is due to erroneous
written official advice of a revenue officer.
c. Assessment is brought about or a result of the taxpayer’s non-
compliance with the law due to a difficult interpretation of the
said law.
d. Taxpayer is declared insolvent or bankrupt.
16. First statement: In civil tax cases involving collection of internal revenue taxes,
prescription is construed strictly against the government and liberally in favor
of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable under
the Tax Code, prescription is construed strictly against the government.
17. If at any time prior to the consummation of the sale all proper charges are paid
to the officer conducting the sale, the goods or effects distrained:
a. shall be restored to the owner.
b. shall no longer be restored to the owner.
c. shall be brought to the Revenue District Officer.
d. shall be brought to the Regional District Officer.
18. If after review and evaluation by the Commissioner or his duly authorized
representative, it is determined that there exists sufficient basis to assess the
taxpayer for any deficiency tax or taxes, the said Office shall issue to the
taxpayer the:
a. Notice of informal conference
b. Notice of discrepancies
c. Preliminary Assessment Notice
d. Formal Assessment Notice
19. For requests for reinvestigation, the taxpayer shall submit all relevant supporting
documents in support of his protest within how many days from date of filing of
his letter of protest, other-wise, the assessment shall become final?
a. Sixty (60) days
b. Thirty (30) days
c. Twenty (20) days
20. In 2018, Ms. Glai Espenilla Bangug, a financial comptroller of EB Company,

earns annual compensation of P1,500,000, inclusive of 13th month and other
benefits in the amount of P80,000 and mandatory SSS contribution of P3,500 and
Philhealth contribution of P2,000. Aside from her employment income, she owns
a convenience store, VAT-registered, with gross sales of P3,000,000. Sales
discount amounts to P300,000; sales returns and allowances amount to P150,000.
Her cost of sales and operating expenses are P1,000,000 and P600,000
respectively and with non-operating income of P100,000. Payments for the first
three (3) quarters amount to P300,000.

lOMoARcPSD|4784205
TAXATION
Can she avail of the 8% income tax rate?
a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT- registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the
VAT threshold.
21. Under the TRAIN, the books of accounts shall be audited and examined yearly by
independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which shall
contain, among others, information lifted from certified balance sheets, profit
and loss statements, schedules listing income-producing properties and the
corresponding income therefrom and other relevant statements if the:
a. gross annual sales, earnings, receipts or output exceed Three
million pesos (P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three
c. gross annual sales, earnings, receipts or output amount to Three
million pesos (P3,000,000)or more.
d. gross quarterly sales, earnings, receipts or output exceed One
Hundred Fifty Thousand (P150,000).
22. Your client dies on July 14, 2018. You are appointed as administrator. You
withdraw from his bank deposit P100,000 because the estate needs cash to
settle some obligations. What is the consequence of your withdrawal from
the decedent’s bank deposit?
a. subject to final withholding tax of 6%
b. subject to creditable withholding tax of 6%
c. Not subject to withholding tax
d. Subject to penalty and interest because such withdrawal is not
allowed.
23 and 24 are based on the following: A resident decedent left the following
properties:
Real properties P 10,000,000
Personal properties excluding bank deposit 15,000,000
Bank deposit (P 940,000 net of final tax, was withdrawn
from the account of the decedent after the decedent 3,000,000
died)
23. The gross estate of the decedent was:

a. P 28,000,000
b. P 27,000,000
c. P 26,000,000
d. P 25,000,000
24. The final withholding tax on amount withdrawn was:

a. P 200,000
b. P 100,000
c. P 60,000
An unmarried decedent died leaving properties he inherited 4 ½ years ago which

had fair market value of P800,000 at the time of his death (P650,000 at the time
of inheritance). The present decedent mortgaged the property for P50,000 and
paid P20,000 before he died). Other properties in his gross estate had fair
market value of P1,000,000. The total expenses, losses, indebtedness, taxes and
transfer for public purpose amounted to P300,000.
25. How much was the vanishing deduction?

a. P 225,000
b. P 108,333
c. P 102,900
d. P 100,000

lOMoARcPSD|4784205
TAXATION
26 and 27 are based on the following: Transfer Taxes The decedent is a resident
unmarried head of family who died on March 1, 2019. He left the following properties,
obligations and expenses:
Real and personal properties P14,000,000

Family home 30,000,000
Ordinary deductions
Unpaid real estate tax 2,000,000
26. The taxable net estate is:

a. P42,000,000.
b. P32,000,000.
c. P27,000,000.
d. P23,000,000.
27. Continuing the preceding number, the estate tax return shall be filed and the
estate tax paid on or before to avoid penalties:
a. March 1, 2020
b. March 1, 2021
c. September 1, 2018
28 and 29 are based on the following: During the current year, Jose Tugas who resides
in 158 R. Papa Street, Sampaloc Manila and with TIN 135-567-890-006 made the following
gifts:
Date Donee Amount of donation
June 1, 2018 Anton, his son, on P150,000 cash
account of his
marriage celebrated
June 1, 2018
July 10, 2018 His friend Carlos P400,000 a second hand motor
vehicle
September 30, 2018 His daughter Dana P450,000 cash dowry, on account
of her scheduled marriage on
October 25, 2018
November 23, 2018 His father A parcel of land worth P180,000,
subject to the condition that
his father would assume the
mortgage indebtedness of Jose
in the amount of P40,000;
28. Using Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on line
38 (Total net gifts subject to tax) for the return to be filed on November 23,
2018?
a. P1,140,000
b. P 890,000
c. P 140,000
29. Using the Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on
line 18?
a. P53,400
b. P 8,400
c. (P6,600)
30 to 33 are based on the following: Your client, Antonio Manuel, is engaged in various
transactions that are subject to percentage taxes. His address is 143 S. Loyola
Street, Sampaloc, Manila. The TIN is 143-678-910-005. He is under RDO 032. Email ad
is Antoman@gamil.com.
The following data for the first quarter of the current year are presented for your
perusal. Answer the questions by filling up the line in the actual Quarterly
Percentage Tax Return (2551Q).

lOMoARcPSD|4784205
TAXATION
Gross receipts, sale of gas and water P1,500,000
Expenses, sale of gas and water 200,000
Gross receipts, rentals of office spaces, net of 1% 742,500
withholding tax
Expenses, rental of office spaces 150,000
Gross receipts, life insurance premiums 800,000
Expenses, life insurance business 100,000
30. Using line 14 of BIR Form 2551 Q, how much is total tax due?
a. P91,500
b. P68,500
c. P53,500
d. P30,000
31. Assuming your client filed the return and paid the tax on July 25 and it was found
out that it was due to willful neglect, using line 20, how much is the surcharge?
a. P36,305
b. P34,250
c. P26,750
d. P17,125
32. Using the same information in the preceding number, using line 21, how much is the
interest?
a. P8,220
b. P3,425
c. P1,605
d. P1,600
33. Using line 24, how much is the total amount payable excluding compromise penalty?
a. P104,805
b. P 85,730
c. P 74,355
d. P 74,350
34 and 35 are based on the following: In the year 2021, Mr. Nicko Macariola has the
following transactions:
Gross receipts, trucking business P1,500,000

Gross receipts, lease of residential units
(monthly rental is P20,000 per unit) 2,500,000
Gross receipts, practice of accountancy 1,000,000
Sale of four (4) residential lots at P1,500,000 each to
four (4) individual buyers for socialized housing 6,000,000
Sale of three (3) parking spaces at P500,000 each 1,500,000
34. How much is the VAT-exempt gross receipts, assuming the taxpayer is VAT-registered?
a. P8,500,000
b. P6,000,000
c. P3,500,000
35. How much is total VAT-subject amount, assuming the taxpayer is not VAT-registered?
a. P8,500,000
b. P7,500,000
c. P6,500,000
36. In 2018 a stockholder of a closely held corporation owns 100,000 shares before the
IPO. The cost of the share is P1,000,000. During the IPO, the shares are selling
at P12 per share. After the IPO, the outstanding shares of the closely held
corporation are 1,000,000 shares and are now selling at P14 per share at the local
stock exchange.
Your friend asks for your advice whether to sell his shares during the IPO through
the local stock exchange or sell after the IPO not through the local stock exchange.

lOMoARcPSD|4784205
TAXATION
What advice will you give him to minimize income tax?
a. Sell during the IPO because he will pay lesser tax.
b. Sell after the IPO but directly to a buyer so that he will pay lesser
tax.
c. Sell any time because there is no advantage as far as taxes due are
concerned.
d. Sell it below cost after the IPO directly to a buyer so he will not
be subject to tax on capital gain.
37 and 38 are based on the following: ABC Corporation, VAT-registered real estate
dealer, sold a residential lot on July 2, 2021 for P1,500,000. The down payment was
P200,000. The first installment of P100,000 was made on the year of sale. The zonal
value of the subject property at the time of sale amounted to P2,000,000.
37. Would the sale qualify under installment plan?

a. Yes, because the initial payment did not exceed 25% of the selling
price.
b. No, because the amount of the initial payments were not known.
c. Yes, because the sale had initial payments and, therefore, qualified
under installment plan.
d. No, because, as a rule, sale of real property would always be
considered sale under cash basis.
38. How much was the output tax on the installment payment?
a. P48,000
b. P36,000
c. P32,000
d. Exempt from VAT
39. Mr. Florence Binaluyo donates a piece of land to the City of Masbate. The fair
market value per BIR of the piece of land is P2,000,000 and its value per Tax
Declaration is P1,800,000. How much is the documentary stamp tax, if any?
a. P30,000
b. P30,000
c. None, exempt from DST
40. On every original issue, whether on organization, reorganization or for any lawful
purpose, of shares of stock by any association, company or corporation, the
documentary stamp tax is:
a. One peso and fifty centavos (P1.50) on each Two hundred pesos
(P200), or fractional part thereof, of the par value of such stock.
b. Two pesos (P2.00) on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of stock
c. Three pesos (P3.00) on each Two hundred pesos (P200), or fractional
d. Fifteen pesos (P15.00)on each Two hundred pesos (P200), or fractional
41. These are taxes on goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition and to things imported
as well as services performed in the Philippine, which tax shall be in addition
to the value-added tax.
a. Percentage Taxes
b. Income Tax
c. Documentary Stamp Taxes
d. Excise Taxes
42. Which of the following articles shall be subject to specific excise tax?
a. Excise tax on alcoholic products
b. Excise tax on automobiles
c. Excise tax on non-essential services
d. Excise tax on sweetened beverages

lOMoARcPSD|4784205
TAXATION
43. A residential building located in one of the cities in Metro Manila has a fair
market value of P10,000,000. The city ordinance fixed the actual assessment level
at 60%. How much is the basic real property tax, excluding the Special Educational
Fund (SEF)?
a. P120,000
b. P 60,000
c. P30,000
44. Unless otherwise provided in the Local Government Code, the tax period of all
local taxes, fees and charges shall be:
a. calendar year.
b. fiscal year.
c. either calendar year or fiscal year at the option of the taxpayer.
d. neither calendar year nor fiscal year at the option of the LGU.
45. Who of the following shall not qualify as senior citizen?

a. Resident Filipino citizen, 60 years old
b. Filipino citizen with dual citizenship, 60 years old, 6 months
residency in the Philippines
c. Resident alien, 65 years old
46. A Company that hires a PWD shall be allowed subject to certain conditions:
a. Ten percent (10%) of the total amount paid as salaries and wages to
senior citizens as additional deduction.
b. Fifteen percent (15%) of the total amount paid as salaries and wages
to senior citizens as additional deduction.
c. Twenty-five percent (25%) of the total amount paid as salaries and
wages to senior citizens as additional deduction.
d. Thirty percent (30%) of the total amount paid as salaries and wages
to senior citizens as additional deduction.
47. One of the following is not qualified to register as Barangay Micro Business
Enterprise (BMBE).
a. Bakery with total assets not exceeding P3,000,000
b. Motor shop with total assets not exceeding P3,000,000
c. A CPA practitioner with total assets not exceeding P3,000,000
d. Farm producing agricultural products with total assets not exceeding
P3,000,000
48. Which of 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
49. LAB Corporation originally issued stock dividends valued at P2,000,000. How much
is the documentary stamp tax, if any?
a. P30,000
b. P20,000
c. P15,000
50. The final income tax return for the taxable year 2018 which was due on April 15,
2019 was filed earlier on March 15, 2019. A substantially amended return was
filed on May 31, 2019. When is the last day to make a valid assessment?
a. March 15, 2022
b. April 15, 2022
c. May 31, 2022
d. May 31, 2025

lOMoARcPSD|4784205
TAXATION
SITUATIONAL
During the year 2018, ABC Corporation paid for the monthly rental of a residential
house of its branch manager, Mr. J. de la Cruz, amounting to P 68,000.
51. How much is the value of the fringe benefit?

a. P68,000
b. P34,000
c. P16,000
d. P11,333
52. How much is the monetary value of the fringe benefit?

a. P68,000
b. P34,000
c. P16,000
d. P11,333
53. How much is the fringe benefit tax?

a. P18,308
b. P16,000
c. P 6,000
SITUATIONAL
An individual taxpayer holds shares of stock as investment which he bought from a

publicly-listed company for P500,000 (P500,000 par value). The shares are listed
and traded in the local stock exchange. He sells them for P750,000. How much is the
capital gains tax on the sale, if any?
54. How much is the capital gains tax, if any?

a. P112,500
b. P 37,500
c. P 4,500
d. None, not subject to capital gains tax
55. How much is the capital gains tax on the sale assuming the corporation from which
the shares are bought is not compliant with the mandatory minimum public ownership?
a. P112,500
b. P 37,500
c. P 4,500
d. None, not subject to capital gains tax
SITUATIONAL
A resident citizen, 50 years old, married, with three (3) qualified dependent
children asks you to assist him in computing his taxable net income for the year
2018:
Gross professional income, net of 15% withholding tax P680,000

Professional expenses 300,000
Retirement benefits received from his previous
employer that maintained a reasonable private
pension plan (he served the company for 12 years) 250,000
Lump sum benefits received from SSS 200,000
Prize in a sports tournament sponsored by a group
of businessmen promoting health products 50,000
Gain from sale of bonds (maturity period is 4 years) 10,000
Interest income from bonds with a maturity period
of 7 years 20,000
Interest on long term deposits with maturity period
of 5 years 30,000
Philippine Lotto winnings 500,000
Share in the net income of a business partnership 100,000

lOMoARcPSD|4784205
TAXATION
56. How much is the total amount of excluded or exempted income?
a. P1,150,000
b. P1,000,000
c. P 500,000
d. P 480,000
57. How much is the final withholding tax on certain income?

a. P130,000
b. P120,000
c. P110,000
d. P 20,000
58. How much is the taxable net income?

a. P651,176
b. P510,000
c. P385,000
d. P375,000
59. How much is the tax due and payable?

a. 81,544
b. 61,544
c. 57,500
d. (62,500)
60. How much is the total income tax expenses for the year?
a. P177,500
b. P167,500
c. P 77,500
d. P 57,500
SITUATIONAL
The decedent was a resident unmarried head of family died on January 6, 2022. The
following data were provided from his estate:
Real and personal properties (excluding a piece of land valued

at P2,000,000 transferred mortis causa to his son, and car
valued at P500,000 which was revocably transferred to a nephew,
decedent waived his right to revoke before he died)
P14,000,000
The following items were claimed as deductions from the gross estate
Funeral expenses P 100,000
Judicial expenses 200,000
Loss of a personal property due to theft (500,000 recovered
from Insurance) 1,000,000
Transfer for public use 500,000
61. How much is to be reflected in line 34 of BIR Form No. 1801 (gross estate)?
a. P46,500,000
b. P46,000,000
c. P42,500,000
d. P42,000,000
62. How much is to be reflected in line 35 of BIR Form 1801 (the total ordinary
deductions)?
a. P3,800,000
b. P3,500,000
c. P3,200,000
d. P3,000,000
63. How much is to be reflected in line 37D of BIR Form 1801 (the total special
deductions)?
B a. P15,000,000
b. P11,000,000
c. P 2,000,000
d. P 1,500,000

lOMoARcPSD|4784205
TAXATION
64. How much is to be reflected in line 40 of BIR Form 1801 (net taxable estate)?
a. P42,000,000.
b. P32,000,000.
c. P28,000,000.
d. P23,500,000.
65. How much is to be reflected in line 16 of BIR Form No. 1800 (the donor’s tax), if
any, on certain transfer mentioned in the information given above?
a. P30,000
b. P15,000
c. P10,000
d. None, not subject to donor’s tax
SITUATIONAL
A VAT-registered corporation has the following data taken from the books of accounts
for the first calendar quarter of 2018:
Gross sales P150,000,000
Sales returns and allowances 10,000,000
Sales discount (given at the time of sale including P500,000
discount given to senior citizens) 4,500,000
Cost of sales 90,500,000
Office equipment purchased January 1, 2018 1,100,000
Vehicle for land transport imported January 1, 2018 2,500,000
Pre-owned helicopter acquired January 1, 2018 10,000,000
Maintenance expenses, vehicle for land transport and helicopter 150,000
Purchase of goods for sale, (included in the cost of sales above) 30,000,000
Operating expenses (40% with passed-on VAT) 5,000,000
Office supplies purchased (wholly used) 900,000
VAT payments for January 5,000,000
February 2,000,000
66. How much is the output tax?
a. P18,000,000
b. P16,800,000
c. P16,320,000
d. P16,260,000
67. Can the taxpayer claim creditable input tax on importation of vehicle for land
transport?
a. Yes, because the vehicle for land transport is used for the VAT-
subject business.
b. No, because the value of the vehicle exceeded P2,400,000.
c. Yes, because the vehicle is a depreciable asset for income tax
purposes.
d. No, because input tax is not allowed on importation.
68. Can the taxpayer claim input tax on acquisition of helicopter?
a. Yes, because the helicopter is used for the VAT-subject business.
b. No, because the helicopter is a non-depreciable asset, hence, no
input tax shall be allowed.
c. Yes, because the helicopter is a depreciable asset for income tax
purposes, hence, input tax shall be allowed.
d. No, because input tax is not allowed on helicopters without any
exception.
69. How much is the creditable input tax?
a. P4,080,000
b. P3,954,600
c. P3,950,200
d. P3,948,000
70. How much is the VAT payable upon filing of the quarterly return on or before April
25, 2018?
a. P6,920,000
b. P5,845,400
c. P5,370,000
d. P5,305,400
- END –

lOMoARcPSD|4784205
TAXATION
ANSWERS & SOLUTIONS/CLARIFICATIONS

1 A 26 C 51 A
2 A 27 A 52 B
3 D 28 B 53 A
4 A 29 B 54 D
5 A 30 C 55 B
6 C 31 C 56 C
7 C 32 D 57 B
8 D 33 D 58 B
9 A 34 B 59 D
10 C 35 C 60 A
11 A 36 D 61 B
12 C 37 A 62 D
13 A 38 A 63 A
14 D 39 C 64 C
15 D 40 B 65 B
16 C 41 D 66 D
17 A 42 D 67 B
18 A 43 A 68 B
19 A 44 A 69 B
20 B 45 C 70 D
21 A 46 C
22 A 47 C
23 B 48 D
24 C 49 B
25 B 50 C
1. Reference: Section 22 (E) (4), NIRC, as amended
2. Reference: Section 24 (A) (1) (a), (b) and (c), NIRC, as amended
3. Reference: Section 25 (C), NIRC, as amended
Section 4 (C), Revenue Regulations No. 8-2018

The preferential income tax rate under subsection (C) (D) and (E) of Section 25 of the
Tax Code, as amended, shall no longer be applicable without prejudice to the application
of preferential tax rates under existing international tax treaties, if warranted. Thus. all
concerned employees of the regional or area headquarters and regional operating
headquarters of multinational companies, offshore banking units and petroleum service
contractor and subcontractor ‘s shall be subject to the regular income tax rate under
Sec. 24(A)(2) ta) of the Tax Code. as amended.
4. Compensation income P5,000,000

Tax due under Section 24 (A)
2,000,000 P490,000
3,000,000 x 32% 960,000 P1,450,000
5. References: Section 2.27 (E) (1), Revenue Regulations No. 9-98, as amended by
Revenue Regulations No. 12-2007
Section 2.28 (A) (2), Revenue Regulations No. 9-98, as amended by
Revenue Regulations No. 12-2007

lOMoARcPSD|4784205
TAXATION
6. Gross receipts P1,000,000
Less: Discounts (P 100,000)
Returns and allowances ( 150,000) (250,000)
Net receipts 750,000
Less: Cost of services
Salaries of personnel (P 300,000)
Fees of consultants ( 50,000)
Rental of equipment ( 70,000 ) (420,000)
Gross income 330,000
Less: Operating expenses 420,000
Net operating loss (P 90,000)
RCIT P - ____
MCIT (not subject yet) P___-____
Tax due and payable Zero
8. Reference: Section 52, Revenue Regulations No. 2
13. Reference: Section 6 (E), NIRC, as amended under TRAIN
14. Reference: Section 2, Revenue Regulations No. 30-2002
16. References: CIR vs. Goodrich Phils., Inc. G.R. 104171, Feb. 24, 1999
Lim vs. CA, G.R. 48134-37, Oct. 18, 1990
In criminal tax cases involving tax offenses punishable under the Tax Code, prescription is
construed strictly against the taxpayer.
17. Reference: Section 210, NIRC, as amended
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. - If at any
time prior to the consummation of the sale all proper charges are paid to the officer
conducting the sale, the goods or effects distrained shall be restored to the owner.
18. An order the to expedite the processing of Letter Notice (LN) cases, the issuance of Notice
for Informal Conference may immediately commence, even without prior issuance of Letters
of Authority, as required in certain situations, as prescribed in the existing RMOs on the LN
system.
19. References: Section 228, NIRC, as amended

Section 3.1.5, Revenue Regulations No. 12-99
as amended under Revenue Regulations No. 18-2013
The term “relevant supporting documents” refer to those documents necessary to support
the legal and factual bases in disputing a tax assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting documents shall not
apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be denied.
23. Real properties, Philippines P10,000,000

Bank deposit (P3,000,000 – P1,000,000) 2,000,000
Gross estate P27,000,000
24. Amount withdrawn P1,000,000

Rate 6%
Final withholding tax P 60,000

lOMoARcPSD|4784205
TAXATION
25. Value to take P 650,000

Less: Mortgage paid -
Less: Proportional deduction (650,000/1,800,000 x 300,000) 108,333
Final basis 541,667
Rate 20%
26. Reference: Section 2, Revenue Regulations No. 30-2002

Less: Deductions 2,000,000
Estate after deductions 42,000,000
Less: Family home (10,000,000)
Standard deduction ( 5,000,000)
Taxable net estate P27,000,000
28. 25 Personal property (From Part V Schedule A) P -

26 Real property (From Part V Schedule B) 180,000
27 Total gifts in this return 180,000
Less: Deductions allowed (Sum of items 28 to 32)
28 Mortgage assumed by the donee 40,000
34 Total net gifts in this return (Item 27 less Item 28) 140,000
35 Add: Total net gifts during the calendar year (Item 36 of return
previously filed with the year)
June 1, 2018 150,000
July 10, 2018 400,000
September 30, 2018 450,000 1,000,000
36 Total net gifts (Sum of Items 34 and 35) 1,140,000
38/14 Total net gifts subject to tax (Item 36 less Item 37) P 890,000
29. 14 Total net gifts subject to tax (From Part IV Item 38) P890,000
16 Total donor’s tax due (Item 14 x Item 15) 53,400
17 Less: Tax credit/payments
17A Payments for prior gifts during the taxable year
(1,000,000 – 250,000 x 6%) 45,000
18 Tax payable/Overpayment ((Item 16 less Item 17A) P 8,400
30. Alpha numeric

tax code (ATC) Taxable amount Rate Tax due
PT 060 P1,500,000 2% P30,000
PT 010 750,000 1% 7,500
PT 120 800,000 2% 16,000
Total tax due P53,500
31. Total tax due P53,500

Surcharge rate 50%
Surcharge for willful neglect P26,750
32. Interest on delinquency (April 25 to July 25)

(53,500 x 12% x 91/365) P1,600

lOMoARcPSD|4784205
TAXATION
33. 14 Total tax due (From schedule 1 item 7) P53,500

Less: Tax credit/payment (attach proof)
15 Creditable percentage tax per BIR Form No. 2307
7,500
Tax still payable 46,000
Add: Penalties
20 Surcharge 26,750
21 Interest 1,600
Total amount payable P74,350
34. Sale of four (4) residential lots at P1,500,000 each to four (4) individual
buyers for socialized housing P6,000,000
35. Gross receipts, trucking business P1,500,000

Gross receipts, lease of residential units 2,500,000
Vatable gross amount P6,500,000
36. Sell directly to

Sell during IPO buyer after IPO
Gross selling price P1,200,000 P1,400,000
Less: Cost - 1,000,000
Gross selling price/net capital gain P1,200,000 P 400,000
Rate 4% 15%
Tax due P 48,000 P 60,000
Ratio = 100,000 shares/1,000,000 shares 10%
37. Initial payment/selling price (300,000/1,500,000 = 20%) does not exceed 25%.
38. 300,000/1,500,000 x 2,000,000 = 400,000 x 12% = 48,000
39. Transfers exempt from donor’s tax under Section 101(a) and (b) of the Tax Code shall be
exempt from the tax imposed under this Section.
43. Fair market value P10,000,000

Multiplied by assessment level 60%
Assessed Value 6,000,000
Tax rate 2%
Basic real property tax P 120,000
46. Conditions:
a. That such entities present proof as certified by the Department of Labor and
Employment that disabled persons are under their employ:
b. The disabled employee is accredited with the Department of Labor and Employment
and the Department of Health as to his disability, skills and qualifications.
47. BMBE refers to any business entity or enterprise engaged in the production, processing or
manufacturing of products or commodities, including agro-processing, trading and services,
whose total assets including those arising from loans but exclusive of the land on which the
particular business entity's office, plant and equipment are situated, shall not be more than
Three Million Pesos (P3,000,000.00).
“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.

lOMoARcPSD|4784205
TAXATION
49. Documentary stamp tax (P2,000,000/200 x P2) = P20,000
50. If the return is amended substantially different from the original return, the three (3) year
prescriptive period shall be counted from the filing of the amended return.
There is substantial amendment when a new return is filed declaring more losses, which
can only be done either:
1) In reducing gross income, or
2) In increasing the items of deductions claimed.
If the amendment is minimal, the counting of the prescriptive period is still the original
period. (CIR vs. Phoenix Assurance, Inc.’ G.R. L-19727, May 20, 1965, 14 SCRA 52
52. P68,000 x 50% P34,000
53. P34,000 divided by 65% x 35 P18,308
55. Selling price P750,000

Less: Cost 500,000
Capital gain P250,000
Capital gains tax 250,000 x 15% P 37,500
56. Retirement benefits received from his previous employer that maintained
a reasonable private pension plan (he served the company for 12 years)
P250,000
Lump sum benefits received from SSS 200,000
Interest income from bonds with a maturity period of 7 years 20,000
Interest on long term deposits with maturity period of 5 years 30,000
Total P500,000
57. Prize in a sports tournament sponsored by a group of businessmen

promoting health products (P50,000 X 20%) P 10,000
Share in the net income of a business partnership (P100,000 X 10%) 10,000
Philippine Lotto winnings (500,000 x 20%) 100,000
Total P120,000
58. Gross professional income, net of 15% withholding tax (P680,000/85%) P800,000
Less: Professional expenses 300,000
Net income from operation 500,000
Add: Non-operating income
Gain from sale of bonds (maturity period is 4 years) 10,000
Taxable income P510,000
60. Regular income tax P 57,500

Final tax on passive income 120,000
Total P177,500
Note: The income tax expenses include the regular income tax, final tax on passive income
and capital gains tax, if any.
61. Real and personal properties (14,000,000 + 2,000,000) P16,000,000

62. Unpaid real estate tax P2,000,000

Loss of a personal property due to theft 500,000
Transfer for public use 500,000
Total P3,000,000

lOMoARcPSD|4784205
TAXATION
63. Family home P 10,000,000

Standard deduction 5,000,000
Total P 15,000,000
64. 34 Gross estate P 46,000,000

35 Less: Ordinary deductions 3,000,000
36 Estate after ordinary deductions 43,000,000
37D Less: Total special deductions 15,000,000
40 Net taxable estate P 28,000,000
65. 36 Total net gifts P 500,000

38 Total net gifts subject to tax 250,000
16 Total donor’s tax due P 15,000
66. Gross sales P 150,000,000

Less: Sales returns and allowances 10,000,000
Sales discount 4,500,000 14,500,000
Net sales P 135,500,000
Tax rate 12%
Output tax P 16,260,000
67. Reference: Section 3 B, Revenue Regulations No. 12-2012

Only one vehicle for land transport is allowed for the use of an official or employee, the
value of which should not exceed P2,400,000.
68. Reference: Section 3 C, D and E, Revenue Regulations No. 12-2012
C. No depreciation shall be allowed for yachts, helicopters, airplanes and/or aircrafts, and
land vehicles which exceed the threshold amount, unless the taxpayer’s main line of
business is transport operations or lease of transportation equipment and the vehicles
purchased are used in said operations.
D. All maintenance expenses on account of non-depreciable vehicles for taxation
purposes are disallowed in its entirety.
E. The input taxes on the purchase of non-depreciable vehicles and all input taxes on
maintenance expenses are likewise disallowed for taxation purposes.
69. Office equipment (1,100,000 x 12% divided 60 x 3) P 6,600

Purchase of goods for sale (30,000,000 12%) 3,600,000
Operating expenses (5,000,000 x 40% x 12%) 240,000
Office supplies purchased (900,000 x 12%) 108,000
Total P3,954,600
70. Output tax P16,260,000

Less: Input taxes 3,954,600
VAT payable 12,305,400
Less: VAT payments for January and February 7,000,000
Tax payable P5,305,400

CPA Review Classes for De La Salle University Dasmariñas  Week No. 1
TAXATION A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAX101: ESTATE TAXATION

A. ESTATE TAX RATE
Effective January 1, 2018 There shall be levied, assessed, collected and paid upon the transfer of
(Under TRAIN) the net estate of every decedent, whether resident or nonresident of the
Philippines, a tax at the rate of six percent (6%) based on the value of such
net estate.”
B. GROSS ESTATE
Composition of Gross Estate
Resident or citizen decedent Non-resident alien decedent
Real properties Wherever situated Situated in the Philippines
Personal properties Wherever situated Situated in the Philippines
Taxable transfers Wherever situated Situated in the Philippines
C. GROSS ESTATE OF MARRIED DECEDENTS

Conjugal partnership of gains Absolute community of
(CPOG) properties (ACOP)
Exclusive properties of the Included Included
decedent
Common properties Included Included
Exclusive properties of the Not included Not included
surviving spouse
D. COMPOSITION OF THE GROSS ESTATE OF MARRIED DECEDENTS

1. Conjugal Partnership of Gains (Relative Community of Properties)
Exclusive properties Conjugal properties
a. Properties brought into the marriage a. Properties acquired by onerous title during the marriage at the
as either of the spouse’s own; expense of the common fund, whether the acquisition be for the
partnership, or for only one of the spouses;
b. Properties acquired by gratuitous b. Properties obtained from labor, industry, work or profession of
(or lucrative) title during the either or both of the spouses;
marriage;
c. Properties acquired by right of c. The fruits, natural, industrial or civil, due or received during the
redemption or by exchange with marriage from the common property, as well as the net fruits
other property belonging to only from the exclusive property of each spouse;
one of the spouses;
d. Properties acquired with exclusive d. The share of either spouse in the hidden treasure which the law
money of either spouse. awards to the finder or owner of the property where the treasure
is found;
e. Properties acquired through occupation such as fishing and
hunting;
f. Livestock existing upon the dissolution of the partnership in
excess of the number of each kind brought to the marriage by
either spouse;
g. Properties acquired by chance, such as winnings from gambling
and betting.
2. Absolute Community of Properties

Exclusive properties Community Properties
a. Properties acquired during the a. All properties owned
marriage by gratuitous (or lucrative) title by either spouse, and the fruits as by spouses at the time
well as the income thereof, if any, unless it is specifically provided by the of the celebration of
donor, testator or grantor that they shall form part of the community; marriage or acquired
b. Property for personal and exclusive use of either spouse, however, jewelry thereafter.
shall form part of the community property;
c. Property acquired before the
marriage by either spouse who has legitimate descendants by a former
marriage, and the fruits as well as the income, if any, of such property.
Page 1 of 8 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX101
Week 1: ESTATE TAX
3. Exercise: The decedent was married at the time of death. He was survived by his wife and children.
Indicate proper classification with a check mark.
EXCL- CONJ- EXCL- COMM-
FMV CPOG CPOG ACOP ACOP
Cash owned by the decedent before the marriage P5,000,000
Real property inherited by the decedent during the
6,000,000
marriage
Personal property received by the wife as gift before
400,000
the marriage
Property acquired by decedent with cash owned
600,000
before the marriage
Personal effects of the decedent purchased with the
500,000
exclusive money of the wife
Jewelry purchased with cash of the surviving spouse
1,000,000
earned before marriage
Property unidentified when and by whom acquired 1,200,000
Cash representing income received during the
2,000,000
marriage from exclusive property
Property acquired before marriage by the decedent
who has legitimate descendants by a former 3,000,000
marriage
E. DETERMINATION OF THE VALUE OF THE ESTATE

Valuation a. Generally – Fair market value at the time of decedent’s death;
Rules b. Real property – Higher between fair market value, BIR (zonal value) and fair market value,
Provincial and City assessor (assessed value);
c. Personal properties – Recently purchased – Purchase price
Not recently purchased – Pawn value x 3
d. Securities (shares of stock)
1) Traded in the local stock exchange – Mean between the highest and lowest quotations
on valuation date or on a date nearest the valuation date;
2) Not traded in the local stock exchange
a) Common (ordinary) shares – Book value on valuation date or on a date nearest the
valuation date;
b) Preferred (preference) shares – Par value
F. RULE OF RECIPROCITY (NON RESIDENT ALIEN DECEDENT)

1. Properties covered Intangible personal property situated in the Philippines owned by non-resident
by reciprocity alien decedent.
2. Basic rules When there is reciprocity – The intangible personal property of non-resident
alien situated in the Philippines are not included in the gross estate.
When there is no reciprocity – The intangible personal property of non-
resident alien situated in the Philippines are included in the gross estate.
3. Properties The following shall be considered as situated in the Philippines (among
considered situated others):
in the Philippines a. Franchise which must be exercised in the Philippines;
b. Shares, obligations or bonds issued by any corporation or sociedad
anonima organized and constituted in the Philippines in accordance with
its law;
c. Shares, obligations or bonds issued by any foreign corporation 85%
of the business of which is located in the Philippines;
d. Shares, obligations or bonds issued by any foreign corporation if
such shares, obligations or bonds have acquired a business situs in
the Philippines;
e. Shares or rights in any partnership, business or industry established
in the Philippines.
G. FAMILY HOME
1. The family home, constituted jointly by the husband and the wife or by an unmarried head of the
family, is the dwelling house where they and their family reside and the land on which it is situated.
2. The family home must be the actual residential home of the decedent and his family at the time of his
death, as certified by the Barangay Captain of the locality the family home is situated.
3. The total value of the family home must be included as part of the gross estate of the decedent.
H. OTHER ITEMS
1. Proceeds of life Generally taxable, except when:
insurance a. A third person is irrevocably designated as beneficiary;
b. The proceeds/benefits come from SSS or GSIS;
c. The proceeds come from group insurance.
Page 2 of 8
Week 1: ESTATE TAX
Assumption when When the designation of the beneficiary is not stated or is not clear, the
designation is not Insurance Code assumes revocable designation.
stated
2. Claims against a. The full amount of the claims is included in the gross estate.
insolvent persons b. The uncollectible amount of the claims is deducted from the gross estate.
3. Amount received by a. R.A. No. 4917 is entitled ‘An Act Providing That Retirement Benefits of
heirs under R.A. No. Employees of Private Firms Shall Not be Subject to Attachment, Levy,
4917 Execution, or Any Tax Whatsoever’.
b. The amount received by heirs from decedent’s employer as a consequence of
the death of the decedent-employee is included in the gross estate of the
decedent.
c. The amount above is also allowed as deduction from gross estate.
I. TAXABLE TRANSFERS
1. Examples of taxable a. Transfer in contemplation of death – motivated by thought of death although
transfer death may not be imminent;
b. Revocable transfer – the enjoyment of the property may be altered,
amended, revoked or terminated by the decedent;
c. Transfer passing under general power of appointment;
d. Transfer with retention or reservation of certain rights;
e. Transfer for insufficient consideration.
2. Motives that a. To relieve donor from the burden of management;
preclude a transfer b. To save income or property taxes;
from the category c. To settle family litigated and un-litigated disputes;
of one made in d. To provide independent income for dependents;
contemplation of e. To see the children enjoy the property while the donor is alive;
death f. To protect the family from hazards of business operations; and
g. To reward services rendered.
J. EXEMPTIONS/EXCLUSIONS
1. Exemptions of a. The merger of usufruct in the owner of the naked title;
certain b. The transmission or delivery of the inheritance or legacy by the fiduciary heir
acquisitions and or legatee to the fideicommissary;
transmissions c. The transmission from the first heir, legatee or donee in favor of another
beneficiary in accordance with the desire of the predecessor; and
d. All bequest, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which inures to the
benefit of any individual: Provided, however, that not more than 30% of the
said bequest, devises, legacies or transfers shall be used by such institutions
for administration purposes.
2. Exclusions from a. Amount received as war damages;
gross estate under b. Amount received from US Veterans Administration;
special laws c. Benefits from GSIS and SSS.
K. DEDUCTIONS ALLOWED TO ESTATE

1. Ordinary Deductions Under TRAIN
a. Losses Allowed actual amount Allowed actual amount (pro-rated)
b. Indebtedness (Claims
against the estate) Allowed actual amount Allowed actual amount (pro-rated)
c. Taxes Allowed actual amount Allowed actual amount (pro-rated)
d. Claims against insolvent Allowed uncollectible amount due to Allowed uncollectible amount due
debtor insolvency to insolvency (pro-rated)
e. Unpaid mortgage Allowed actual amount Allowed actual amount (pro-rated)
f. Property previously taxed
(vanishing deduction) Allowed amount per computation Allowed amount per computation
g. Transfer for public Allowed actual amount Allowed actual amount
purpose
2. Special Deductions Under TRAIN

a. Family home Allowed deduction P10,000,000 Not allowed as deduction
maximum
b. Standard deduction Allowed deduction P5,000,000 Allowed deduction P500,000
c. Amount received under
R.A. 4917 Allowed actual amount as Not allowed as deduction
deduction
3. Other Deduction Under TRAIN
Page 3 of 8
Week 1: ESTATE TAX

Share in the conjugal Allowed as deduction to married Allowed as deduction to married
property decedents decedents
L. DEDUCTIONS AMPLIFIED
a. Losses
Requisites for a) Incurred during the settlement of the estate; Actual amount of loss
deduction and b) Arising from fires, storms, shipwreck, or other casualties,
amount or from robbery, theft or embezzlement;
deductible c) Not compensated for by insurance or otherwise;
d) Not claimed as deduction for income tax purposes in an
income tax return;
e) Incurred not later than the last day for the payment of the
estate tax.
Exercise: Wonyoung, a Filipino resident, died on November 5, 2021, and his estate incurred losses:
First loss: From fire on February 2, 2021 of improvement on his property, not compensated by
insurance, P500,000;
Second loss: From flood on February 25, 2022 of household furniture also not compensated by
insurance, P300,000.
Third loss: From sale on February 20, 2022 of a property included in the gross estate, P100,000.
Fourth loss: From theft on April 5, 2022, P300,000, 70% compensated by insurance
Fifth loss: From robbery on May 5, 2022, P150,000, claimed as deduction from gross income
The deductible loss is: P__________________
b. Indebtedness (Claims against the estate)

Requisites for a) The liability represents a personal obligation of the deceased Debts or demands of
deduction and existing at the time of his death; pecuniary nature
amount b) The liability was contracted in good faith and for adequate and which could have
deductible full consideration in money or money’s worth; been enforced
c) The claim must be a debt or claim which is valid in law and against the deceased
enforceable in court; in his lifetime and
d) The indebtedness must not have been condoned by the could have been
creditor or the action to collect from the decedent must not reduced to simple
have prescribed. money terms
e) At the time the indebtedness was incurred the debt instrument
was duly notarized; and
f) If the loan was contracted within three (3) years before the
death of the decedent, the administrator or executor shall
submit a statement showing the disposition of the proceeds of
the loan
c. Unpaid taxes
Requisites for The tax must have Unpaid taxes that accrued before the decedent’s death but
deduction and accrued before the death not including:
amount of the decedent a) any income tax upon income received after the death of
deductible the decedent, or
b) property taxes not accrued before his death,
c) or any estate tax.
d. Claims against insolvent persons

Requisites for a) Value of claims is included in the gross estate; Claims that are not
deduction and b) The incapacity of the debtors to pay their obligation is collectible
amount deductible proven.
Exercise: Escolastica died with a claim against Juanico. Juanico has properties worth P250,000 and
obligations of P350,000. Included in the obligations of Juanico are P50,000 unpaid taxes owed to the
Government of the Philippines and P90,000 payable to Ms. Escolastica.
The deductible claim against insolvent debtors is P_____________________
e. Unpaid mortgage
Requisites for a) The fair market value of the mortgaged property without Amount of unpaid
deduction and deducting the mortgage indebtedness has been initially included mortgage
amount as part of the gross estate;
deductible b) The mortgage indebtedness was contracted in good faith and for
an adequate and full consideration.
2. Transfer for Public Use

Requisite for deductibility Amount deductible Deducted from
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Week 1: ESTATE TAX
The transfer must be testamentary in Amount of all bequest, legacies, devises, Exclusive
character or by way of donation mortis or transfers to or for the use of the property
causa executed by the decedent before his Government of the PH, or any political
death subdivision for exclusively public purpose
3. Property Previously Taxed (Vanishing Deduction)

Rates (based on
Requisites for deduction time gap) Format of computation
a. The date of death of the present 100% - if not more Value to take P xxx
decedent must not exceed 5 years than 1 year Less: Mortgage paid by present
from the date of death of the prior decedent xxx
decedent or date of donation. 80% - if more than Initial basis xxx
b. The property can be identified as the 1 year but not Less: Proportional deduction
one received from prior decedent, or more than 2 years (Initial basis/Gross estate
from the donor, or the property x Deductions) xxx
acquired in exchanged for the original 60% - if more than Final basis xxx
property so received. 2 years but not Rate xxx
c. The property must have formed part more than 3 years Vanishing deduction xxx
of the prior decedent’s gross estate
situated in the Philippines or been 40% -if more than Notes:
included in the total amount of the 3 years but not 1) Under conjugal partnership of gains
gifts of the donor made within 5 years more than 4 years vanishing is a deduction from exclusive
prior to the present decedent’s death. property.
d. The estate tax must have been finally 20% - if more than
determined and paid by the prior 4 years but not 2) Under absolute community of property,
decedent or the donor’s tax must have more than 5 years vanishing deduction may be deducted
been paid by the donor from exclusive property or community
e. No vanishing deduction was allowed in property.
determining the value of the net estate
of the prior decedent
f. Exercise on vanishing deduction

a. Decedent was a citizen of the Philippines who was single at the time of death. Compute the vanishing
deduction based on the following information that were made available:
Properties inherited two-and-a-half years before death:
Located outside the Philippines P3,000,000
Located in the Philippines
FMV, when inherited 6,500,000
FMV, time of death 7,000,000
Unpaid mortgage on the property when inherited 1,500,000
Unpaid mortgage on the property at the time of death 1,000,000
Property acquired through own labor 2,000,000
Losses, indebtedness, taxes, etc. (excluding the unpaid mortgage of P1,000,000) 800,000
Transfer for public use (included in property acquired through own labor) 970,000
4. Family Home Deduction

Conditions for the allowance of family home Amount deductible
deduction
1) The family home must be the actual residential 1) Exclusive property Full value included in the
home of the decedent and his family at the time gross estate
of his death, as certified by the Barangay Captain 2) Conjugal/ One-half (1/2) of the value
of the locality the family home is situated; community property included in the gross
2) The total value of the family home must be estate
included as part of the gross estate of the 3) Partly exclusive Exclusive part (full value)
decedent; and property, partly Conjugal/community part
3) Allowable deduction must be in an amount conjugal/ (1/2 x value)
equivalent to the current fair market value of the community property
family home as declared or included in the gross Note: In all three (3) cases, the maximum amount of
estate, or to the extent of the decedent’s interest family home deduction is P10,000,000.
(whether conjugal/community or exclusive
property), whichever is lower, but not exceeding
P10,000,000 (old deduction was P1,000,000.)
5. Standard Deduction Under TRAIN (effective January 1, 2018)

Resident/citizen decedent Non-resident alien decedent
Amount deductible P5,000,000 P500,000
6. Amount Received by Heirs Under R.A. No. 4917

Requisite for deduction Amount deductible
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Week 1: ESTATE TAX
The amount of the separation benefit is Any amount received by the heirs from decedent’s
included as part of the gross estate of the employer as a consequence of the death of the employee-
decedent decedent
7. Charges Against Exclusive or Conjugal/Communal Property Under the Family Code

a. Support of spouses, their common children and legitimate children of either spouse CONJ/COMM
b. All debts and obligations contracted during the marriage by the designated
administrator-spouse for the benefit of the conjugal partnership of gain or
community, or by both spouses, or by one spouse with the consent of the other CONJ/COMM
c. Debts and obligations contracted by either spouse without the consent of the other to
the extent that the family may have been benefited CONJ/COMM
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the
conjugal/community property CONJ/COMM
e. All taxes and expenses for mere preservation made during the marriage upon the
separate property of either spouse used by the family CONJ/COMM
f. Expenses to enable either spouse to commence or complete a professional or
vocational course, or other activity for self-improvement CONJ/COMM
g. Ante nuptial debts of either spouse insofar as they have redounded to the benefit of
the family CONJ/COMM
h. Value of what is donated or promised by both spouses in favor of their legitimate
children for the exclusive purpose of commencing or completing a professional or
vocational course or other activity for self-improvement CONJ/COMM
i. Expenses of litigation between the spouses unless the suit is found to be groundless CONJ/COMM
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family EXCLUSIVE
k. Support of illegitimate children of either spouse EXCLUSIVE
l. Liabilities incurred by either spouse by reason of crime or quasi-delict EXCLUSIVE
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other
kind of gambling whether permitted or prohibited by law EXCLUSIVE
8. Share of the Surviving Spouse

Gross conjugal/community properties P xxx
Less: Conjugal/community deductions xxx
Net conjugal/community properties (NCP) P xxx
Share of surviving spouse (1/2 x NCP) P xxx
M. Tax Credit for Estate Tax Paid to a Foreign Country

1. Entitled to tax credit Resident or citizen decedents
2. Deducted from estate The estate tax imposed in the Tax Code shall be credited with the amounts of
tax due any estate tax imposed by the authority of a foreign country.
3. Limitations on credit
a. Only one foreign Limit: Net estate, foreign/Entire net estate x Philippine estate tax or
country is Actual foreign estate tax, whichever is lower
involved
b. Two or more Limit (a) – Per foreign country : Net estate, per foreign country/Entire net
foreign countries estate x Philippine estate tax due or
are involved Limit (b) – By total: Net estate (all foreign countries)/Entire net estate x Phil.
estate tax due
whichever is lower
N. Administrative Provisions
1. Notice of Death Under TRAIN – No longer required
2. Estate Tax Returns Under TRAIN

a. Estate tax returns 1) In all cases of transfer subject to tax;
are filed 2) Where the said estate consists of registered or registrable property
(regardless of the value of the gross estate)
b. Persons to file 1) Executor
returns 2) Administrator or
3) Any of the legal heirs
c. Information shown in 1) The value of the gross estate of the decedent at the time of his death, or in
the returns case of non-resident alien of that part of his gross estate situated in the
Philippines;
2) The deductions allowed from the gross estate;
3) Such part of such information as may at the time be ascertainable and such
supplemental data as may be necessary to establish the correct taxes;
d. Time of filing returns Within one year from decedent’s death
e. Returns to be When the estate tax returns show a gross value exceeding P5,000,000
supported with
statements certified
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Week 1: ESTATE TAX
to by a CPA
f. Contents of the 1) Itemized assets of the decedent with their corresponding gross value at the
statements certified time of his death, or in case of non-resident alien, of that part of his estate
to by a CPA situated in the Philippines;
2) Itemized deductions;
3) The amount of tax due whether paid or still due and outstanding
g. Filing of certified Within 30 days after the promulgation of such order
copy of the schedule
of partition and the
order of the court
ordering the same
h. Extension for filing The Commissioner can, in meritorious cases, extend the filing of returns for a
the returns period not exceeding 30 days.
i. Place of filing of the In case of resident decedent:
returns a) Accredited agent bank;
b) Revenue District Officer;
c) Collection Officer, or
d) Duly authorized Treasurer of the city or municipality where the decedent
was domiciled at the time of death.
2) In case of non-resident decedent:
a) Revenue District Office where the executor or administrator is registered;
b) Revenue District Office having jurisdiction over the executor or
administrator’s legal residence (if executor or administrator is not
registered);
c) Office of the Commissioner (RDO No. 39 – South Quezon City) (if the
estate does not have an executor or administrator in the Philippines)
3. Exercise: Decedent died January 1, 2020. Determine whether or not notice of death, estate tax
return or statement certified by a CPA need to be filed (Y/N)
Estate Statement
Notice tax certified by
of death return CPA
Case 1 – Gross estate is P16,000,000; Deductions, P11,000,000
2 – Gross estate is P4,000,000; Deductions, P6,000,000
3 – Gross estate is P2,000,000, Deductions, P600,000
(NRA decedent)
4– Gross estate is P15,00,000 comprising of car, land and
shares of stock; Deductions, P10,000,000
5 – Gross estate is P5,000,000; Deductions are
P1,200,000 (NRA decedent)
6 – Gross estate is P5,500,000; Deductions are
P1,000,000 (NRA decedent)
4. Payment of Tax Under TRAIN (effective January 1, 2018)

a. Time of At the time the estate tax returns are filed
payment
b. Extension of 1) Estate is settled through the courts – not to exceed 5 years
time of 2) Estate is settled extrajudicially – not to exceed 2 years
payment
c. Requirement of If an extension is granted, the Commissioner or his duly authorized representative
bond if may require the executor, or administrator, or beneficiary, as the case may be, to
extension is furnish a bond in such amount, not exceeding double the amount of the tax and with
granted such sureties as the Commissioner deems necessary, conditioned upon the payment
of the said tax in accordance with the terms of the extension.
d. Extension of When there is negligence, intentional disregard of rules and regulations and fraud on
payment not the part of the taxpayer.
allowed
e. Liability for 1) The estate tax shall be paid by the executor or administrator before the delivery of
payment the distributive share in the inheritance to any heir or beneficiary;
2) Where there are two or more executors or administrators, all of them are severally
liable for the payment of tax;
3) The executor or administrator of an estate has the primary obligation to pay the
estate tax but the heir or beneficiary has subsidiary liability for the payment of that
portion of the estate tax which his distributive share bears to the value of the total
net asset.
f. Payment in 1) In case the available cash of the estate is insufficient to pay the total estate tax
installment due, payment by installment shall be allowed within two (2) years from statutory
date for its payment without civil penalty and interest.
2) In case of lapse of two years without the payment of the entire tax due, the
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Week 1: ESTATE TAX
remaining balance thereof shall be due and demandable subject to the applicable
penalties and interest reckoned from the prescribed deadline for filing the return
and payment of the estate tax.
3) No civil penalties or interest may be imposed on estates permitted to pay the
estate tax due by installment. Nothing, however, prevents the Commissioner from
executing enforcement action against the estate after the due date of the estate tax
provided that all the applicable laws and required procedures are
followed/observed.
g. Modes of 1) Payment through Authorized Agent Bank (AAB)
payment 2) Payment through Tax Debit Memo (TDM) (not acceptable as payments for
withholding taxes, fringe benefit tax, and for taxes, fees and charges collected
under special schemes or procedures or programs of the Government or BIR)
3) Payment through E-Payment System
4) Payment directly to the BIR
5) Payment through creditable withholding taxes
5. Acts Requiring Certification from the Commissioner that the Estate Tax Has been Paid
Acts requiring 1. Delivery of distributive shares to the heirs;
certification 2. Registration in the Registry of Deeds of transfer of inherited real property or real
rights;
3. Payments of debt by decedent’s debtor to the heirs, legatees, executor or
administrator of the creditor-decedent;
4. Transfer of inherited shares, rights or bonds;
5. Withdrawal from decedent’s bank deposit (allowed subject to final withholding tax
of 6%, withdrawal slip shall contain a statement that all joint depositors are still
living at the time of withdrawal by any one of the joint depositors and such
statement shall be under oath by the said depositor)
6. Accomplishing Tax Returns and Forms (BIR Form No. 1801)

a. BIR Form No. and BIR Form No. 1801 shall be filed in triplicate (per the BIR form.)
number of copies
a. Payment and 1) Upon filing of Estate Tax Return, the estate tax due shall be paid to the
issuance of Authorized Agent Bank (AAB) where the return is filed.
Revenue Official 2) In places where there are no AABs, payment shall be made directly to the
Receipt Revenue Collection Officer or duly authorized City or Municipal Treasurer who
shall issue Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower portion of the return must
be properly machine-validated and stamped by AAB to serve as the receipt of
payment.
4) The machine validation shall reflect the date of payment, amount paid and
transaction code, and the stamp mark shall show the name of the bank,
branch code, teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank debit advice or credit
document, whichever is applicable, as additional proof of payment.
END
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TAX-201: DONOR’S TAX

A. Donor’ Tax Rates
The tax for each calendar year shall be six percent (6%) computed on the basis of the total gifts in
excess of Two hundred fifty thousand pesos (P250,000) exempt gift made during the calendar year.
Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign
purposes shall be governed by the Election Code, as amended.
B. Composition of Gross Gifts

Resident or citizen donor Non-Resident Alien Donor
Personal properties Wherever situated Situated in the Philippines
Real properties Wherever situated Situated in the Philippines
C. Rule of Reciprocity
Properties covered Intangible personal properties situated in the Philippines given as gifts by non-
by the rule resident alien donor.
Basic rules: a. When there is reciprocity – The intangible personal properties situated in the
Philippines given as gifts by a non-resident alien donor are not subject to donor’s tax.
b. When there is no reciprocity – The intangible personal properties situated in the

Philippines given as gifts by a non-resident alien donor are subject to donor’s tax.
D. Transfer for Less Than Adequate and Full Consideration

1. The rule: Where property, other than a real property that has been subjected to the final capital gains tax,
is transferred for less than an adequate and full consideration in money or money’s worth, then the amount
by which the fair market value of the property at the time of the execution of the Contract to Sell or
execution of the Deed of Sale which is not preceded by a Contract to Sell exceeded the value of the agreed
or actual consideration or selling price shall be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.
Personal properties Real properties
Ordinary assets Subject to donor’s tax Subject to donor’s tax
Capital assets Subject to donor’s tax Not subject to donor’s tax
2. A sale, exchange, or other transfer of property made in the ordinary course of business (a transaction
which is a bona fide, at arm’s length, and free from any donative intent), will be considered as made for an
adequate and full consideration in money or money’s worth.”
E. Valuation of Gifts Made in Property

Property Donated Valuation
Gift is made in property Fair market value at the time of the gift
Real property Provisions in estate tax shall apply to the valuation of said real property.
F. Exemptions of Certain Gifts/Deductions from Gross Gifts

1. Found in the Tax Code Under TRAIN (Effective January 1, 2018)
Resident/citizen Non-resident alien
donor donor
a. Gifts made to or for the use of the National Government or
any entity created by any of its agencies which is not
conducted for profit, or to any political subdivision of the
said Government Allowed as deduction
b. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution,
accredited nongovernment organization, trust or
philanthropic organization or research institution or
organization. Allowed as deduction
Notes:
1) In case of gifts made to certain institutions (no. 1 c above), in order to be exempt, not more than 30% of
said gifts shall be used by such donee for administration purposes.
2) For the purpose of the exemption, a 'non-profit educational and/or charitable corporation, institution,
accredited nongovernment organization, trust or philanthropic organization and/or research institution or
organization' is a school, college or university and/or charitable corporation, accredited nongovernment
organization, trust or philanthropic organization and/or research institution or organization, incorporated as
a nonstock entity, paying no dividends, governed by trustees who receive no compensation, and devoting
all its income, whether students' fees or gifts, donation, subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes enumerated in its Articles of Incorporation.

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-201
Week 1: DONOR’S TAX
2. Other deductions
Resident or Non-Resident
Citizen Donor Alien Donor
a. Encumbrance on the property donated if assumed by the donee Allowed Allowed
b. Those specifically provided by the donor as a diminution from the
property donated Allowed Allowed
3. Exempt Donations Under Special Laws. – Donations to:

a. International Rice Research Institute (IRRI);
b. Philippine American Cultural Foundation;
c. Ramon Magsaysay Award Foundation;
d. Philippine Inventors Commission;
e. Integrated Bar of the Philippines (IBP);
f. Development Academy of the Philippines (DAP);
g. National Social Action Council;
h. Aquaculture Department of Southeast Asian Fisheries Development Center of the Philippines (SEAFDEC).
G. The Law That Governs The Imposition Of Donor’s Tax

1. 1. The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter
vivos.
2. 2. The donor’s tax shall not apply unless and until there is a completed gift.
3. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the
donee; it is completed by the delivery, either actually or constructively, of the donated property to the
donee.
4. In order that the donation of an immovable may be valid:
a. It must be made in a public document specifying therein the property donated.
b. The acceptance may be made in the same Deed of Donation or in a separate public document, but it
shall not take effect unless it is done during the lifetime of the donor.
c. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic
form, and this step shall be noted in both instruments.
5. A gift that is incomplete because of reserved powers, becomes complete when either:
(1) the donor renounces the power; or
(2) his right to exercise the reserved power ceases because of the happening of some event or
contingency or the fulfilment of some condition, other than because of the donor’s death.
6. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community
after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s is
subject to donor’s tax.
7. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate
left by the decedent is not subject to donor’s tax, unless specifically and categorically done in favor of
identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate.
8. The law in force at the time of the completion of the donation shall govern the imposition of donor’s tax.
9. For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that
accrues to the donee.
10. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the donee the obligation
to pay the mortgage liability, then the net gift is measured by deducting from the fair market value of the
property the amount of mortgage assumed.
H. Computation of Taxable Net Gift and the Donor’s Tax Due

1. Donations made on or after January I, 1998 shall be subject to the donor’s tax computed in accordance
with the amended schedule of rates prescribed under Section 99 of the National Internal Revenue Code of
1997 (R.A. No. 8424).
2. Donations made on or after January 1, 2018 shall be subject to the donor’s tax under TRAIN (R.A. No.
10963).
3. The computation of the donor’s tax is on a cumulative basis over a period of one calendar year.
4. Husband and wife are considered as separate and distinct taxpayers for purposes of donor’s tax.
5. If what was donated is a conjugal or community property and only the husband signed the deed of
donation, there is only one donor for donor’s tax purposes, without prejudice to the right of the wife to
question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil
Code of the Philippines and the Family Code of the Philippines.
6. With the exception of moderate donations for charity or on occasions of family rejoicing, neither spouse
may donate any community property or conjugal property without the consent of the other.
7. Every donation between the spouses during the marriage shall be void except for moderate gifts, which
the spouse may give each other on the occasion of any family rejoicing, and donation mortis causa.
8. Any provision of law to the contrary notwithstanding, any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign purposes, duly reported to the commission (COMELEC)
shall not be subject to the payment of any gift tax (Sec. 13 R.A. No. 7166).
Exercise: Determine whether or not the following is subject to donor’s tax (Y/N):
a. Husband donated conjugal property with the consent of the wife to charity event (charitable
institution’s administration expenses exceed 30% of the gifts)
Page 2 of 4
b. Wife donated community property without the consent of the husband on occasion of their
legitimate child’s birthday (amount of gift is moderate)
c. Husband gifted his wife a diamond ring on occasion of her birthday
d. Wife gifted her husband a branded shirt of account of his birthday (amount is moderate)
e. Husband transferred some of his exclusive property to his wife, transfer to take effect after his
death
f. Surviving spouse renounced his share in the conjugal partnership in favor of the heirs of the
deceased spouse
g. An heir renounced his share in the hereditary estate in favor of no one in particular
h. Taxpayer donated to the campaign fund of a candidate, duly reported to the COMELEC
i. Donee failed to indicate his acceptances of the donation before the transferor died
j. Donee signified his acceptance of the donated property known to the donor before he died,
delivery of the donated property done after the transferor died
I. Tax Credit for Donor’s Taxes Paid to a Foreign Country

1. One foreign Limit
country Net gift, foreign X Philippine donor’s tax due
Total net gifts xxx
Actual foreign donor’s tax xxx
Allowed (lower between actual and limit) xxx
2. Two or more Limit (a) – By country xxx
foreign Limit (b) – By total xxx
countries Limit [lower between limits (a) and (b)] xxx
Actual total foreign donor’s taxes xxx
Allowed tax credit (lower between allowed limit and actual total foreign donor’s taxes)
xxx
J. Filing of Return and Payment of Tax

1. Requirement Any individual who makes any transfer by gift (except those which are exempt from
donor’s tax) shall, for the purpose of donor’s tax, make a return under oath at least in
duplicate (triplicate per BIR Form No. 1800)
2. Contents of the The return shall set forth:
donor’s tax return a. Each gift made during the calendar year which is to be included in computing net
gifts;
b. The deductions claimed and allowable;
c. Any previous net gifts made during the same calendar year;
d. The name of the donee; and
e. Such other information as may be required by rules and regulations made pursuant
to law.
3. Time for filing of The donor’s tax return shall be filed within thirty (30) days after the date the gift is
return made or completed.
4. Payment of The donor’s tax due shall be paid at the same time that the return is filed.
donor’s tax
4. Modes of Same as estate tax (See TAX-101 handouts)
payment
6. Place of filing of a. In case of resident donors:
return 1) Authorized agent bank;
2) Revenue District Officer;
3) Revenue Collection Officer;
4) Duly authorized Treasurer of the city or municipality where the donor was
domiciled at the time of the transfer.
b. In case of non-resident donors:
1) Philippine Embassy or Consulate where he is domiciled at the time of the transfer,
or
2) Office of the Commissioner (RDO No. 39 –South Quezon City)
Note: Returns filed with Philippine Embassy or Consulate shall be paid thereat.
7. Notice of The donor engaged in business shall give a notice of donation on every donation worth
donation by a at least P50,000 to the RDO which has jurisdiction over his place of business within 30
donor engaged days after receipt of the qualified donee institution’s duly issued Certificate of Donation,
in business which shall be attached to the said Notice of Donation, stating that not more than 30%
of the said donations/gifts for the taxable year shall be used for administration
purposes.
K. Accomplishing Tax Returns and Forms

1. Separate return 1) A separate return shall be filed by each donor for each gift (donation) made on
different dates during the year reflecting therein any previous net gifts made in the
same calendar year.
Page 3 of 4
2) Only one return shall be filed for several gifts (donations) by a donor to the different
donees on the same date.
3) If the gift (donation) involves conjugal/community property, each spouse shall file
separate return corresponding to his/her share in the conjugal/community property.
This rule shall likewise apply in the case of co-ownership over the property being
donated.
2. Payment and 1) Upon filing of Donor’s Tax Return, the total amount payable shall be paid to the
issuance of Authorized Agent Bank (AAB) where the return is filed.
Revenue Official 2) In places where there are no AABs, payment shall be made directly to the Revenue
Receipt Collection Officer or duly authorized City or Municipal Treasurer who shall issue
Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower portion of the return must be
properly machine-validated and stamped by AAB to serve as the receipt of payment.
4) The machine validation shall reflect the date of payment, amount paid and
transaction code, and the stamp mark shall show the name of the bank, branch code,
teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank debit advice or credit document,
whichever is applicable, as additional proof of payment.
Cases
1. A resident alien donor donated to a Philippine domestic corporation a property located abroad valued at
P500,000. The foreign donor’s tax on the donation was P100,000. A donation earlier within the same
calendar year, was donated to a legitimate daughter, a property valued at P300,000.
How much was the tax payable?
2. On January 15, 2022, Momo gave a piece of land to her brother-in-law who is getting married on February
14, 2022. The assessed value and zonal value of the land were P750,000 and P1,000,000 respectively.
The land had an unpaid mortgage of P200,000, which was not assumed by the donee and an unpaid realty
tax of P10,000 which was assumed by the donee.
Question
1 – What value shall be reflected in the gross gift?
2 - How much shall be the total deductions?
3 – How much was the taxable gift?
4 - How much was the donor’s tax due?
5 - When shall be the due date for the filing of donor’s tax return?
END
Page 4 of 4
CPA Review Classes for De La Salle University Dasmariñas  Weeks No. 2-3
TAX-301: VALUE-ADDED TAX

1. VAT-Subject Transactions
Transactions Tax Base
a. Sale of goods or properties in the course of trade or business Gross selling price
b. Sale of services and lease of properties in the course of trade or business Gross receipts
c. Importation Total landed cost
2. “In the Course of Trade or Business” Defined

The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or
an economic activity including transactions incidental thereto, by any person regardless of whether or not
the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of
its net income and whether or not it sells exclusively to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as defined in the Tax Code rendered in the
Philippines by non-resident foreign persons shall be considered as being rendered in the course of trade or
business.
3. Goods or properties
The term “goods or properties” refers to all tangible and intangible objects which are capable of
pecuniary estimation and shall include, among others:
a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or
business;
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like property or right;
c. The right or the privilege to use any industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.
4. Sale or exchange of services

Sale or exchange of services means the performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration, whether in kind or in cash, including those performed or
rendered by:
a. Construction and service contractors;
b. Stock, real estate, commercial, customs and immigration brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or repacking goods for others;
g. Proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; (theatres
and movie houses (deleted in TRAIN);
h. Proprietors, operators of restaurants, refreshment parlors, cafes and other eating places, including clubs
and caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or cargoes including persons who transport goods
or cargoes for hire and other domestic common carriers by land, relative to their transport of goods
or cargoes;
l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one
place in the Philippines to another place in the Philippines;
m. Sales of electricity by generation, transmission, and/or distribution companies, including electric
cooperatives;
n. Services of franchise grantees of electric utilities, telephone and telegraph, radio and television
broadcasting and all other franchise grantees, except those under Section 119 of the Tax Code;
o. Non-life insurance companies (except their crop insurance), including surety, fidelity, indemnity and
bonding companies;
p. Similar services regardless of whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties.
The phrase “sale of exchange of services” shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan
secret formula or process, goodwill, trademark, trade brand or other like property or right;
(2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or information;
(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph
(2) or any such knowledge or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his employee in connection with the use of property

Weeks 2-3: VALUE-ADDED TAX
or rights belonging to, or the installation or operation of any brand, machinery or other apparatus
purchased from such nonresident person.
(6) The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television
time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of
lease or licensing agreement was executed if the property is leased or used in the Philippines.
5. Computation of VAT Payable (Excess Input Tax)

a. Output tax exceeds input tax at the end of any taxable Output tax xxx
quarter Less: Input tax xxx
VAT payable xxx
b. Input tax inclusive of input tax carried over from the Output tax xxx
previous quarter exceeds output tax Less: Input tax ( xxx )
Excess input tax (xxx )
6. Computation of the Tax Base and the Applicable Tax Rates

Transaction Tax Base Tax Rate
a. Sale of goods The term "gross selling price" means the total amount of money or 12% or 0%
its equivalent which the purchaser pays or is obligated to pay to
the seller in consideration of the sale, barter or exchange of the
goods or properties, excluding the value-added tax. The excise tax,
if any, on such goods or properties shall form part of the gross
selling price.
In computing the taxable base during the month or quarter,

the following shall be allowed as deductions from gross
selling price:
(a) Discounts determined and granted at the time of sale,
which are expressly indicated in the invoice, the
amount thereof forming part of the gross sales duly
recorded in the books of accounts.
Sales discount indicated in the invoice at the time of
sale, the grant of which is not dependent upon the
happening of a future event, may be excluded from
the gross sales within the same month/quarter it was
given.
(b) Sales returns and allowances for which a proper credit
or refund was made during the month or quarter to
the buyer for sales previously recorded as taxable
sales.
Gross selling price

Gross sales xxx
Less: Sales returns and allowances xxx
Sales discount xxx xxx
Net sales xxx
Add: Excise tax, if any xxx
Tax base (excluding VAT) xxx
b. Sale of real Installment received xxx 12% or 0%
properties on Add: Interest xxx
installment plan Penalties for late payment xxx xxx
(initial payments do Tax base xxx
not exceed 25% of
the gross selling If FMV is greater than selling price:
price) Actual collection (VAT exclusive)
--------------------------------------------- x Fair Market Value
Agreed consideration (VAT exclusive)
c. Sale of real Selling price stated in the sales documents or fair market value, 12% or 0%
properties on cash whichever is higher
basis or deferred
payment plan (initial
payments exceed
25% of the gross
Page 2 of 20
selling price)
d. Sale of services The term "gross receipts" means the total amount of money or its 12% or 0%
equivalent representing the contract price, compensation, service
fee, rental or royalty, including the amount charged for materials
supplied with the services and deposits and advanced payments
actually or constructively received during the taxable quarter for
the services performed or to be performed for another person,
excluding value-added tax.
Gross receipts computed as follows:

Cash received (actually and constructively) xxx
Advance payments for future projects xxx
Materials charged with the services xxx
Gross receipts (excluding VAT) xxx
Note: Receivables, although earned, are not included.

e. Gross receipts for For Dealer in Securities, the term “gross receipts” means gross 12% or 0%
dealer in selling price less cost of the securities sold.
securities
Gross receipts computed as follows:
Gross selling price xxx
Less: Acquisition cost of securities sold for the month or quarter
xxx
Balance xxx
Add: Other or incidental income xxx
Gross receipts (excluding VAT)
xxx
f. Gross receipts on Gross receipts shall refer to the following: 12% or 0%
the sale of electricity a. Total amounts charged by generation companies for the sale of
by generation, electricity and related ancillary services;
transmission and b. Total amount charged by transmission by any entity including
distribution National Grid Corporation of the Philippines (NGCP) for
companies transmission of electricity and related ancillary services;
c. Total amount charged by distribution companies and electric
cooperatives for distribution and supply of electricity and related
electric service. The universal charge passed on and collected by
distribution companies and electric cooperatives shall be excluded
from the computation of the Gross Receipts.
Sale of electricity by generation, transmission by any entity

including the National Grid Corporation of the Philippines
(NGCP), and distribution companies including electric
cooperatives shall be subject to 12% VAT on their gross
receipts.
g. Gross receipts Total premiums collected, whether paid in money, notes, credits or 12% or 0%
from non-life any substitute for money
insurance
companies
7. VAT on Importation
a. When importation Importation begins when the carrying vessel or aircraft enters the jurisdiction of
begins and the Philippines with intention to unload therein.
deemed
terminated Importation is deemed terminated upon payment of the duties, taxes and other
charges due upon the articles, or secured to be paid, at a port of entry and the
legal permit for withdrawal shall have been granted, or in case said articles are
free of duties, taxes and other charges, until they have legally left the jurisdiction
of the customs.
b. Tax base There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to 12% based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such tax to be paid by the importer
prior to the release of such goods from customs custody: Provided, That
where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus
excise taxes, if any.
In general where customs duties are based on the value (ad valorem)
Total value (i.e. dutiable value-cost, insurance, freight) xxx
Add: Customs duties xxx
Page 3 of 20
Excise tax xxx

Other charges prior to release of goods from Customs custody xxx
Tax Base xxx
In case where customs duties is based on volume or quantity (specific)

Total landed cost xxx
Add: Excise tax xxx
Tax Base xxx
c. Tax rate 12%
8. Output VAT
a. Meaning of output tax Output tax means the value-added tax on sale or lease of taxable goods
or properties or services by any person registered or required to register.
b. Determination of output In a sale of goods or properties, the output tax is computed by
tax multiplying the gross selling price by the regular rate of VAT.
c. Exercises
1) The following data are taken from sale of a real estate dealer on January 2, 2018:
Consideration in the Deed of Sale P5,000,000

Fair market value per tax declaration 4,800,000
Fair market value per BIR 5,200,000
Selling price of an adjacent lot sold on the same date 6,000,000
Payments on the consideration:
January 2, 2018 1,000,000
January 2, 2019 2,000,000
January 2, 2020 2,000,000
How much is the output tax for January 2, 2018, January 2, 2019 and January 2, 2020 using 12% VAT
rate?
c. 2) A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2018:
Accounts receivable, January 1, 2018 P 500,000

Sales on account for the month of January 1,000,000
Cash sales for the month of January 300,000
Accounts receivable, January 31, 2018 700,000
Cash purchases for the month of January 2018 400,000
How much is the output tax for the month of January, 2018 using 12% rate assuming the taxpayer is a:
a) trader. b) service provider
3) Mr. K Ganda, not VAT-registered, imported an article from Japan for his personal use. The invoice value
of the imported article was Y1,000,000 (Y1=P0.35). The following were incurred in connection with the
importation:
Insurance P15,000
Freight 10,000
Postage 5,000
Wharfage dues 7,000
Arrastre charges 8,000
Brokerage fees 25,000
Facilitation fee 3,000
The imported article was subject to P50,000 customs duties and to P30,000 excise tax. How much was
the VAT on importation using 12% rate?
9. Sources of Output Taxes

Sale of goods or properties Sale of services and lease of properties
a. Actual regular sales a. Actual regular sales
b. Actual zero-rated sales b. Actual zero-rated sales
c. Deemed sales
10. Zero-Rated Sales Defined

A zero-rated sale of goods or properties and services (by a VAT-registered person) is a taxable transaction
for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods,
properties or services, related to such zero-rated sale, shall be available as tax credit or refund in
accordance with the Regulations.
Under TRAIN
Page 4 of 20
a. Export sales of goods Zero-rated

b. Foreign currency denominated sales 12% regular VAT rate
a. Effectively zero-rated sales Zero-rated
11. Zero-Rated Sales of Goods or Properties

a. Export sales of goods
1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership
of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services,
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale and delivery of goods to:
a) Registered enterprises within a separate customs territory as provided under special laws; and
b) Registered enterprises within tourism enterprise zones as declared by the Tourism Infrastructure and
Enterprise Zone Authority (TIEZA) subject to the provisions under Republic Act No. 9593 or The
Tourism Act of 2009. (Vetoed)
3) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export
oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of
the said buyer’s goods and paid for in acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
4) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed
70% of the total annual production;
5) Those considered export sales under the Omnibus Investment Code of 1987 (E. O. No. 226), and other
special laws.
6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations Provided, That the goods, supplies, equipment and fuel shall be
used for international shipping or air transport operations.
b. Sales to persons or entities whose exemption under special laws or international agreements to which
the Philippines is a signatory effectively subjects such sales to zero rate.
12. Zero-rated Sales of Goods or Properties which Shall be Subject to 12% VAT Upon Satisfaction of
Certain Conditions (under the TRAIN)
a. Items subject to the twelve 1) Sale of raw materials or packaging materials to a nonresident buyer
percent (12%) value- for delivery to a resident local export oriented enterprise to be used
added tax and no longer be in manufacturing, processing, packing or repacking in the
considered export sales Philippines of the said buyer’s goods and paid for in acceptable
subject to zero percent foreign currency and accounted for in accordance with the rules and
(0%) VAT rate regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale of raw materials or packaging materials to export-oriented
enterprise whose export sales exceed 70% of the total annual
production;
3) Those considered export sales under the Omnibus Investment
Code of 1987 (E. O. No. 226), and other special laws.
b. Conditions to be satisfied 1) Successful establishment and implementation of an enhanced VAT
refund system that grants refunds of creditable input tax within
ninety (90) days from the filing of the VAT refund application with
the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety (90) days from the filing of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
13. Considered Export Sales Under Omnibus Investment Code

“Considered export sales under Executive Order No. 226” shall mean:
a. the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit,
landing certificates, and other commercial documents, of export products exported directly by a
registered export producer, or
b. the net selling price of export products sold by a registered export producer to another export
producer, or to an export trader that subsequently exports the same;
Sales of export products to another producer or to an export trader shall only be deemed export sales
when actually exported by the latter, as evidenced by landing certificates or similar commercial
documents.
Pursuant to EO 226 and other special laws, even without actual exportation, the following shall be
considered constructively exported:
a. sales to bonded manufacturing warehouses of export-oriented manufacturers;
Page 5 of 20
b. sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903,
7922 and other similar export processing zones;
c. sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant
to RA 7227;
d. sales to registered export traders operating bonded trading warehouses supplying raw materials in the
manufacture of export products under guidelines to be set by the Board in consultation with the Bureau
of Internal Revenue (BIR) and the Bureau of Customs (BOC);
e. sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities,
of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.
14. Zero-Rated Sales of Services and Lease of Properties

1) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines
which goods are subsequently exported where the services are paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Services other than processing, manufacturing or repacking rendered to a person engaged in business
conducted outside the Philippines or to a non-resident person not engaged in business who is outside
the Philippines when the services are performed the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the BSP;
3) Services rendered to persons or entities whose exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects the supply of such services to zero percent
rate;
4) Services rendered to persons engaged in international shipping or air transport operations, including
lease of property for use thereof: Provided, That these services shall be exclusive for international
shipping or air transport operation;
5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing
goods for an enterprise whose export sales exceed 70% of the total annual production.
6) Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign
country.
7) Sale of power or fuel generated through renewable sources of energy. Provided, however, that zero-
rating shall not extend to the sale of services related to the maintenance or operation of plants
generating said power.
8) Services rendered to:
a) Registered enterprises within a separate customs territory as provided under special law; and
b) Registered enterprises within tourism enterprise zones as declared by the TIEZA subject to the
provisions under Republic Act No. 9593 or The Tourism Act of 2009. (Vetoed)
9) Services rendered to offshore gaming licensees subject to gaming tax under Section 125-A of the Tax
Code by service providers, including accredited service providers as defined under Section 27(G) (as
amended on 22 September 2021 by RA 11590)
15. Zero-rated sales of Services and Lease of Properties which shall be subject to 12% VAT upon
satisfaction of Certain conditions (under the TRAIN)
a. Items subject to the 1) Processing, manufacturing or repacking of goods for other persons
twelve percent (12%) doing business outside the Philippines which goods are subsequently
value-added tax and no exported where the services are paid for in acceptable foreign
longer be considered currency and accounted for in accordance with the rules and
export sales subject to regulations of the Bangko Sentral ng Pilipinas (BSP);
zero percent (0%) VAT 2) Services performed by subcontractors and/or contractors in
rate processing, converting, or manufacturing goods for an enterprise
whose export sales exceed 70% of the total annual production.
b. Conditions to be satisfied 1) Successful establishment and implementation of an enhanced VAT
refund system that grants refunds of creditable input tax within
ninety (90) days from the filing of the VAT refund application with
the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety (90) days from the filing of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
16. Effectively Zero-Rated Sales Defined

Sales of goods or property or services to persons or entities who are tax-exempt under international
agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International
Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate.
17. Deemed Sales Transactions

1) Transfer, use or consumption not in the course of trade or business of goods and properties originally
intended for sale or use in the course of trade or business;
2) Distribution or transfer to shareholders or investors as share in the profits of VAT-registered person;
3) Distribution or transfer to creditors in payment of debt or obligation;
Page 6 of 20
4) Consignment of goods if not sold within 60 days following the date of consignment;
5) Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-in-
trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is
continued by the new owner or successor.
Notes: a) In cases 1) to 4), the tax base is the market value.

b) In case 5), the tax base is the lower between acquisition cost or market value.
The Commissioner of Internal Revenue shall determine the appropriate tax base where the gross selling price is
unreasonably lower than the actual market value (lower by more than 30% of the actual market value).
Exercises:
1) Determine whether the following qualify as VAT-subject deemed sale transactions or not (Y/N)
a. VAT-registered person withdraws goods from his business for his personal use
b. Property dividends which constitute stocks in trade or properties primarily held for sale or lease
declared out of retained earnings
c. Consigned goods returned by the consignee within the 60-day period
d. Goods on hand when a single proprietorship incorporates
e. Proprietor of a single proprietorship sells his entire business
f. Goods on hand upon the dissolution of a partnership and creation of a new partnership which
takes over the business
18. Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons

a. In the case of goods imported into the Philippines by VAT-exempt persons, entities, or agencies which are
subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter
shall be considered the importers thereof who shall be liable for VAT on such importation.
b. The tax due on such importation shall constitute a lien on the goods, superior to all charges or liens,
irrespective of the possessor of said goods.
19. Differences Between Sale of Goods or Properties and Sale of Services or Lease of Properties
Sale of Goods or Properties Sale of Services or Lease of
Properties
a. Tax base Gross selling price (accrual basis) Gross receipts (cash basis)
b. Sources of output a. Actual regular sales a. Actual regular sales
tax b. Actual zero-rated sales b. Actual zero-rated sales
c. Deemed sales
20. Caselets
a. A VAT-registered corporation has the following data taken from the books of accounts for the first calendar
quarter of 2018:
Gross sales P 5,000,000
Sales returns and allowances 100,000
Sales discount given at the time of sale 400,000
Sales discount given to cover prompt payment 200,000
Sales allowance to cover roll back in prices 120,000
Cost of sales 1,500,000
Office equipment purchased January 1, 2018 1,100,000
Vehicle for land transport imported January 1, 2018 2,500,000
Purchase of goods for sale, (included in the cost of sales above) 300,000
Operating expenses (40% with passed-on VAT) 500,000
Office supplies purchased (wholly used) 90,000
VAT payments for January and February 40,000
How much is the taxable sales and the output VAT?
b. A VAT-registered service contractor has the following data for the month of January, 2018:
Cash received for buildings completed on January 2018 with a contract price of P3,800,000
P5,000,000
Cash advances received for building to be constructed on February, 2018 300,000
Cash received from VAT-registered supplier on materials returned to the supplier 100,000
Cash received from owners of building for materials charged with the services 1,000,000
Cash received from owners of building to be used to pay building permit fees 200,000
Cash received from VAT-registered sub-contractors for overpayments 300,000
Payments to subcontractors for the electrical job 500,000
Purchase of supplies and materials used in the construction 100,000
How much is the gross receipts for the month and the output tax using 12% VAT?
21. VAT-Exempt Transaction Defined
Page 7 of 20
“VAT-exempt transactions” refer to sale of goods or services which, by their nature, are specifically listed in
and expressly exempted from VAT, under the Tax Code, without regard to the tax status of the party in the
transaction.
Transactions not subject to VAT (output tax) are not entitled to tax credit of VAT (input tax) on purchases.
The person making the exempt sale shall not bill any output tax to his customers because the said
transaction is not subject to VAT.
22. VAT-Exempt Transaction Under Section 109

(a) Sale or importation of:
-agricultural and marine food products in their original state,
-livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption;
and
-breeding stock and genetic materials therefor;
(b) Sale or importation of:
- fertilizers, seeds, seedlings and fingerlings;
- fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported,
used in the manufacture of finished feeds
-(except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals
generally considered as pets);
(c) Importation of personal and household effects
-belonging to residents of the Philippines returning from abroad and
-non-resident citizens coming to resettle in the Philippines;
-Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the
Philippines;
(d) Importation of:
professional instruments and implements,
wearing apparel, domestic animals, and
tools of trade, occupation or employment,
personal and household effects
--belonging to:
persons coming to settle in the Philippines or
Filipinos or their families and descendants who are now residents or citizens of other countries, such
parties hereinafter referred to as overseas Filipinos,
in quantities and of the class suitable to the profession, rank or position of the persons importing said
items,
for their own use and not for barter or sale, accompanying such persons, or arriving within a reasonable
time:
Provided, That the Bureau of Customs may, upon the production of satisfactory evidence that such
persons are actually coming to settle in the Philippines and that the goods are brought from their former
place of abode, exempt such goods from payment of duties and taxes:
Provided, further, That vehicles, vessels, aircrafts, machineries and other similar goods for use in
manufacture, shall not fall within this classification and shall therefore be subject to duties, taxes and
other charges;
(e) Services subject to percentage tax;

(f) Services by agricultural contract growers and
milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
(g) Medical, dental, hospital and veterinary services, except those rendered by professionals;
(h) Educational services rendered by:
-private educational institutions, duly accredited by DepEd, CHED and Technical Education and Skills
Development Authority (TESDA), and
-those rendered by government educational institutions;
(i) Services rendered by individuals pursuant to an employer-employee relationship;
(j) Services rendered by regional or area headquarters established in the Philippines by multinational
corporations which act as supervisory, communications and coordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;
(k) Transactions which are exempt
-under international agreement to which the Philippines is a signatory or
-under special laws except those granted under PD No. 529
(l) Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development
Authority to their members as well as sale of their produce, whether in its original state or processed form,
to non-members; their importation of direct farm inputs, machinery and equipment, including spare parts
thereof, to be used directly and exclusively in the production and/or processing of their produce;
Page 8 of 20
Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the
agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g., trader),
then only those sales to its members shall be exempted from VAT; It is to be reiterated, however, that sale
or importation of agricultural food products in their original state is exempt from VAT irrespective of the
seller and buyer thereof, pursuant to Subsection (a) hereof;
(m) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good
standing with the Cooperative Development Authority;
(n) Sales by non-agricultural, non-electric and non-credit cooperatives duly registered and in good standing
with the Cooperative Development Authority; Provided, That the share capital contribution of each
member does not exceed P15,000 and regardless of the aggregate capital and net surplus ratably
distributed among the members;
(o) Export sales by persons who are not VAT-registered;
(p) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of
trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act
No. 7279, otherwise known as the Urban Development and Housing Act, residential lot valued at
P1,500,000 and below, house and lot, and other residential dwellings valued at P2,500,000 and below:
Provided, That beginning January 1, 2021, the VAT exemption shall only apply to sale of real properties not
primarily held for sale to customers or held for lease in the ordinary course of trade or business, sale of real
property utilized for socialized housing as defined by Republic Act No. 7279, sale of house and lot, and other
residential dwellings with selling price of not more than P2,000,000:
Provided, further, That every three (3) years thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index, as published by the Philippine Statistics Authority (PSA);
Note: Sale of parking lot in a condominium is a separate and distinct transaction and is not covered by the
rules on threshold amount not being a residential lot, house and lot or a residential dwelling, thus,
should be subject to VAT regardless of the amount of selling price.
(q) Lease of residential units with a monthly rental not exceeding P15,000;
(r) Sale or importation, printing or publication of books and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of paid advertisement; (see amendment of CREATE Act below)
(s) The transport of passengers by international carriers;
(t) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international transport operations; Provided, however, that the
exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be
subject to the requirements on restriction on vessel importation and mandatory vessel retirement
program of Maritime Industry Authority (MARINA);
(u) Importation of fuel, goods and supplies by persons engaged in international shipping and air transport
operations. The fuel, goods and supplies shall be used for international shipping or air transport
operations. Thus, said fuel, goods and supplies shall be used exclusively or shall pertain to the transport
of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice versa, without
docking or stopping at any other port in the Philippines unless the docking or stopping at any other
Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or
to load passengers and/or cargoes bound for abroad: Provided, further, that if any portion of such fuel,
goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel,
goods and supplies shall be subject to twelve percent (12%) VAT
(v) Services of bank, non-bank financial intermediaries performing quasi-banking functions, and other non-
bank financial intermediaries; such as money changers and pawnshops, subject to percentage tax under
Secs. 121 and 122, respectively, of the Tax Code
(w) Sale or lease of goods and services to senior citizens and persons with disability, as provided under
Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and 10754 (An Act Expanding the
Benefits and Privileges of Persons With Disability), respectively;
(x) Transfer of property pursuant to Section 40 (C) (2) of the NIRC, as amended (merger or consolidation);
(y) Association dues, membership fees, and other assessments and charges collected by homeowners
associations and condominium corporations;
(z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
(aa) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning
January 1, 2019; and
(bb) Sale or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of Three million pesos (P3,000,000).
Self-employed individuals and professionals availing of the 8% tax on gross sales and/or receipts and other
non-operating income, under Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of this Code shall also be
exempt from the payment of twelve percent (12%) VAT.
For the purpose of the threshold of P3,000,000 (used to be P1,919,500), the husband and the wife shall be
considered separate taxpayers. However, the aggregation rule for each taxpayer shall apply. For instance, if
a professional, aside from the practice of his profession, also derives revenue from other lines of business
Page 9 of 20
which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the
threshold has been exceeded. Thus, the VAT-exempt sales shall not be included in determining the threshold.
A VAT-registered person may, in relation to Sec. 236 (H) of the 1997 Tax Code, as amended, elect that the
exemption in Sec. 4.109-1(B) hereof shall not apply to his sales of goods or properties or services.
Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter
when the election was made except for franchise grantees of radio and TV broadcasting whose annual gross
receipts for the preceding year do not exceed ten million pesos (P10,000,000.00) where the option becomes
perpetually irrevocable.
Under CREATE Act

Sale, importation, printing or publication of books, and any newspaper, magazine, journal, review bulletin, or
any such educational reading material covered by the UNESCO agreement on the importation of educational,
scientific and cultural materials, including the digital or electronic format thereof: provided, that the
materials enumerated herein are not devoted principally to the publication of paid advertisements;
Sale of or importation of prescription drugs and medicines for cancer, mental illness, tuberculosis, and
kidney diseases beginning January 1, 2021.
Under CREATE Act (COVID-19 related VAT-exemptions)

Sale or importation of the following beginning January 1, 2021 to December 31, 2023:
Capital equipment, its spare parts and raw materials, necessary for the production of personal protective
equipment components such as coveralls, gown, surgical cap, surgical mask, n-95 mask, scrub suits, goggles
and face shield, double or surgical gloves, dedicated shoes, and shoe covers, for COVID-19 prevention
All drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-
19
Drugs for the treatment of COVID-19 approved by the Food and Drug Administration (FDA) for use in clinical
trials, including raw materials directly necessary for the production of such drugs
23. Exercises on VAT-Exempt Items

a. Based on the following current year data, determine the VAT-subject and VAT-exempt amounts:
Case 1 Case 2 Case 3
Selling price, condominium unit P2,000,000 P2,500,000 P4,500,000
Selling price, parking lot 500,000 800,000 900,000
Total P2,500,000 P3,300,000 P5,400,000
VAT-subject
Vat-exempt
b.The following information pertains to adjacent residential lots sold to different buyers for the current year:
Lot 1 Lot 2 Lot 3
Value of the lot P800,000 P900,000 P1,000,000
Sold to Mr. P. Cruz Mr. M. Juan Mr. J. Ramos
VAT-subject
VAT-exempt
c. The following information pertains to adjacent lots sold to one buyer during the current year:
Lot 1 Lot 2 Lot 3
Value of the lot P800,000 P900,000 P1,000,000
Sold to Mr. A. Juan Mr. A. Juan Mr. A. Juan
VAT-subject
VAT-exempt
d.The following information pertains to lease of property for the current year:
Apartment house Commercial building
Case 1 – Rent per unit per month P 15,000 P 15,000
Annual gross receipts P2,500,000 P2,500,000
VAT-subject
VAT-exempt
Case 2 – Rent per month P 15,000 P 15,000

VAT-subject
VAT-exempt

VAT-subject
VAT-exempt
Page 10 of 20

VAT-subject
VAT-exempt
e. Based on the following current year information, determine the VAT-subject and the VAT-exempt amounts:
Husband Wife
Case 1 – Gross receipts, practice of profession P2,500,000 P2,000,000
VAT-subject
VAT-exempt
Case 2 – Gross receipts, practice of profession P1,800,000 P -

Gross receipts, beauty parlor 1,200,000
Gross receipts, trucking business 1,500,000 -
Gross sales, grocery store 1,500,000
Gross sales, agricultural food products (original state) 1,200,000
Gross sales, livestock - 1,300,000
Total P4,500,000 P4,000,000
VAT-subject
VAT-exempt
f. The following data taken from its books are presented to you by Fish Fresh, Canned and Dried, VAT-
registered company:
Sale of locally produced canned sardines 1,000,000
Sale of newly hauled fresh sardines 1,500,000
Sale of canned sardines to a Subic Bay Metropolitan Authority accredited enterprise 500,000
Sale of locally produced dried fish 700,000
Importation of fresh fish from Alaska, USA 2,000,000
Importation of canned sardines from Portugal 3,000,000
g. Identify the following transactions as of January , 2018: A) VAT-subject at regular rate B) VAT-subject at
zero rate C) VAT-exempt
1) Sale of an apartment house

2) Sale of the right or the privilege to use any industrial, commercial or scientific equipment
3) Services rendered by local construction and service contractors
4) Services rendered by transportation contractors on their transport of goods or cargoes
from one domestic port to another domestic port
5) Sale of electricity by generation, transmission and/or distribution companies
6) Services rendered by a beauty parlor
7) Services rendered by a funeral parlor
8) Transport of passengers and cargoes by a domestic air or sea carriers from the Philippines
to a foreign country
9) Sale of goods, supplies, equipment and fuel to persons engaged in international shipping
and air transport operations
10) Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed 70% of the total annual production
11) Sale of power or fuel generated through renewable sources of energy
12) Services rendered to persons engaged in international shipping or air transport operations,
including lease of property for use thereof
13) Sale of gold to Bangko Sentral ng Pilipinas
14) Sale to non-resident buyer of goods assembled in the Philippines to be delivered to a
resident in the Philippines, paid for in acceptable foreign currency and accounted per BSP
rules and regulations
15) Distribution or transfer of goods to creditor in payment of debt or obligation
16) Sale of goods or services to Asian Development Bank
17) Sale of goods or services to Land Bank of the Philippines
18) Services rendered by review schools for CPA Licensure Examination
19) Educational services rendered by private educational institutions accredited by DEPED,
CHED or TESDA
20) Export sales of persons who are VAT-registered
21) Export sales of persons who are not VAT-registered
22) Sale of real property utilized for low-cost or socialized housing
23) Lease of residential units by VAT-registered lessor where the monthly rental per unit does
not exceed P15,000
24) Lease of commercial units by VAT-registered lessor where the monthly rental per unit
does not exceed P15,000 and whose annual gross rentals amount to P3,000,000
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25) Sale of agricultural foods products in their original state where the annual gross sales
exceed P3,00,000
26) Sale by a person who is VAT-registrable of canned food products where the annual gross
sales exceed P3,000,000
27) Performance of VAT-subject services where the gross annual receipts do not exceed
P3,000,000
28) Medical services rendered by professionals
29) Medical services rendered to confined patient by a doctor employed by the hospital
30) Transfer of property through merger or consolidation
31) Association due of homeowners association
32) Sale of residential lot by a VAT-registered real estate dealer the value of which is
P1,500,000
33) Sale of medicine to Senior Citizens and Person With Disability
34) Sale of lechong manok (take out)
35) Sale of lechong manok in a restaurant
36) Sale of cut flowers
37) Sale of broom and walis tingting
38) Sale of copra, molasses and ordinary salt
39) Laboratory services rendered by hospitals
40) Sale of medicine to in-patients of the hospital
24. Input Tax Defined

a. Meaning of Input tax is the value-added tax due from or paid by a VAT-registered person in the
input tax course of his trade or business on importation of goods or local purchase of goods,
properties or services, including lease or use of properties, in the course of his trade or
business. It shall also include the transitional input tax and the presumptive input tax.
b. Categories of 1) VAT paid on local purchases (passed on by seller) or on importation (passed-on VAT)
creditable or 2) Presumptive input tax
deductible 3) Transitional input tax
input taxes 4) Standard input tax
c. Persons who The input tax credit on importation of goods or local purchases of goods, properties or
can avail of services by a VAT-registered person shall be creditable:
input tax credit 1) to the importer upon payment of VAT prior to the release of goods from customs
custody;
2) to the purchaser of the domestic goods or properties upon consummation of the sale;
or
3) to the purchaser of services or the lessee or licensee upon payment of the
compensation, rental, royalty or fee.
a. Exercises: Determine whether or not input tax credit can be availed of (Y/N)
1) Importation of goods for personal use, VAT already paid
2) Importation of goods for business use, VAT not yet paid
3) Purchase on account of domestic goods from VAT-registered supplier evidenced by VAT
invoice
4) Purchase for cash of domestic goods from VAT-registered supplier, evidenced by a receipt
printed by unaccredited printer
5) Purchase of domestic properties from non-VAT seller, evidenced by VAT official receipt
6) Purchase of services from a VAT-registered service-provider, bills already paid
7) Purchase of services from a VAT-registered service provider, bills not yet paid
8) Purchase on account of goods from a non-VAT seller who issued VAT invoice
25. Determination of Allowable Input Taxes

a. Determination Input tax carried over from previous period xxx
of creditable Input tax deferred on capital goods exceeding P1,000,000 from previous quarter xxx
input tax Transitional input tax xxx
Presumptive input tax xxx
Others xxx
Total xxx
Input taxes on current transactions xxx
Total available input taxes xxx
Less: Deductions from input taxes xxx
Total allowable input taxes xxx
b. Deductions a. Input tax claimed as tax credit certificate or refund
from b. Input tax attributed to VAT-exempt sales
input taxes c. Input tax attributed to sales to Government
26. Sources of Creditable Input Taxes (Local Purchases or Importation)

a. Passed-on VAT
1) Input tax 1) Purchase or importation of goods:
Page 12 of 20
evidenced by a) For sale; or

a VAT invoice b) For conversion into or intended to form part of a finished product for sale, including
or official packaging materials; or
receipts c) For use as supplies in the course of trade or business;
issued by a d) For use as raw materials supplied in the sale of services;
VAT- e) For use in trade or business for which deduction for depreciation or amortization is
registered allowed.
person which 2) Purchase of real properties for which a VAT has actually been paid;
shall be valid 3) Purchase of services in which a VAT has actually been paid;
for 5 years 4) Transactions “deemed sale”;
from the date
of permit to
use
2) VAT- A VAT-registered person who is also engaged in transactions not subject to VAT shall be
registered allowed to recognize input tax credit on transactions subject to VAT as follows:
person is also a) All the input taxes that can be directly attributed to transactions subject to VAT may
engaged in be recognized for input tax credit; and
transactions
not subject to b) If any input tax cannot be directly attributed to either a VAT taxable or VAT-exempt
VAT transaction, the input tax shall be pro-rated to the VAT taxable and VAT-exempt
transactions and only the ratable portion pertaining to transactions subject to VAT
may be recognized for input tax credit computed as follows:
VAT sales / Total sales X Input taxes
3) Exercise: A VAT-registered taxpayer is also engaged in VAT-exempt transactions. The following VAT
exclusive data are made available:
a. Domestic VAT-subject cash sales P1,000,000
b. VAT-exempt sales on account 500,000
c. Export cash sales 300,000
d. Cash purchases of supplies from VAT supplier (used for all transactions) 150,000
e. Purchase on account of merchandise from VAT-registered trader (for VAT sales only) 200,000
REQ: Compute the VAT payable assuming the taxpayer will use the input tax on zero-rated sales as input tax
credit
27. Claim for Input Tax on Depreciable Goods

a) Where a VAT-registered a) Estimated useful life is 5 years or more - Input tax shall be spread
person purchases or evenly over of a period of 60 months to commence in the calendar month
imports capital goods, when the capital good is acquired.
which are depreciable
assets for income tax b) Estimated useful life is less than 5 years – Input tax shall be spread
purposes, the aggregate evenly on a monthly basis by dividing the input tax by the actual number
acquisition of which of months comprising the estimated useful life. The claim for input tax
(exclusive of VAT) in a shall commence in the calendar month the capital good is acquired
calendar month exceeds
P1,000,000, regardless of
the acquisition cost of
each capital good
b) Where the aggregate The total amount of input taxes will be allowable as credit against output tax
acquisition cost (exclusive in the month of acquisition.
of VAT) of the existing or
finished depreciable
capital goods purchased or
imported during any
calendar month does not
exceed P1,000,000
c) Amortization allowed The amortization of the input VAT shall only be allowed until December 31,
until December 31, 2021 2021 after which taxpayers with unutilized input VAT on capital goods
purchased or imported shall be allowed to apply the same as scheduled until
fully utilized.
In the case of purchase of services, lease or use of properties, the input tax
shall be creditable to the purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
d) Meaning of aggregate The aggregate acquisition cost of a depreciable asset in any calendar month
acquisition cost refers to the total price, excluding the VAT, agreed upon for one or more
assets acquired and not on the payments actually made during the calendar
month. An asset acquired in installment for an acquisition cost of more than
P1,000,000, excluding the VAT, will be subject to the amortization of input
tax despite the fact that the monthly payments or installments may not
Page 13 of 20
exceed P1,000,000.
e) Sale or transfer of If the depreciable capital good is sold or transferred within a period of 5
depreciable good within a years or prior to the exhaustion of the amortizable input tax thereon, the
period of 5 years or prior entire unamortized input tax on the capital goods sold or transferred can be
to the exhaustion of the claimed as input tax credit during the month or quarter when sale or transfer
amortizable input tax was made.
f) Meaning of capital goods Capital goods or properties refers to goods or properties with estimated
or properties useful life greater than one (1) year and which are treated as depreciable
assets under the Tax Code, used directly or indirectly in the production or
sale of taxable goods or services.
g) Meaning of construction Construction in progress (CIP) is the cost of construction work which is not
in progress yet completed. CIP is not depreciated until the asset is placed in service.
Normally, upon completion, a CIP is reclassified and the reclassified asset is
capitalized and depreciated.
h) Input tax on a) CIP is considered, for purposes of claiming input tax, as a purchase of
construction in progress service, the value of which shall be determined based on the progress
billings.
b) Until such time the construction has been completed, it will not qualify as
capital goods as defined, in which case, input tax credit on such
transaction can be recognized in the month the payment was made;
Provided, that an official receipt of payment has been issued based on the
progress billings.
i) Contract for the sale of In case of contract for the sale of service where only the labor will be
service where only the supplied by the contractor and materials will be purchased by the contractee
labor will be supplied from other suppliers, input tax credit on the labor contracted shall still be
recognized on the month the payment was made based on the progress
billings while input tax on the purchase of materials shall be recognized at
the time the materials were purchased.
j) Input tax claimed while Once the input tax has already been claimed while the construction is in
the construction is in progress, no additional input tax can be claimed upon completion of the
progress asset when it has been reclassified as a depreciable capital asset and
depreciated.
k) Rules on allowing input a. Only one vehicle for land transport is allowed for the use of an official or
tax credit on vehicles, employee, the value of which should not exceed P2,400,000.
and other expenses b. No depreciation shall be allowed for yachts, helicopters, airplanes and/or
incurred (RR No. 12- aircrafts, and land vehicles the value of which exceed the P2,400,000
2012, Oct. 12, 2012) threshold amount, unless the taxpayer’s main line of business is transport
operations or lease of transportation equipment and the vehicles
purchased are used in said operations;
c. All maintenance expenses on account of non-depreciable vehicles for
taxation purposes are disallowed in its entirety;
d. The input taxes on the purchase of non-depreciable vehicles and all input
taxes on maintenance expenses incurred thereon are likewise disallowed
for taxation purposes.
l) Exercises:
1) Lalisa Corp. acquires 3 units of office equipment at P600,000 each on February 2018. The estimated life is
4 years.
Question
1 – Can the taxpayer amortize the input tax?
2 – If it can amortize the input tax, how much is the monthly amortization?
3 – Up to what month will the amortization be?
4 – Assuming the taxpayer acquires the office equipment on February 2022, can it amortize the input tax on
the acquisition?
2) A taxpayer acquires an office furniture on January 2018 for P1,000,000. Its estimated life is 3 years.
Question
1 – Can the taxpayer amortize the input tax?
2 – If he can amortize the input tax, how much is the monthly amortization?
28. Presumptive Input Tax
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1) Persons allowed 1) Processors of sardines, mackerel and milk

presumptive input tax 2) Manufacturers of refined sugar and cooking oil
3) Manufacturers of packed noodle-based instant meals
2) Rate and basis of 4% (used to be 1 ½%) of gross value in money of purchases of primary
presumptive input tax agricultural products which are used as inputs to their production
3) Exercises: Determine whether or not the following can avail of the presumptive input tax (Y/N)
a) Processor of sardines on its purchase of tomatoes, onions and other agricultural products used as
inputs in the production
b) Processor of sardines on its purchase of fresh fish to be used in the production of processed
sardines
c) Processor of fruits on its purchase of fresh fruits to be used in processing canned fruits
d) Manufacturer of refined sugar on its purchase of packaging materials and labels
e) Manufacturer of cooking oil on its purchase of copra
f) Manufacturer of instant champorado on its purchase of glutinous rice to be used in manufacturing
instant champorado
29. Transitional Input Tax

1) Situations where 1) Taxpayers who became VAT-registered persons upon exceeding the
transitional input tax minimum turnover of P3,000,000 in any 12-month period;
may be allowed 2) Taxpayers who voluntarily register even if their turnover does not exceed
P3,000,000 (except franchise grantee of radio and/or television
broadcasting whose threshold is P10,000,000);
2) Basis of transitional Beginning inventory of goods, materials and supplies (including those that
input tax are VAT-exempt under Sec. 109)
3) Amount of transitional 2% of the value of the beginning inventory on hand or actual VAT paid on
input tax such goods, materials and supplies, whichever is higher.
The value allowed for income tax purposes on inventories shall be the basis
for the computation of the 2% transitional input tax, including goods that are
exempt from VAT under Sec. 109 of the Tax Code.
A taxpayer is engaged in VAT-subject transactions but enjoys exemption from VAT as an entity because his
annual gross sales do not exceed the VAT threshold amount. Beginning the current year, he decides to
optionally register under the VAT system. Compute the transitional input tax based on the following data:
Ending inventory VAT-subject goods, previous year

Cost P 250,000
Net realizable value 200,000
Ending inventory VAT-exempt goods, previous year
Cost 1,400,000
Net realizable value 1,450,000
Actual VAT paid on the inventory 30,000
30. Standard Input Tax (as updated by RMC No. 36-2021)

Standard input tax is no longer applicable beginning 1 January 2021 in accordance with Section 4-114-2 of
Revenue Regulations No. 13-2018 as further implemented by Revenue Memorandum Circular No. 036-2021
31. Withholding VAT

Transactions Withholding Agent Withholdng VAT
Rate
1) Purchase of goods by Government or any of its political subdivisions, 5% (used to be
Government, political instrumentalities or agencies, including government- 3%) of gross
subdivisions, etc. owned or controlled corporations (GOCCs) payment made
(creditable)
2) Purchase of services by Government or any of its political subdivisions, 5% (used to be
Government, political instrumentalities or agencies, including GOCCs 6%) of gross
subdivisions, etc. payments
(creditable)
3) Payments for lease or Government or any of its political subdivisions, 12%
use of properties or instrumentalies or agencies, including GOCC’s;
property rights to non-
resident owners Private corporations, individuals, estate and trusts,
whether large or non-large taxpayers
Payor or person in control of the payment

4) Purchase of goods or Payor-purchaser in the course of trade of business 12% of payee’s
services in the course of gross sales or
Page 15 of 20
Transactions Withholding Agent Withholdng VAT

Rate
trade or business Payee-seller shall execute: receipts
(payee-seller has more 1) “Waiver of the Privilege to Claim Input Tax
than one payor-buyer) Credit”, and
2) “Notice of Availment of the Option to Pay the Tax
through the Withholding Process”.
5) Purchase of goods or Payor-purchaser in the course of trade of business 12% of payee’s
services in the course of gross sales or
trade or business Payee-seller shall execute waiver and notice of receipts
(payee-seller has only availment as in above.
one payor-buyer for the
whole year)
f. Remittance of withholding VAT

Remittance of The VAT withheld shall be remitted within ten (10) days following the end of the
withholding VAT month the withholding was made.
32. Advance Payment of VAT

Transactions 1) Sale of refined sugar
requiring 2) Sale of flour
advance payment of 3) Transport of Naturally Grown and Planted Timber Products (RR No. 13-2007)
VAT 4) Sale of jewelry, gold and other metallic minerals (RR No. 5-2013)
Advance payment of The advance payments made by the seller/owner of refined sugar, importer or
VAT allowed as credit miller of wheat/flour and sellers/ owners of naturally grown and planted timber
against output tax products shall be allowed as credit against their output tax on the actual gross
selling price of refined sugar/flour/timber products.
Advance payments Advance payments which remain unutilized at the end of the taxpayer’s taxable
may be available for year where the advance payment was made, which is tantamount to excess
issuance of tax credit payment, may, at the option of the owner/seller/taxpayer or
certificate (TCC) importer/miller/taxpayer, be available for the issuance of TCC upon application duly
filed with the BIR by the seller/owner or importer/miller within two (2) years from
the date of filing of the 4th quarter VAT return of the year such advance payments
were made, or if filed out of time, from the last day prescribed by law for filing the
return.
Advance VAT Advance VAT payments which have been the subject of an application for the
payment claimed as issuance of TCC shall not be allowed as carry-over nor credited against the output
TCC cannot be carried tax of the succeeding quarter/year.
over
Issuance of TCC Issuance of TCC shall be limited to the unutilized advance VAT payment and shall
limited to unutilized not include excess input tax.
advance VAT payment
Separare applications Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a
required separate
application for TCC following the applicable rules.
33. Refund of Input Tax

a. Input Tax on Zero- A VAT-registered person whose sales of goods, properties or services are zero-
Rated Sales of rated or effectively zero-rated may apply for the issuance of a tax credit certificate
Goods or Property, or refund of input tax attributable to such sales. The input tax that may be subject
etc. of the claim shall exclude the portion of input tax that has been applied against the
output tax. The application should be made within 2 years after the close of the
taxable quarter when the sales were made.
b. Printing of the word The Supreme Court has ruled in several cases that the printing of the word “zero-
“zero-rated” required rated” is required to be placed on the VAT invoices or receipts covering zero-rated
sales in order to be entitled to claim for tax credit or refund.
c. Other documents In another case, failure of the taxpayer to indicate its zero-rated sales in its VAT
may be used to prove returns and in its official receipts is not sufficient reason to deny its claim for tax
“zero-rated” sale credit or refund when there are other documents from which the court can
determine the veracity of the taxpayer’s claims. (Southern Philippine Power Corp.
vs. CIR, G.R. 179632, Oct. 19, 2011)
d. Unused Input Tax A VAT-registered person whose registration has been cancelled due to retirement
of Person Who Retired or cessation of business, or due to change in or cessation of status may, within 2
or Ceased Business years from the date of cancellation, apply for the issuance of a tax credit certificate
for any unused input tax which he may use in payment of his other internal
revenue taxes. He shall be entitled to a refund if he has no internal revenue tax
liabilities.
e. Period of Refund or Refund or tax credit certificate shall be granted within 90 days from the date of
Tax Credit of Input submission of the official receipts or invoices and other documents in support of
Page 16 of 20
Tax the application filed.
Should the Commissioner find that the grant of refund is not proper, the
Commissioner must state in writing the legal and factual basis for the denial.
f. Appeal of full or “In case of full or partial denial of the claim for tax refund, the taxpayer affected
partial denial may, within thirty (30) days from the receipt of the decision denying the claim,
appeal the decision with the Court of Tax Appeals: Provided, however, That
failure on the part of any official, agent, or employee of the BIR to act on the
application within the 90-day period shall be punishable under Section 269.
g. Manner of Giving Refunds shall be made upon warrants drawn by the CIR or by his authorized
Refunds representative without the necessity of being countersigned by the COA Chairman.
34. Caselets on Input VAT

IU Corporation, VAT-registered, has the following transactions during the month of January 2021:
Domestic sales, exclusive of VAT P 800,000
Importation of goods for sale 240,000
Importation of goods for personal use 100,000
Purchase of office supplies, exclusive of VAT 20,000
Purchase of office equipment, total invoice price (estimated life is 3 years) 1,680,000
Purchase of home appliances for the residence of IU Corp’s President., gross of VAT 17,920
Payment of services for store repair, contractor not VAT- registered but issued VAT
official receipt (total invoice amount) 33,600
Purchase of services for repainting of store (evidenced by ordinary receipt issued by
contractor) 4,480
Purchase of real property to be used as office, VAT not included, purchase price not paid
yet 500,000
Purchase of vehicle for land transport and for business use, net of VAT 1,200,000
Payment of maintenance expenses for vehicle for land transport, net of VAT 50,000
Question
1 – How much of the VAT on importation can be claimed as input tax credit?
2 – How much of the input tax on purchase of office equipment can be claimed as input tax credit?
3 – Can the passed-on VAT on purchase of vehicle for land transport be claimed as input tax credit? Why or
why not?
4 – Can the passed-on VAT by a service contactor who is not VAT registered be claimed as input tax credit?
5 – How much is the total allowable input taxes for the month?
35. Invoicing Requirement, Refund of Input Taxes and Others

a. VAT Invoice and A VAT-registered person shall issue:
VAT Official a) a VAT invoice for every sale, barter, or exchange of goods or properties; and
Receipt b) a VAT official receipt for every lease of goods or properties, and for every sale,
barter or exchange of services.
b. Validity of VAT The invoice/receipt shall be valid for five (5) years from the date of the permit to
invoice and VAT use.
OR
c. Invoicing The following information shall be indicated in VAT invoice or VAT official
Requirement receipt:
a) A statement that the seller is VAT-registered person followed by TIN;
b) The total amount to be paid with the indication that such amount includes
the VAT:
1) Amount of tax shall be shown as a separate item in the invoice or receipt;
2) “VAT-exempt sale”, if the sale is exempt;
3) “Zero-rated sale”, if the sale is subject to zero percent VAT;
4) If mixed sales, breakdown of the sales price between its taxable, exempt
and zero-rated components and the calculation of the VAT on each
portion. Separate invoices or receipts may be issued for each type of
sales.
c) The name, business style, if any, address and TIN of the customer, in case the
sales amount to P1,000 or more.
Exercise: Indicate what invoice or official receipt shall be issued by the following assuming VAT
threshold amount is exceeded
1) Office supplies trader
2) Warehousing services
3) Beauty parlor
4) Mango farm owner
5) Trucking business
6) Fuel or power supplier generated from renewable sources of energy
7) Movie theatre owner
Page 17 of 20
8) Professional basketball player in the Philippine Basketball Association (PBA)

9) Contract artists of television companies
10) Fresh fish dealer
36. Invoicing and Recording Deemed Sale Transactions

Deemed Transaction Invoicing and Recording
a. Transfer, use or Memorandum entry
consumption not in the
course of trade or
business;
b. Distribution or transfer to Invoice shall be prepared at the time of the occurrence of the transaction
shareholders or investors and shall be duly recorded in the subsidiary sales journal. The total amount
or to creditor in payment of “deemed sale” shall be included in the return to be filed for the month or
of debt or obligation; quarter.
c. Consignment of goods if Same as in 2) above
not sold within 60 days
following the date of
consignment;
d. Retirement from or An inventory shall be prepared and submitted to the RDO having jurisdiction
cessation of business over the taxpayer’s principal place of business not later than 30 days after
retirement or cessation from business.
37. VAT Returns and Payment of Value-Added Tax

a. Monthly VAT Declaration and Payment of VAT
1) Filing of the declaration Not later than 20th day following the end of the first two (2) months in a
and payment of value- quarter
added tax
2) Taxpayers enrolled with Group A – 25 days following the end of the month
Electronic Filing and B – 24 days following the end of the month
Payment System (EFPS) C – 23 days following the end of the month
D – 22 days following the end of the month
E – 21 days following the end of the month
b. Filing of Quarterly VAT Return and Payment of VAT
1) Filing of quarterly return Every person liable to pay the value-added tax imposed under this Title shall
and payment of value- file a quarterly return of the amount of his gross sales or receipts within 25
added tax days following the close of each taxable quarter prescribed for each
taxpayer.
VAT-registered persons shall pay the value-added tax on a monthly basis.

Monthly VAT declarations shall remain until December 31, 2022.
Beginning January 1, 2023, the filing and payment required shall be done
within 25 days following the close of the taxable year.
2) Meaning of taxable The term “taxable quarter” shall mean the quarter that is synchronized to
quarter the income tax quarter of the taxpayer (i.e. calendar quarter or fiscal
quarter.)
3) Quarterly return includes Amounts reflected in the monthly VAT declarations for the first two (2)
the amounts reflected in months of the quarter shall still be included in the quarterly VAT return,
the monthly VAT which reflects the cumulative figures for the taxable quarter.
declarations
4) Monthly payments to be Payments in the monthly VAT declarations shall be credited in the quarterly
credited in the quarterly VAT return to arrive at the net VAT payable, or excess input
VAT return tax/overpayment as of the end of the quarter.
5) Deductions from the The VAT payable/Excess Input tax for each taxable quarter shall be reduced
quarterly VAT payable by the total amount of taxes previously paid for the immediately preceding
(excess input tax) two (2) months, and the advance payments/creditable VAT withheld by the
payors for the three months of the quarter.
d. Substituted VAT Return

1) Substituted VAT 1) In case of sale of goods or services by persons subject to 12% VAT, whose gross
Return (Payee with sales or receipts have already been subjected to 12% VAT by the lone payor, the
Lone Payor) payee (seller) shall no longer be required to file the monthly VAT declaration and the
quarterly returns.
2) The Monthly Remittance Return of VAT Withheld duly filed by the withholding
agent-payor serves as the substituted return of the payee (seller) with lone payor.
2) Payee with Several Payees with several payors are still required to file the regular VAT return reflecting
Payors the consolidated total of all taxable transactions for the taxable period and applying
as tax credits the taxes withheld by several payors.
Page 18 of 20
e. Substituted Official Receipts

Sellers who are Sellers of services whose gross receipts have been subjected to 12% final VAT shall
exempt from issuing be exempt from the obligation of issuing duly registered VAT official receipts
Official Receipts covering their receipts for services sold.
f. Short Period Return

1) Final return of a Any person who retires from business with due notice to the BIR office where the
person who retires taxpayer (head office) is registered and whose VAT registration has been cancelled
from business shall file a final quarterly return and pay the tax due thereon within 25 days from the
end of the month when the business ceases to operate or when the VAT registration
has been officially cancelled.
2) Subsequent Subsequent monthly declarations/quarterly returns are still required to be filed if the
monthly results of the winding up of the affairs/business of the taxpayer reveal taxable
declarations/ transactions.
quarterly returns to
be filed after
retirement
3) Effective date of All persons first registered shall be liable to VAT on the effective date of registration
VAT registration stated in their Certificates of Registration (i.e., the first day of the month following
their registration.)
4) Initial monthly VAT 1) If the effective date of registration falls on the first or second month of the
declaration or taxable quarter, the initial monthly VAT declaration shall be filed within twenty
quarterly VAT return (20) days after the end of the month, and the initial quarterly return shall be filed
on or before the 25th day after the end of the taxable quarter.
2) If the effective date of registration falls on the third month of the taxable quarter,
the quarterly return shall be filed on or before the 25th day of the month following
the end of the taxable quarter, and no monthly VAT declaration need be filed for
the initial quarter.
g. Payment of VAT on Importation

The VAT on importation shall be paid by the importer prior to the release of such goods from customs
custody.
38. Where to File and Pay VAT

a. Where to file The monthly VAT declaration and quarterly returns shall be filed with:
monthly VAT 1) Bank duly accredited by the Commissioner of Internal Revenue located in the
declaration and revenue district office where such taxpayer (head office of the business
quarterly VAT establishment) is required to register.
return if payment 2) In the absence of accredited bank, the monthly VAT declaration and quarterly
is involved return shall be filed with Revenue District Officer, Collection Agent, duly authorized
Treasurer of the Municipality/City where such taxpayer (head office of the
business establishment) is required to be registered.
b. Where to file The monthly VAT declaration and the quarterly VAT return, where no payment is
monthly VAT involved, shall be filed with:
declaration and a) Revenue District Officer/Large Taxpayer District Office/Large Taxpayer
quarterly VAT Assistance Division;
return if no b) Collection Agent;
payment is c) Duly authorized Municipal/City Treasurer of the Municipality or City where the
involved taxpayer (head office of the business establishment) is registered or required
to be registered.
c. Consolidated Only one consolidated quarterly VAT return or monthly VAT declaration covering the
monthly results of operations of the head office as well as the branches for all lines of
declaration and business subject to VAT shall be filed by the taxpayer, for every return period, with
quarterly return the BIR office where the taxpayer is required to be registered.
39. Submission of Quarterly Summary Lists of Sales/Purchases

a. Persons required to 1) Persons required to submit summary lists of sales. – All persons liable to
submit summary VAT such as manufacturers, wholesalers, service-providers, among others. (RR
list of sales or No. 1-2012 deleted the requirement of having quarterly total sales/receipts, net of
purchases VAT, exceeding P2,500,000.)
2) Persons required to submit summary lists of purchases. – All persons liable
to VAT such as manufacturers, wholesalers, service-providers, among others. (RR
No. 1-2012 deleted the requirement of having quarterly total purchases, net of
VAT, exceeding P1,000,000).
b. Where to File the The quarterly summary list of all sales or purchases, whichever is applicable, shall be
Summary Lists of submitted to the RDO, LTDO or LTAD having jurisdiction over the taxpayer.
Sales or Purchases
c. When to Submit the The quarterly summary list shall be submitted, on or before the 25th day of the
Summary Lists of month following the close of the taxable quarter (VAT quarter) – calendar quarter or
Page 19 of 20
Sales or Purchases fiscal quarter.
40. Power of the Commissioner to Suspend Business Operations

Power of the The Commissioner of Internal Revenue or his authorized representative may order
Commissioner to suspension or closure of a business establishment for a period of not less than 5 days for
Suspend any of the following violations:
Business a) Failure to issue receipts or invoices;
Operations b) Failure to file VAT return;
c) Understatement of taxable sales or receipts by 30% or more of the correct taxable
sales or receipts for the taxable quarter;
d) Failure of any person to register as required under the law.
41. Mandatory Registration under the VAT System

Persons required Any person who, in the course of trade or business, sells, barters or exchanges goods or
to mandatorily properties or engages in the sale or exchange of services shall be liable to register if:
register (a) His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109(A) to (BB), have exceeded P3,000,000; or
“(b) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109(A) to (BB),
will exceed P3,000,000.
42. Optional Registration of VAT-Exempt Persons

a. Persons (1) Any person who is not required to register for value-added tax may elect to register for
allowed value-added tax by registering with the Revenue District Office that has jurisdiction
optional VAT over the head office of that person, and paying the annual registration fee P500 for
registration every separate or distinct establishment or place of business, including facility types
where sales transactions occur, shall be paid upon registration and every year
thereafter on or before the last day of January.
Cooperatives, individuals earning purely compensation income, whether locally or

abroad, and overseas workers are not liable to the registration fee herein imposed.
(2) Any person who elects to register optionally shall not be entitled to cancel his
registration for the next three (3) years.
(3) Any person who elected to pay the eight percent (8%) tax on gross sales or receipts
shall not be allowed to avail of this option.
(4) For purposes of Value-Added Tax, any person who has registered value-added tax as a
tax type shall be referred to as a ‘VAT-registered person’ who shall be assigned only
one Taxpayer Identification Number (TIN).
Page 20 of 20
TAX-401: PERCENTAGE TAX

1. OTHER PERCENTAGE TAXES (SUMMARIZED)
Percentage Tax Tax Base Tax Rate
Sec. 116 – Tax on persons
exempt from VAT under Sec.
109 (BB) (annual gross sales or Gross quarterly sales or receipts 3%
receipts do not exceed
P3,000,000
Sec. 117 – Percentage tax on
domestic carriers and keepers Actual or minimum quarterly gross receipts whichever is
3%
of garage (transport of higher
passengers)
Sec. 118 – Percentage tax on
Quarterly gross receipts 3%
international carriers
Sec. 119 – Tax on franchises Gross receipts:
Franchises on radio and/or TV broadcasting companies
whose annual gross receipts of the preceding year do
exceed ₱10,000,000 3%
Franchises on gas and water utilities 2%
Sec. 120 – Tax on overseas
dispatch, message or Amount paid for such services (by the person who used the
10%
conversation originating from communications facilities)
the Philippines
Sec. 121 – Tax on banks and Gross receipts on interest, commissions and discounts from
non-bank financial lending activities; income from financial leasing:
intermediaries performing Remaining maturity period of instrument is 5 years or less 5%
quasi-banking functions Remaining maturity period of instrument is more than 5
years 1%
Dividends and equity shares in net income of subsidiaries; 0%
Royalties, rentals of property, real or personal, profits from
exchange and all other items treated as gross income
under the Tax Code 7%
Net trading gains within the taxable year on foreign
currency, debt securities, derivatives and other similar
financial instruments 7%
Sec. 122 – Tax on other non- Gross receipts derived from interest, commissions, discounts
bank financial intermediaries and all other items treated as gross income under the Tax
Code 5%
Interests, commissions and discounts from lending
activities, as well as income from financial leasing:
Remaining maturity of instrument is 5 years or less 5%
Remaining maturity of instrument is more than 5 years 1%
Sec. 123 – Tax on life insurance Total premiums collected 2%
premiums
Sec. 124 – Tax on agents of Total premiums collected/paid
foreign insurance companies Generally 4%
(fire, marine or miscellaneous Owners of property obtain insurance directly with foreign
insurance) insurance companies 5%
Sec. 125 – Amusement taxes Gross receipts
Jai-alai and race track 30%
Cockpits, cabarets, night or day clubs 18%
Professional basketball games 15%
Boxing exhibitions 10%
Sec. 126 – Tax on winnings Actual amount paid for every winning ticket after deducting
the cost of the ticket 10%
Winnings from double, forecast/quinella and trifecta bets 4%
Prize of winning race horse owners 10%
Sec. 127 (A) Tax on sale, Gross selling price or gross value in money 6/10 of
barter or exchange of shares Gross selling price or gross value in money in accordance 1%
of stock listed and traded with the proportion of shares of stock sold, bartered,
through the local stock exchanged or otherwise disposed to the total outstanding
exchange shares of stock after listing in the local stock exchange
(B) Tax on shares of stock Up to 25% 4%
sold or exchanged through Over 25% but not over 33 1/3% 2%
public offerings Over 33 1/3% 1%

Week 3: PERCENTAGE TAX
2. PERCENTAGE TAXES AMPLIFIED

a. Sec. 116 - Tax on Persons Exempt from VAT Under Section 109 (BB)
1) Persons subject to the Persons whose annual sales or receipts do not exceed P3,000,000 (used to
tax be P1,919,500) and who are not VAT registered. [Sec. 109 (BB)]
2) Tax base Gross quarterly sales or receipts
3) Tax rate 3%
4) Optional VAT Persons subject to the above tax may apply for registration as VAT-subject
registration persons not later than ten (10) days before the beginning of the taxable
quarter.
5) Cancellation of VAT Any person exempt from VAT under Sec. 109 (BB) who elects to register
registration under the VAT system shall not be allowed to cancel his registration for the
next three (3) years.
6) Non-VAT registered A non-VAT registered taxpayer who initially opted to avail of the 8% option
taxpayer exceeded the but has exceeded the VAT threshold during the taxable year, shall be subject
VAT threshold to 3% Percentage Tax on the first P3,000,000 of his or her gross sales or
gross receipts under Section 116 of the Tax Code, as amended, without
imposition of any penalty if payment is timely made on the following month
when the threshold is breached.
The excess of the threshold shall be subject to VAT prospectively, and the
8% income tax previously paid shall be credited to the Income Tax Due
under the graduated rates.
6) Cooperatives Cooperatives shall be exempt from the 3% gross receipts tax.
7) Exercises:
a) Mr. Jaime Rodriguez is the owner of a small variety store. His gross sales in any one year do not exceed
the VAT threshold amount. He is not VAT-registered. The following data are taken from the books of the
variety store for the month ending November 30, 2018:
Merchandise inventory, December 31, 2018 P 150,000
Gross sales 250,000
Purchases from VAT-registered suppliers 150,000
How much is the percentage tax due and payable?
b) A taxpayer is non-VAT because his VATable sales do not exceed the VAT threshold of P3,000,000. He
initially opted to pay 8% income tax in the first three (3) quarters of 2018 because his gross sales
amounted to P3,000,000 only. During the same taxable year, however, his annual gross sales reached
P4,000,000.
Question 1 – How much is the percentage tax, if any?

2 – How much is the VAT, if any?
b. Sec. 117 - Percentage Tax on Domestic Carriers and Keepers of Garage (Common Carrier’s Tax)
1) Common carrier defined Persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public and shall include
transportation contractors.
2) Persons subject to 1) Cars for rent or hire driven by the lessee
common carrier’s tax 2) Transportation contractors, including persons who transport passengers
3) Other domestic carriers by land for the transport of passengers
4) Keepers of garage
3) Persons not subject to 1) Owners of banca
common carrier’s tax 2) Owners of animal-drawn two wheeled vehicle
4) Tax base Actual quarterly gross receipts or minimum quarterly gross receipts
whichever is higher.
5) Tax rate 3%
6) Minimum quarterly 1) Jeepney for Manila and other cities P65,700 (P2,400)
receipts hire Provincial P32,900 (P1,200)
2) Public utility Not exceeding 30 passengers P98,600 (P3,600)
bus >30 but ≤50 passengers P164,200 (P6,000)
Exceeding 50 passengers P197,100 (P7,200)
3) Taxis Manila and other cities P98,600 (P3,600)
Provincial P65,700 (P2,400)
4) Car for hire With chauffeur P82,100 (P3,000)
Without chauffeur P49,300 (P1,800)
Page 2 of 9
7) Exemption from local The gross receipts of common carriers derived from their incoming and
taxes outgoing freight shall not be subject to the local taxes imposed under the
Local Government Code of 1991.
8) Transportation 1) Transportation contractors on their transport of goods or cargoes;
contractors and 2) Persons who transport goods or cargoes for hire;
common carriers 3) Other domestic carriers by land relative to their transport of goods or
subject to VAT cargoes;
4) Common carrier by air and sea relative to their transport of passengers,
goods or cargoes from one place in the Philippines to another place in the
Philippines.
9. Exercise
Jill Ilustre Transport Co., VAT-registered, is a domestic common carrier by land and sea within the
Philippines. It had the following data in a quarter:
On land carriers:
Gross receipts from cargoes P500,000
Gross receipts from passengers 700,000
On sea carriers:
Gross receipts from cargoes 900,000
Gross receipts from passengers 1,000,000
Question 1 – How much is the percentage tax?

Question 2 – How much is the output value-added tax
c. Sec. 118 - Percentage Tax on International Carrier (Common Carrier’s Tax)

1) Persons subject to 1) International air carriers doing business in the Philippines
tax 2) International shipping carriers doing business in the Philippines
2) Tax base Gross receipts derived from the transport of cargo from the Philippines to another
country
3) Tax rate 3%
4) Gross receipts Gross receipts shall include, but shall not be limited to, the total amount of
defined money or its equivalent representing the contract, freight/cargo fees, mail fees,
deposits applied as payments, advance payments and other service charges and
fees actually or constructively received during the taxable quarter from cargo
and/or mail, originating from the Philippines in a continuous and uninterrupted
flight, irrespective of the place of sale or issue and the place of payment of the
passage documents. (Sec. 5, RR 15-2013, implementing R.A. No. 10378)
5) Exempt from VAT 1) Transport of passengers by international carriers doing business in the
(not allowed to Philippines
register for VAT 2) Transport of cargo by international carriers doing business in the Philippines
purposes)
6) Offline Not subject to the 3% common carrier’s tax on international carriers
international carrier
having
branch/office as a
sales agent in the
Philippines
4) Exercises: Determine whether or not the following shall be subject to the common carrier’s tax
on international carriers. (Answers are provided)
a) All Nippon Airlines, maintaining flight operations to and from the Philippines, on freight and
cargo fees, cargo originating from the Philippines (passage documents sold in Japan)
b) Japan Air Lines, maintaining flight operations to and from the Philippines, on freight and
cargo fees, cargo originating from the Japan (passage documents sold in the Philippines)
c) All Nippon Airlines, maintaining flight operations to and from the Philippines, gross receipts
from sale of tickets to passengers originating from the Philippines (passage documents sold
in the Philippines)
d) United Airlines, no flight operations to and from the Philippines, on gross receipts from
transport of cargo from Singapore to Tokyo (passage documents sold in the Philippines by its
sales agent)
d. Sec. 119 – Tax on Franchises

1) Persons subject to 1) Franchises on radio and/or television broadcasting companies whose annual
tax gross receipts of the preceding year does not exceed P10,000,000;
2) Franchises on gas and water utilities.
2) Tax base Gross receipts derived from the business covered by the law granting the
franchise.
Page 3 of 9
3) Tax rates 1) Franchise on gas and water utilities - 2%

2) Franchise on radio and/or TV broadcasting - 3%
3) PAGCOR and its licensees and franchisees - 5%
4) Optional VAT 1) Radio and TV broadcasting companies whose annual gross receipts of the
registration preceding year does not exceed P10,000,000 shall have the option to be
registered within 10 days before the beginning of the calendar quarter as VAT
taxpayer and pay VAT thereon.
2) Once the option is exercised, it shall not be revoked.
5) Franchise grantees 1) Telephone and telegraph;
subject to VAT 2) Radio and/or television broadcasting;
3) Toll road operations;
4) All other franchisees, other than those covered by Sec. 119 of the Tax Code,
regardless of how their franchise may have been granted.
6) PAGCOR and its PAGCOR and its licensees and franchisees were subjected to VAT but nullified in
licensees and a Supreme Court decision (G.R. 172087). Subject to 5% franchise tax of the
franchisees gross revenue or earnings from its operations and licensing of gambling casinos,
gaming clubs and other similar recreation or amusement places, gaming pools,
and other related operations pursuant to Section 13 (2) of P.D. No. 1869
(Revenue Memorandum Circular No. 33-2013).
6) Exercises: Determine what business tax will the following be subject to

As a franchisee, Ms. Kathleen En, had the following data on revenues and receivables, taxes not included:
Receivables
Revenues Beginning End
From operations:
Covered by the franchise P2,000,000 P300,000 P400,000
Not covered by the franchise 600,000 50,000
How much is franchise tax due if she is a franchise grantee of :

1) water and gas utilities.
2) electric utility.
e. Sec. 120 - Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines
1) Persons subject The tax imposed shall be payable by the person paying for the services rendered
to tax and shall be paid to the person rendering the services who is required to collect
and pay the tax within twenty (20) days after the end of the quarter.
2) Persons not 1) Philippine Government;
subject to tax 2) Diplomatic services;
3) International organizations;
4) News services.
3) Tax base Amount paid for the services rendered
4) Tax rate 10%
5) Examples of 1) Telephone;
communication 2) Telegraph;
facilities 3) Telewriter exchange;
4) Wireless and other communication equipment services.
f. Sec. 121 - Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking
Functions (Gross Receipts Tax)
1) Bank defined The term “bank” means every banking institution, as defined in Sec. 2 of R.A. No.
337, as amended, otherwise known as The General Banking Act. A bank may
either be a commercial bank, a thrift bank, a development bank, a rural bank or a
specialized government bank.
2) Non-bank The term “non-bank financial intermediary” means a financial intermediary, as
financial defined in Sec. 2 (D) (c) of R.A. No. 337, as amended, otherwise known as The
intermediary General Banking Act, authorized by the BSP to perform quasi-banking activities
defined
3) Quasi-Banking The term “quasi-banking activities” means borrowing funds from twenty (20) or
activities more personal or corporate lenders at any time, through the issuance,
endorsement, or acceptance of debt instruments of any kind other than deposits
for the borrower’s own account, or through the issuance of certificates of
assignment or similar instruments, with recourse, or repurchase agreements for
purposes of relending or purchasing receivables and other similar obligation:
Provided, however, That commercial, industrial and other non-financial
companies, which borrow funds through any of these means for the limited
purpose of financing their own needs or the needs of their agents or dealers, shall
not be considered as performing quasi-banking functions.
4) Persons subject Banks and non-bank financial intermediaries performing quasi-banking functions
to the tax
Page 4 of 9
Tax base Tax rates

5) Tax base and tax Gross receipts on interest, commissions and discounts from
rates lending activities; income from financial leasing:
Remaining maturity period of instrument is 5 years or less 5%
Remaining maturity period of instrument is more than 5 1%
years
Dividends and equity shares in net income of subsidiaries 0%
Royalties, rentals of property, real or personal, profits from
exchange and all other items treated as gross income
under the Tax Code 7%
Net trading gains within the taxable year on foreign
currency, debt securities, derivatives and other similar
financial instruments 7%
6) In case maturity is In case the maturity period is shortened thru pre-termination, the maturity
shortened through period shall be reckoned to end as of the date of pre-termination for purposes of
pre-termination classifying the transaction and applying the correct rate of tax accordingly.
7) Exercise: A domestic bank had the following data in a quarter.

Rentals from safety deposit boxes and real property acquired through mortgage P300,000
foreclosures, gross of applicable tax
Service fees, net of applicable tax 186,000
Dividends and equity shares in the net income of subsidiaries 500,000
Amounts received from lending activities, net of applicable tax, on instruments with
maturities of:
Five years and less 760,000
More than five years 891,000
Net trading gain during the quarter 500,000
Net trading loss during the quarter (within the same year) 300,000
Compute the percentage tax for the quarter.
g. Sec. 122 – Tax on Other Non-Bank Financial Intermediaries (Gross Receipts Tax)
1) Persons subject to Non-bank financial intermediaries, such as money changers and pawnshops
tax
2) Tax base and tax Tax base Tax
rates rates
Gross receipts derived from interest, commissions, discounts and
all other items treated as gross income under the Tax Code 5%
Interests, commissions and discounts from lending activities, as
well as income from financial leasing:
Remaining maturity of instrument is 5 years or less 5%
Remaining maturity of instrument is more than 5 years 1%
3) In case maturity is In case the maturity period is shortened thru pre-termination, the maturity
shortened through period shall be reckoned to end as of the date of pre-termination for purposes
pre-termination of classifying the transaction and applying the correct rate of tax accordingly.
h. Sec. 123 – Tax on Life Insurance Premiums

1) Persons subject to tax Person, company or corporation (except purely cooperative companies or
associations) doing life insurance business of any sort in the Philippines.
2) Tax base Total premiums collected, whether such premiums are paid in money, notes,
credits or any substitute for money.
3) Tax rate 2% (per Sec. 1, R.A. No. 10001)
4) Other items subject to a) Premium on Health and Accident Insurance, whether received by a life or
the premium tax (RMC non-life insurance company
No. 49-2010) b) Re-issuance fees, reinstatement fees, renewal fees as well as penalties
paid to the life insurance company which are incidental to or in connection
with the insurance policy contracts issued
c) Investment income realized from the investment of funds obtained from
others allowed and approved by the Insurance Commission
5) Items earned by life a) Insurance and reinsurance commissions, whether life or non-life
insurance company b) Management fees
subject to VAT or c) Rental income
percentage tax as the d) Other income earned which can be pursued independently of the
case may be (RMC No. 49- insurance business activities
2010)
Page 5 of 9
6) Investment income The interest income earned by the life insurance companies from investing
realized from the the premiums received in marketable securities, bonds and other financial
investment of instruments is considered exempt from further imposition of business tax
premiums earned since the premiums which have been the source of the funds invested had
already been subject to the premium tax (RMC No. 49-2010).
7) Persons subject to VAT 1) Non-life insurance companies (except their crop insurance) including
surety, fidelity, indemnity and bonding companies;
2) Pre-need companies;
3) Health Maintenance Organizations (HMOs).
i. Sec. 124 – Tax on Agents of Foreign Insurance Companies

1) Persons subject to tax Every fire, marine or miscellaneous insurance agent authorized under the
Insurance Code to procure policies of insurance on risks located in the
Philippines.
2) Tax base Total premiums collected
3) Tax rate 4%
4) Direct insurance with In all cases where owners of property obtain insurance directly with
foreign insurance foreign companies, they shall pay the tax of 5% on premiums paid.
companies
j. Sec. 125 – Amusement Taxes

1) Persons subject to tax Proprietor, operator or lessee of:
1) cockpits; 4) Professional basketball games;
2) cabarets, night and day clubs; 5) Jai-alai and race tracks.
3) boxing exhibitions;
2) Tax base and tax rates TAX BASE TAX RATE
Jai-alai and race tracks Gross receipts 30%
Cockpits Gross receipts 18%
Cabarets, night and day clubs Gross receipts 18%
Professional basketball Gross receipts 15%
games
Boxing exhibitions Gross receipts 10%
Note: The term “cabarets, night and day clubs” includes videoke bars,
karaoke bars, karaoke televisions, karaoke boxes and music
lounge. (RMC No. 18-2010)
3) Payment of tax It shall be the duty of the proprietor, lessee or operator concerned, as well
as any party liable, within twenty (20) days after the end of each quarter
to make a true and complete return of the amount of gross receipts
derived during the preceding quarter and pay the tax due thereon.
4) Exempt boxing Boxing exhibitions wherein World or Oriental Championships in any
exhibition 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.
5) 15% tax on professional The 15% tax on professional basketball games shall be in lieu of all other
basketball games in lieu percentage taxes of whatever nature and description.
of all other percentage
taxes
6) 30% tax and other taxes The 30% tax in the case of Jai-Alai and racetracks of their gross receipts
imposed even if no is irrespective of whether or not any amount is charged for admission
amount is charged for
admission
7) Meaning of gross For the purpose of amusement tax, the term “gross receipts” embraces
receipts all the receipts of the proprietor, lessee or operator of the amusement
place. Said gross receipts also include income from television, radio and
motion picture right, if any.
8) Exercise
Boy Logro is a caterer and a videoke bar operator. In a taxable period, she had the following data, tax not
included:
Sales:
From operations of the Sherep Catering Service:
Cash sales P400,000
Accounts receivable (catering) 250,000
From operations of the Sintonado Videoke Bar:
Cash sales 1,360,000
Page 6 of 9
Payments for catering service, based on gross receipts (80% of which are to 60%
VAT taxpayers)
Question 1 – How much is the amusement tax payable?
b. The following data are presented to you:

Gross receipts, sale of tickets P 500,000
Gross receipts, sale of food and drinks inside the amusement place 1,000,000
Gross receipts, sale of souvenir items inside the amusement place 300,000
Compute the amusement tax assuming the amusement place is a:

1) Race track.
2) Cockpit.
3) Videoke bar.
4) Venue where professional basketball games are held.
5) Venue where boxing exhibitions featuring Philippine championship.
6) Venue where world boxing championship is held involving a Filipino boxer and promoted by a
domestic corporation.
k. Sec. 126 - Tax on Winnings

1) Persons subject to 1) Every person who wins in horse races;
tax 2) Winning from double, forecast/quinella and trifecta bets;
3) Owners of winning race horses
2) Tax base and tax Tax base Tax rate
rates Amount paid for every winning 10% (person who wins in horse
ticket less cost of the tickets races)
Amount paid for every winning 4% (double, forecast/quinella and
ticket trifecta bets)
less cost of the tickets
Prize 10% (owners of winning race
horses)
3) Definition of terms 1) Daily double or extra double is an event wherein the bettor selects a number
in each of two consecutive races and the selection in each race must finish
first.
2) Forecast is an event wherein the bettor selects two (2) numbers in a selected
race, and the selection must finish first and second in the correct order.
3) Double quinella is an event wherein the bettor selects two (2) numbers in
each of the two (2) selected races, and the selection in each race must finish
first and second in either order.
4) Trifecta is an event wherein the bettor selects three (3) numbers in a selected
race and the selection must finish first, second and third in the correct order.
4) Collection of tax 1) Tax on winnings shall be deducted from the “dividends” corresponding to each
winning ticket or the “prize” of each winning racehorse.
2) Tax on winnings shall be withheld by the operator, manager or person in
charge of the horse races before paying the dividends or prizes.
5) Remittance of tax The operator, manager or person in charge of horse races shall remit the taxes
to BIR to the BIR within 20 days from the date the tax was deducted and withheld.
l. Sec. 127 (A) - Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded Through the
Local Stock Exchange.
1) Persons subject to tax Seller or transferor of shares of stock
2) Person not subject to Dealer in securities
tax
3) Tax base Gross selling price or gross value in money
4) Tax rate 6/10 of 1% (.006) effective January 1, 2018 (used to be 1/2 of 1%)
5) Collection of tax It shall be the duty of every stock broker who effected the sale to collect the
tax.
6) Remittance of tax The tax collected shall be remitted within 5 banking days from the date of
collected collection.
7) Not deductible for The tax on sale, etc. of shares of stock listed and traded through the local
income tax purposes stock exchange shall not be deductible for income tax purposes
8) Gain derived from sale, Any gain derived from the sale, barter, exchange or other disposition of
barter, exchange or shares of stock under Sec. 127 shall be exempt from capital gains tax and
other disposition of from the regular individual or corporate income tax.
shares stock of under
Sec. 127
9) Exercise: Pink Yummy has shares of stock of Manila Trading Corp valued at P500,000 which are held as
investment. She sold them for P300,000.
Page 7 of 9
REQ: a. How much is the percentage tax on the sale of the shares listed and traded in the local stock
exchange assuming the sale is on January 5, 2018?
b. How much is the capital gains tax assuming the shares are sold January 5, 2018 directly to a buyer and
not through the stock exchange?
c. How much is the value-added tax assuming the shares are held as inventory and Pink Yummy is a VAT-
registered dealer in securities?
m. Sec. 127 (B) - Tax on Shares of Stock in Closely Held Corporation Sold or Exchanged Through
Initial Public Offering.
1) Persons subject to tax 1) Issuing corporation in initial public offering;
2) Seller in secondary offering.
2) Tax base Gross selling price or gross value in money
3) Tax rates Shares sold, bartered, exchanged
--------------------------------- = Up to 25% - 4%
Total outstanding shares = Over 25% but not over 33 1/3% - 2%
= Over 33 1/3% - 1%
4) Payment of tax 1) In case of primary offering – The corporate issuer shall file the return and
pay the tax within 30 days from the date of listing of the shares in the
local stock exchange.
2) In case of secondary offering – The stock broker shall collect the tax and
remit the same to BIR within 5 banking days from the date of collection.
5) Not deductible for The tax paid on initial public offering and secondary offering shall not be
income tax purposes deductible for income tax purposes.
6) Gain derived from sale, Any gain derived from the sale, barter, exchange or other disposition of
barter, exchange or shares of stock under Sec. 127 shall be exempt from capital gains tax and
other disposition of from the regular individual or corporate income tax.
shares stock of under
Sec. 127
7) Repeal Section 6 of Bayanihan to Recover as One Act (RA 11494) repeals the
imposition of the IPO Tax.
2. RETURNS AND PAYMENTS OF PERCENTAGE TAXES

a. Quarterly Return Every person subject to the percentage taxes imposed shall file a quarterly
return of the amount of his gross sales, receipts or earnings and pay the tax
due thereon within twenty-five (25) days after the end of each taxable
quarter.
b. Consolidated return of Large taxpayers shall file a consolidated return and pay the tax accordingly.
large taxpayers
c. Large taxpayers 1) As to tax payments
Percentage tax At least P200,000 per quarter
VAT At least P200,000 per quarter
Excise tax At least P1,000,000 per year
Income tax At least P1,000,000 per year
Documentary stamp tax At least P1,000,000 per year
Withholding tax At least P1,000,000 annually
2) As to financial condition
Gross sales/receipts At least P1,000,000,000 per year
Gross purchases At least P800,000,000 for the preceding
year
Net worth At least P300,000,000 at the close of
each calendar or fiscal year
d. Person whose VAT In the case of a person whose VAT registration is cancelled and who
registration is cancelled becomes liable to the 3% tax on VAT-exempt persons, the tax shall accrue
from the date of cancellation and shall be paid within 25 days after the end
of each taxable quarter.
e. Person retiring from a Any person retiring from a business subject to percentage tax shall notify
business subject to the nearest internal revenue officer, file his return and pay the tax due
percentage tax thereon within 20 days after closing his business.
Page 8 of 9
f. Withholding of Any person, natural or juridical, with respect to his/its purchase in the
percentage tax course of trade or business from non-VAT taxpayers subject to the 3%
percentage under Section 116 of the Tax Code shall be subject to a
percentage tax withholding at source at a rate of 3% based on the payee’s
(or seller’s) sales/receipts. The withholding shall be done if the taxpayer-
payee opts to remit his percentage tax through withholding by filing “Notice
of Availment of the Option to Pay the Tax Through the Withholding Process”.
g. Commissioner of The Commissioner of Internal Revenue may prescribe a minimum amount of
Internal Revenue may gross receipts under the following cases:
prescribe a minimum 1) When a taxpayer fails to issue receipts or invoices;
amount of gross receipts 2) When no return is filed;
3) When there is reason to believe that the books of accounts or other
records do not correctly reflect the declarations made or to be made in
return.
h. Place of filing the 1) Authorized agent bank;
return and payment of 2) Revenue District Office/Large Taxpayer District Office/Large Taxpayer
the percentage tax Assistance Division;
3) Collection Agent;
4) Duly authorized Treasurer of the city or municipality where the business
or principal place of business is located, as the case may be.
i. Option to file a separate A person liable to percentage tax (except large taxpayers) may, at his
return or consolidated option, file a separate return for each branch or place of business, or a
return consolidated return for all branches or places of business.
Page 9 of 9
TAX-501: EXCISE TAXES

A. Definition of excise tax
Excise taxes apply to taxes on goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported as well as services performed in the
Philippine, which tax shall be in addition to the value-added tax.
B. Concept and nature of excise taxes

1. Considered These excise taxes may be considered taxes on production as they are collected only
taxes on from the manufacturers and producers.
production
2. An indirect tax Basically excise tax is an indirect tax, excise taxes are directly levied upon the
manufacturer or importer upon removal of the taxable goods from its place of
production or from the customs custody.
These taxes, however, may be actually passed on to the end consumer as part of the
transfer value or selling price of the goods sold, bartered or exchanged.
C. Goods and services subject to excise tax

1. Goods subject Excise taxes apply to:
to excise taxes a) goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition,
b) things imported, as well as
c) services rendered in the Philippines
Excise taxes specifically apply to:

a) Alcohol products,
b) Tobacco products,
c) Petroleum products,
d) Miscellaneous articles such as automobiles and non-essential goods,
e) Non-essential services,
f) Sweetened beverages, and
g) Mineral products
The excise tax imposed herein shall be in addition to the value-added tax imposed.
2. Kinds of excise 'Specific tax' - an excise tax imposed and based on weight or volume capacity or any
taxes other physical unit of measurement.
'Ad valorem tax - an excise tax imposed and based on selling price or other specified
value of the good.'
3. Examples of a) Excise tax on Cigarettes Packed by Hand
specific tax b) Excise tax on Cigarettes Packed by Machine
c) Excise tax on petroleum products
d) Excise tax on mineral products
e) Excise tax on sweetened beverages
4. Examples of ad a) Excise tax on alcoholic products
valorem tax b) Excise tax on cigars
c) Excise tax on automobiles
d) Excise tax on non-essential services
5. Manner of a) Specific tax = Units x Specific tax rate
Computation of b) Ad valorem tax = Units x SP/unit x Ad valorem tax rate
Excise Tax
D. Filing of Return and Payment of Excise Tax on Domestic Products.
1. Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. -
a. Persons Every person liable to pay excise tax shall file a separate return for each place of
Liable to File production setting forth, among others:
a Return a) the description and quantity or volume of products to be removed,
b) the applicable tax base and the amount of tax due thereon.
In the case of indigenous petroleum, natural gas or liquefied natural gas, the excise tax
shall be paid by the first buyer, purchaser or transferee for local sale, barter or transfer.
Excise tax on exported products shall be paid by the owner, lessee, concessionaire or
operator of the mining claim.
Should domestic products be removed from the place of production without the

Week 4: EXCISE TAX
payment of the tax, the owner or person having possession thereof shall be liable for
the tax due thereon.
b. Time for Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by
Filing of the manufacturer or producer before removal of domestic products from place of
Return and production.
Payment of
Excise tax on locally manufactured petroleum products and indigenous petroleum levied
the Tax
under Sections 148 (Manufactured Oil and Other Fuels) and 151(A)(4) (Indigenous
Petroleum), respectively, shall be paid before removal from the place of production of
such products.
Excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due
and payable upon removal of such products from the locality where mined or extracted.
With respect to the excise tax on locally produced or extracted metallic mineral or
mineral products, the person liable shall file a return and pay the tax within fifteen (15)
days after the end of the calendar quarter when such products were removed subject to
such conditions as may be prescribed by rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
For this purpose, the taxpayer shall file a bond in an amount which approximates the
amount of excise tax due on the removals for the said quarter.
The foregoing rules notwithstanding, for imported mineral or mineral products, whether
metallic or nonmetallic, the excise tax due thereon shall be paid before their removal
from customs custody.
c. Place of Except as the Commissioner otherwise permits, the return shall be filed with and the tax
Filing of paid to any authorized agent bank or Revenue Collection Officer, or duly authorized City
Return and or Municipal Treasurer in the Philippines.
Payment of
the Tax
d. Exceptions The Secretary of Finance, upon recommendation of the Commissioner may, by rules and
regulations, prescribe:
(a) The time for filing the return at intervals other than the time prescribed in the
preceding paragraphs for a particular class or classes of taxpayers after considering
factors such as volume of removals, adequate measures of security and such other
relevant information required to be submitted under the pertinent provisions of this
Code; and
(b) The manner and time of payment of excise taxes other than as herein prescribed,
under a tax prepayment, advance deposit or similar schemes. In the case of locally
produced of extracted minerals and mineral products or quarry resources where the
mine site or place of extraction is not the same as the place of processing or
production, the return shall be filed with and the tax paid to the Revenue District
Office having jurisdiction over the locality where the same are mined, extracted or
quarried: Provided, however, That for metallic minerals processed abroad, the return
shall be filed and the tax due thereon paid to the Revenue District Office having
jurisdiction over the locality where the same are mined, extracted or quarried.
2. Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax

a. Price excluding Unless otherwise provided, the price, excluding the value-added tax, at which the
VAT goods are sold at wholesale in the place of production or through their sales agents
to the public shall constitute the gross selling price
b. Manufacturer If the manufacturer also sells or allows such goods to be sold at wholesale in
also sells or another establishment of which he is the owner or in the profits of which he has an
allows goods to interest, the wholesale price in such establishment shall constitute the gross selling
be sold at price.
wholesale in
another
establishment he
owns
c. Should price be Should such price be less than the cost of manufacture plus expenses incurred until
less than the the goods are finally sold, then a proportionate margin of profit, not less than 10%
cost of of such manufacturing cost and expenses, shall be added to constitute the gross
manufacture selling price.
3. Manufacturer's or Producer's Sworn Statement

Every manufacturer or producer of goods or products subject to excise taxes shall file with the Commissioner
Page 2 of 7
Week 4: EXCISE TAX
on the date or dates designated by the latter, and as often as may be required, a sworn statement showing,
among other information:
A) the different goods or products manufactured or produced and their corresponding gross selling
price or market value,
B) together with the cost of manufacture or production
C) plus expenses incurred or to be incurred until the goods or products are finally sold.
4. Credit for Excise tax on Goods Actually Exported

a. When goods When goods locally produced or manufactured are removed and actually exported
locally produced without returning to the Philippines, whether so exported in their original state or as
or ingredients or parts of any manufactured goods or products, any excise tax paid
manufactured thereon shall be credited or refunded upon submission of the proof of actual
are removed exportation and upon receipt of the corresponding foreign exchange payment.
and actually
exported
b. Excise tax on The excise tax on mineral products, except coal and coke, imposed under Section
mineral 151 shall not be creditable or refundable even if the mineral products are actually
products, exported.
except coal and
coke
E. Payment of Excise Taxes on Imported Articles
1. Person liable
a. Excise tax on Excise taxes on imported articles shall be paid by the owner or importer to the
imported Custom Officers, conformably with the regulations of the Department of Finance and
articles before the release of such articles from the customs house, or by the person who is
found in possession of articles which are exempt from excise taxes other than those
legally entitled to exemption.
b. Tax-free articles In the case of tax-free articles brought or imported into the Philippines by persons,
brought or entities, or agencies exempt from tax which are subsequently sold, transferred or
imported into exchanged in the Philippines to non-exempt persons or entitles, the purchasers or
the Philippines recipients shall be considered the importers thereof, and shall be liable for the duty
by persons, and internal revenue tax due on such importation
entities, or
agencies
exempt from
tax
c. Importation of The provision of any special or general law to the contrary notwithstanding, the
cigars and importation of cigars and cigarettes, distilled spirits, fermented liquors and wines
cigarettes, into the Philippines, even if destined for tax and duty free shops, shall be subject to
distilled spirits, all applicable taxes, duties, charges, including excise taxes due thereon.
fermented
liquors and
wines into the
Philippines
d. Non-labeling or Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free
re-selling of shops which are not labeled as herein above required, as well as tax and duty-free
certain goods articles obtained from a duty free shop and subsequently found in a non duty-free
punishable shop to be offered for resale shall be confiscated, and the perpetrator of such non-
labeling or re-selling shall be punishable under the applicable provisions of this
Code.
e. Destruction of Articles confiscated shall de destroyed using the most environmentally friendly
confiscated method available in accordance with the rules and regulations to be promulgated by
articles the Secretary of Finance, upon recommendation of the Commissioners of Customs
and Internal Revenue.
f. Lien on the The tax due on any such goods, products, machinery, equipment or other similar
article articles shall constitute a lien on the article itself, and such lien shall be superior to
all other charges or liens, irrespective of the possessor thereof.
2. Rate and Basis of the Excise Tax on Imported Articles

Unless otherwise specified imported articles shall be subject to the same rates and basis of excise taxes
applicable to locally manufactured articles.
F. Mode of Computing Contents of Cask or Package
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Week 4: EXCISE TAX
Every fractional part of a proof liter equal to or greater than a half liter in a cask or package containing
more than one liter shall be taxed as a liter, and any smaller fractional part shall be exempt but any
package of spirits, the total content of which are less than a proof liter, shall be taxed as one liter.
G. EXCISE TAX RATES

1. Alcoholic products tax base and rates
Product Tax base and rates
a. Distilled spirits (A) Effective on January 1, 2015
(1) An ad valorem equivalent to twenty percent (20%) of the net retail price* per
proof; and
(2) In addition, the specific tax rate of Twenty pesos (P20.00) per proof liter.
(B) Effective January 1, 2020

(1) An ad valorem tax equivalent to twenty-two percent (22%) of the net retail
price per proof; and
(2) In addition to the ad valorem tax herein imposed, a specific tax of P42.00 per
proof liter.
(C) Effective January 1, 2021

(1) An ad valorem tax equivalent to 22% of the net retail price per proof; and
(2) In addition, a specific tax of P47.00 per proof liter.
(D) Effective January 1, 2022

(E) Effective January 1, 2023

(F) Effective January 1, 2024

(G) In addition, the specific tax imposed under this Section shall be increased by six
percent (6%) every year thereafter, effective January 1, 2025, through revenue
regulations to be issued by the Secretary of Finance.
*net retail price excludes the excise tax and the value-added tax
[Amended by Republic Act No. 11467, 22 January 2020]

b. Wines On wines, effective on January 1, 2020, excise tax is equivalent to P50.00 per liter.
The rate of tax imposed under this Section shall be increased by 6% every year
thereafter, effective January 1, 2021, through revenue regulations issued by the
Secretary of Finance.
Manufacturers and importers of wines shall within the first five (5) days of every
month, submit to the Commissioner a sworn statement of the volume of sales and
removals for each particular brand of wine sold at their establishments for the
three-month period immediately preceding.

c. Fermented liquor Effective on January 1, 2017, the tax on all fermented liquors shall be P23.50 per
liter.
There shall be levied, assessed and collected an excise tax on beer, lager beer, ale,
porter and other fermented liquors regardless if manufactured in factories or sold
and brewed at micro-breweries or small establishments such as pubs and
restaurants, except tuba, basi, tapuy and similar fermented liquors in accordance
with the following schedule:
Effective on January 1, 2020, the tax shall be P35.00 per liter;

Effective on January 1, 2024, the tax shall be P43.00 per liter.
The rates of tax imposed under this Section shall be increased by 6% every year
thereafter effective January 1, 2025, through revenue regulations issued by the
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Week 4: EXCISE TAX
2. Tobacco products (tax base and tax rates)

Product Under TRAIN
a. Cigars There shall be levied, assessed and collected on cigars an excise tax in accordance with the
following schedule:
(1) Effective on January 1, 2013
(a) An ad valorem tax equivalent to 20% of the net retail price (excluding the excise tax
and the VAT) per cigar; and
(b) In addition, a specific tax of P5.00 per cigar.
(2) In addition, the specific tax rate of P5.00 shall be increased by 4% effective on
January 1, 2014 through revenue regulations issued by the Secretary of Finance.
b. Cigarettes Effective on January 1, 2018, P32.50 per pack;
Packed by Effective on July 1, 2018, P35.00 per pack;
Hand Effective on January 1, 2020, P37.50 per pack; and
Effective on January 1, 2022, P40.00 per pack.
c. Cigarettes Effective on January 1, 2018, the tax on all cigarettes packed by machine shall be P32.50
Packed by per pack;
Machine
Effective on July 1, 2018, P35.00 per pack;
Effective on January 1, 2020, P37.50 per pack; and
Effective on January 1, 2022, P40.00 per pack.
The rates of tax imposed under this Subsection shall be increased by four percent (4%)
every year thereafter effective on January 1, 2024, through revenue regulations issued by
the Secretary of Finance.
d. Heated There shall be levied, assessed and collected on heated tobacco products an excise tax at
tobacco the rate prescribed below:
products
Effective on January 1, 2020, P25.00;
Effective on January 1, 2021, P27.50;
Effective on January 1, 2022, P30.00; and
Effective on January 1, 2023, P32.50 per pack of twenty (20) units or packaging
combinations of not more than twenty (20) units.
The rates of tax imposed under this Subsection shall be increased by five percent (5%)
every year effective on January 1, 2024 through revenue regulations issued by the
[Introduced by Republic Act No. 11467, 22 January 2020]

e. Vapor (1) Nicotine Salt or Salt Nicotine. — There shall be levied, assessed and collected on any
products liquid substance, regardless of nicotine content, including nicotine-free liquids or any
similar product, further classified as nicotine salt or salt nicotine, an excise tax based on
the following schedules:
Effective on January 1, 2020, P37.00 per milliliter or a fraction thereof;

Effective on January 1, 2021, P42.00 per milliliter or a fraction thereof;
Effective on January 1, 2022, P47.00 per milliliter or a fraction thereof; and
Effective on January 1, 2023, P52.00 per milliliter or a fraction thereof.
Provided, That the rates of tax imposed under this Subsection shall be increased by five
percent (5%) every year effective on January 1, 2024, through revenue regulations issued
by the Secretary of Finance.
(2) Conventional 'Freebase' or 'Classic' Nicotine. — There shall be levied, assessed and
collected on any liquid substance, regardless of nicotine content, including nicotine-free
liquid or any similar product, further classified as conventional 'freebase' or 'classic'
nicotine an excise tax based on the following schedules:
Effective on January 1, 2020, P45.00 per ten (10) milliliters or a fraction thereof;
Effective on January 1, 2021, P50.00 per ten (10) milliliters or a fraction thereof;
Effective on January 1, 2022, P55.00 per ten (10) milliliters or a fraction thereof; and
Effective on January 1, 2023, P60.00 per ten (10) milliliters or a fraction thereof.
Provided, That the rates of tax imposed under this Subsection shall be increased by five
percent (5%) every year effective January 1, 2024, through revenue regulations to be
issued by the Secretary of Finance.
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Week 4: EXCISE TAX
[Introduced by Republic Act No. 11467, 22 January 2020]
3. Petroleum products (tax base and tax rates)

Product Under TRAIN
1) Lubricating oils and greases, per liter and kilogram, respectively, of volume capacity or weight,
including but not limited to, base Eight pesos (P8.00)
stock for lube oils and greases,
high vacuum distillates, aromatic Effective January 1, 2019, Nine pesos (P9.00):
extracts, and other similar Effective January 1, 2020, Ten pesos (P10.00)
preparations, and additives for
lubricating oils and greases,
whether such additives are
petroleum based or not,
2) Processed gas per liter of volume capacity, Eight pesos (P8.00)
3) On denatured alcohol to be used Effective January 1, 2019, Nine pesos (P9.00)
for motive power Effective January 1, 2020, Ten pesos (P10.00)
4) Waxes and petrolatum per kilogram, Eight pesos (P8.00)
Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
5) Naphtha, regular gasoline and per liter of volume capacity, Seven pesos (P7.00)
other similar products of Effective January 1, 2019, Nine pesos (P9.00)
distillation Effective January 1, 2020, Ten pesos (P10.00)
6) Unleaded premium gasoline
7) Aviation turbo jet fuel, aviation per liter of volume capacity, Four pesos (P4.00);
gas
8) Kerosene per liter of volume capacity, Three pesos (P3.00)
Effective January 1, 2019, Four pesos (P4.00)
Effective January 1, 2020, Five pesos (P5.00)
9) Diesel fuel oil, and on similar per liter of volume capacity, Two pesos and fifty centavos (P2.50)
fuel oils having more or less the
same generating power Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
Effective January 1, 2020, Six pesos (P6.00)
10) Liquefied petroleum gas per kilogram, One peso (P1.00)
Effective January 1, 2019, Two pesos (P2.00)
Effective January 1, 2020, Three pesos (P3.00)
11) Asphalts per kilogram, Eight pesos (P8.00)
Effective January 1, 2019, Nine pesos (P9.00)
Effective January 1, 2020, Ten pesos (P10.00)
12) Bunker fuel oil, and on similar per liter of volume capacity, Two pesos and fifty centavos (P2.50)
fuel oils having more or less the
same generating power Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
13) Petroleum coke per metric ton, Two pesos and fifty centavos (P2.50):
Effective January 1, 2019, Four pesos and fifty centavos (P4.50)
4. Miscellaneous articles (tax base and tax rates)

Under TRAIN
1) Automobiles Effective January 1, 2018
Net manufacturer’s price/Importer’s Selling Price Rate
Up to P600,000 4%
Over P600,000 to P1,000,000 10%
Over P1,000,000 to P4,000,000 20%
Over P4,000,000 50%
Hybrid vehicles shall be subject to 50% of the applicable excise tax rates on automobiles
Purely electric vehicles and pick-ups shall be exempt from excise tax on automobiles.
2) Non- There shall be levied, assessed, and collected a tax equivalent to 5% based on the gross
essential receipts derived from the performance of services, net of excise tax and VAT, on invasive
services cosmetic procedures, surgeries, and body enhancements directed solely towards
improving, altering, or enhancing the patient’s appearance and do not meaningfully
promote the proper function of the body or prevent or treat illness or disease.
This tax shall not apply to procedures necessary to ameliorate a deformity arising from, or
directly related to, a congenital or developmental defect or abnormality, a personal injury
resulting from an accident or trauma, or disfiguring disease, tumor, virus or infection:
Page 6 of 7
Week 4: EXCISE TAX
Provided, further, That cases or treatments covered by the National Health Insurance
Program shall not be subject to this tax.”
3) Sweetened Effective January 1, 2018:
beverages
(1) A tax of Six pesos (P6.00) per liter of volume capacity shall be levied, assessed, and
collected on sweetened beverages using purely caloric sweeteners, and purely non-caloric
sweeteners, or a mix of caloric and non-caloric sweeteners: Provided, That this tax rate
shall not apply to sweetened beverages using high fructose corn syrup: Provided, further,
That sweetened beverages using purely coconut sap sugar and purely steviol glycosides
shall be exempt from this tax; and
(2) A tax of Twelve pesos (P12.00) per liter of volume capacity shall be levied, assessed,
and collected on sweetened beverages using purely high fructose corn syrup or in
combination with any caloric or non-caloric sweetener.
5. Mineral products (tax base and tax rates)

Under TRAIN
1. On domestic Effective January 1, 2018, Fifty pesos (P50.00) per metric ton;
or imported Effective January 1, 2019, One hundred pesos (P100.00) per metric ton; and
coal and coke Effective January 1, 2020, One hundred fifty pesos (P150.00) per metric ton.
notwithstandi
ng any
incentives
granted in any
law or special
law
2. On all Four percent (4%) based on the actual market value of the gross output thereof at the
nonmetallic time of removal, in the case of those locally extracted or produced
minerals and
quarry Four percent (4%) based the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation.
resources
3. Copper and Four percent (4%) on the actual market value of the gross output thereof at the time of
other metallic removal, in the case of those locally extracted or produced; or
minerals
Four percent (4%) on the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation
4. Gold and Four percent (4%) on the actual market value of the gross output thereof at the time of
chromite removal, in the case of those locally extracted or produced; or
Four percent (4%) on the value used by the Bureau of Customs in determining tariff
and customs duties, net of excise tax and value-added tax, in the case of importation
5. On indigenous Six percent (6%) of the fair international market price thereof, on the first taxable sale,
petroleum barter, exchange or such similar transaction
Such tax to be paid by the buyer or purchaser before removal from the place of
production.
Page 7 of 7
De La Salle University - Dasmarinas
Preboard Examinations
Kenneth L. Manuel, CPA, JD
1. The inherent powers of the government are primarily _____ in character.

a. Executive
b. Legislative
c. Judicial
d. Quasi-judicial
2. The Philippine government recently passed RA No. 14023, otherwise known as Bardagulan
to Heal as One Act, which penalized, among others, violation of community quarantine
rules in light of the prevailing pandemic. This is an example of the exercise of the
government of which inherent power?
a. Taxation
b. Eminent Domain
c. Police Power
d. Corruption
3. Eminent domain:
a. Is the power to take public property for public purpose after payment of just
compensation.
b. Is the power to take private property for private purpose after payment of just
compensation.
c. Is the power to take public property for private purpose after payment of just
compensation.
d. Is the power to take private property for public purpose after payment of just
compensation.
4. The Marshall doctrine justifies:

a. The use of taxation as an implement of police power.
b. The imposition of taxes in progressive rates.
c. The bias of taxation for the protection of the less fortunate.
d. The power of the government to collect taxes even without the grant of the Constitution.
5. When the law itself provides for non-payment of taxes, such tax escape is known as:
a. Tax evasion
b. Tax holiday
c. Tax minimization
d. Tax avoidance
6. Statement 1: A revenue bill must originate from the House of Representatives.

Statement 2: A bill granting tax exemption must originate from the Senate.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
7. Statement 1: Under the non-establishment clause, the government cannot support any
religion.
Statement 2: Taxes may be used to establish a park in honor of a saint or a religious figure.
8. All of the following are major Divisions of the BIR, except:

a. Operations Group
b. Legal Group
c. Inventory Systems Group
d. Resource Management Group
9. Which of the following statements is true?

a. The National Internal Revenue Code is a codification by our executive department of
our taxation laws.
b. The Bureau of Internal Revenue does not have a lawmaking power, but it is able to
promulgate rules within limits provided by law through Revenue Regulations.
c. The Tariffs and Customs Code, the Local Government Code, and the Omnibus
Investment Code are not sources of tax laws.
d. The Congress does not need the concurrence of the Senate in enacting a tax law.
10. The valuation of the CIR of real properties is called:

a. Zonal value
b. Assessed value
c. Fair market value
d. Appraised value
11. It is defined as a delinquency tax assessment made without the benefit of a complete or
partial investigation by an authorized revenue officer.
a. Hasty assessment
b. Jeopardy assessment
c. Delinquency assessment
d. Impartial assessment
12. Within how many days must additional supporting documents be submitted?
a. Fifteen (15) days from filing of a request for reinvestigation.
b. Thirty (30) days from filing of a request for reinvestigation.
c. Sixty (60) days from filing of a request for reinvestigation.
d. Ninety (90) days from filing of a request for reinvestigation.
13. Mimiyuuuh Company filed its annual income tax return for the calendar year 2020 on April
12, 2021. The BIR assessed Mimiyuuuh of deficiency taxes on April 14, 2024, without
alleging fraud. Mimiyuuuh, in its protest, contended that the period for BIR to assess has
already prescribed. Is Mimiyuuuh correct?
a. Yes, the right of BIR to assess has prescribed on April 12, 2023.
b. Yes, the right of BIR to assess has prescribed on April 12, 2024.
c. No, the right of BIR to assess will only prescribe on April 15, 2024.
d. No, the right of BIR to assess will only prescribe on April 15, 2025.
14. Which of the following is not a test to determine the timing of taxability of income?
a. Realization Test
b. All Events Test
c. Immediacy Test
d. Claim of Right Doctrine
15. Statement 1: Individuals can only use the calendar year

Statement 2: Corporations can only use the fiscal year
16. Momo is a resident citizen, Nayeon is a non-resident citizen, while Dahyun is a resident
alien. Who among them is subject to income tax only on income derived from sources
outside the Philippines?
a. Momo only.
b. Nayeon only.
c. Dahyun only.
d. Neither Momo, Nayeon, or Dahyun.
Situational Problem No. 1: For items 17 to 19, refer to the following information:
Lalisa, a resident citizen, purchased a parcel of land, measuring 1,000 square meters at a price of
P2,000,000, on January 5, 2021. Due to the construction of a subway station a few hundred
meters away from Lalisa’s parcel of land, the fair market value of the land increased to
P15,000,000 by 2022. Lalisa procured an appraiser to determine the new value of the land, and
the appraiser affirmed the increase to P15,000,000. The land was used as a collateral to secure a
loan amounting to P10,000,000 by way of a real estate mortgage. The proceeds of the loan was
used by Lalisa to construct buildings on the land for leasing.
17. Is Lalisa subject to income tax?

a. Yes. The amount that will be subject to income tax is P15,000,000.
b. Yes. The amount that will be subject to income tax is P13,000,000.
c. No. The increase in value of the land is not subject to income tax.
d. No. Loans are exempt from all internal revenue taxes.
18. Under the realization test, under which of the following scenarios would Lalisa be subject to
income tax?
a. Repayment of the loan
b. Foreclosure of the real estate mortgage
c. Payment of the documentary stamp taxes on the loan
d. Further appreciation of the value of the land to ten times the amount it was originally
acquired.
19. Suppose that Rose is a real estate dealer, and she saw that everything she needs is on the
ground that Lalisa owns. Rose wanted to purchase half of Lalisa’s parcel of land, or an area
of 500 square meters. Lalisa sold the land to Rose at a gain on 2025. When shall Lalisa file
her annual income tax return and reflect the gain from the sale of land to Rose?
a. Thirty (30) days from the date of sale.
b. April 15, 2026.
c. April 15, 2025.
d. Fifteenth day of the fourth month following the close of Lalisa’s taxable year which may
be in any last day of the month other than December 31.
20. A non-resident alien engaged in trade or business is one whose stay in the Philippines is:
a. At least 180 days
b. More than 180 days
c. At least 183 days
d. More than 183 days
21. Which is true regarding the taxation of non-resident aliens not engaged in trade or business?
a. They are subject to the final tax of 30% based on gross income.
b. They are subject to the final tax of 30% based on taxable income.
c. They are subject to the final tax of 25% based on gross income.
d. They are subject to the final tax of 25% based on taxable income.
22. Statement 1: An individual taxpayer whose only income is interest from bank deposits need
not file his income tax return.
Statement 2: A minimum wage earner who has derives no other income aside from his
minimum wage employment need not file his income tax return.
Industrious as he is known, Arthur, a non-VAT registered resident citizen, works as a

government employee at daytime and accepts clients for accounting work after office hours. At
the same time, Arthur maintains a t-shirt printing shop to earn more. For the taxable year
ending December 31, 2021, Arthur earned the following amounts:
Taxable compensation income P 850,000
Gross receipts from accounting work 1,500,000
T-shirt printing shop
Gross sales P 1,400,000
Cost of sales (800,000)
Gross income P 600,000
Operating expenses (400,000)
Net income P 200,000
Upon filing his first quarter income tax return, Arthur availed of the 8% income tax option:
23. Is his availment of the 8% income tax option correct?

a. No, because the 8% income tax option is available only for VAT-registered taxpayers.
b. No, because Arthur is not a purely compensation income earner.
c. No, because Arthur’s gross receipts exceeded the threshold allowed to avail of the 8%
income tax option.
d. Yes.
24. Assuming that the availment of the 8% income tax option is proper, how much is Arthur’s
income tax due?
a. 232,000
b. 300,000
c. 357,000
d. 377,000
Solutions:
Taxable compensation income 850,000
(800,000) 130,000
50,000 x 30% = 15,000
Income tax on compensation 145,000
Gross receipts from accounting work 1,500,000

Gross sales on t-shirts 1,400,000
Total gross sales/receipts 2,900,000
Tax rate 8%
Income tax on businesses 232,000
Income tax on compensation 145,000

Income tax on businesses 232,000
Income tax due 377,000
25. How much is Arthur’s percentage tax due?

a. 0
b. 29,000
c. 58,000
d. 87,000
26. Which is true regarding the taxation of non-resident foreign corporations?

a. They are subject to the final tax of 30% based on gross income.
b. They are subject to the final tax of 30% based on taxable income.
c. They are subject to the final tax of 25% based on gross income.
d. They are subject to the final tax of 25% based on taxable income.
27. Samahan ng mga Nagkakaisang Manggagawa ng Bagong Silang is a labor organization

registered with the Department of Labor and Employment. It collected union dues from its
members amounting to P400,000, and it likewise operated a memorabilia shop in which it
earned an income of P350,000. The said labor organization used P600,000 of the proceeds for
the professional development of its union members. How much of the above amount is
subject to the regular corporate income tax of 30%?
a. P 350,000
b. P 150,000
c. P 600,000
d. P 750,000
28. In order for the reduced rate of 20% corporate income tax to apply, a domestic corporation
must have a taxable income:
a. Not exceeding P5,000,000
b. Less than P5,000,000
c. Not exceeding P100,000,000
d. Less than P100,000,000
29. Under the CREATE Act, interest income from depository banks under the Foreign Currency
Deposit System earned by a resident foreign corporation is:
a. Subject to capital gains tax of 15%
b. Subject to final withholding tax of 15%
c. Subject to final withholding tax of 7.5%
d. Exempt
Transit earned the following items of income for the taxable year ending December 31, 2021.
Dividends from domestic corporation 480,000
Receipts from rental of machinery 330,000
Interest income from expanded foreign currency deposit
system 140,000
Royalties from literary compositions 190,000
1,140,000
30. If Transit is a partnership constituted in the Philippines, which of the following statements is
true?
a. P1,140,000 will be subject to regular income tax at the rate of 0 to 35%.
b. P330,000 will be subject to regular income tax at the rate of 25%.
c. All items will not be subject to regular income tax as they are all passive income and are
therefore subject to final withholding tax.
d. All items will not be subject to any income tax as Transit will be merely considered as
pass-through entity.
31. If Transit is a resident foreign corporation, how much is final withholding tax?
a. 10,500
b. 38,000
c. 48,500
d. 59,000
Solutions:
Amount Rate Tax
Dividends from domestic corporation 480,000 -
Receipts from rental of machinery 330,000 -
Interest income from expanded foreign currency 15% 21,000
deposit system 140,000
Royalties from literary compositions 190,000 20% 38,000
1,140,000 59,000
32. If Transit is a non-resident foreign corporation, how much is final withholding tax?
a. 144,250
b. 153,750
c. 202,000
d. 228,000
Solutions:
Amount Rate Tax
Dividends from domestic corporation 480,000 15% 72,000
Receipts from rental of machinery 330,000 7.5% 24,750
Interest income from expanded foreign currency
deposit system 140,000 -
Royalties from literary compositions 190,000 25% 47,500
1,140,000 144,250
Fearless Corporation, a dealer in sugar under the brand Mr. Perfectly Refined Sugar, has gross
sales of ₱1,400,000,000 with cost of sales of ₱560,000,000 and allowable deductions of
₱150,000,000 for calendar year 2020. Fearless Corporation began operating in 1989.
Fearless Corporation’s total assets of ₱180,000,000 includes the land and building in which the
business is situated, amounting to ₱50,000,000 and ₱25,000,000, respectively.
33. How much is Fearless Corporation’s income tax due?
a. 172,500,000
b. 189,750,000
c. 193,500,000
d. 207,000,000
Solutions:
Sales 1,400,000,000
Less: Cost of sales (560,000,000)
Gross profit 840,000,000
Less: Deductions (150,000,000)
Taxable income 690,000,000
Divided by 12 months 12
Taxable income per month 57,500,000
January - June (57,500,000 x 6 x 30%) 103,500,000

July - December (57,500,000 x 6 x 25%) 86,250,000
Income tax due 189,750,000
34. Compute for Fearless Corporation’s minimum corporate income tax.

a. 4,200,000
b. 8,400,000
c. 12,600,000
d. 16,800,000
Solutions:
Sales 1,400,000,000
Gross profit 840,000,000
Divided by 12 months 12
Gross profit per month 70,000,000
January - June (70,000,000 x 6 x 2%) 8,400,000

July - December (70,000,000 x 6 x 1%) 4,200,000
35. Assuming Fearless Corporation follows a fiscal year which begins on March 1, how much is
Fearless Corporation’s income tax due considering the amounts presented above were
earned or incurred from March 1, 2020, to February 28, 2021?
a. 161,000,000
b. 184,000,000
c. 189,750,000
d. 207,000,000
Solutions:
January - June (57,500,000 x 6 x 30%) 69,000,000
July - December (57,500,000 x 6 x 25%) 115,000,000
36. Statement 1: Freeport zones are managed as separate customs territory.

Statement 2: Freeport zones need not be adjacent to a seaport or airport of entry.
37. Which of the following is not an investment promotion agency that is covered by Title XIII
of the Tax Code as introduced by the CREATE Act?
a. Philippine Economic Zone Authority (PEZA)
b. Subic Bay Metropolitan Authority (SBMA)
c. Maritime Industry Authority (MARINA)
d. Authority of the Freeport Area of Bataan (AFAB/FAB)
38. All of the following are enhanced deductions that a registered business enterprise may avail,
except:
a. 50% additional deductible amount on direct labor expense
b. 10% additional depreciation allowance on buildings
c. 20% additional deduction on administrative expenses
d. 100% additional deduction on training expenses
39. In computing for the optional standard deduction of individuals, the computation is based
on:
a. Gross sales or receipts
b. Gross income
c. Net income
d. Taxable income
40. Net operating loss carry over

a. Can be deducted against income tax due to arrive at taxable income
b. Can be deducted against income tax due to arrive at income tax payable
c. Can be deducted against gross income to arrive at income tax payable
d. Can be deducted against gross income to arrive at taxable income
41. A CPA certification containing the itemized assets and liabilities of the estate is required if:
a. The gross estate exceeds P500,000.
b. The gross estate exceeds P5,000,000.
c. The gross estate exceeds P200,000.
d. The gross estate exceeds P2,000,000.
42. Which of the following is/are transmitted by way of succession?
I. Transmissible rights
II. Transmissible properties
III. Obligations of the decedent in their full amount
a. II only.
b. I and II only.
c. II and III only.
d. I, II, and III.
43. A decedent died with an unpaid liability of P2,000,000. A week after his death, the debt fell
due. The creditor called the decedent’s phone, the decedent’s son picked up, and informed
the creditor that the decedent has died. The creditor lashed out, saying that that is not a
valid excuse to not pay the debt. The decedent’s son settled one-fourth of the debt, an
amount of P500,000, within two hours. The remainder is unpaid. What is the effect of the
payment of P500,000 to the claimable deduction of the estate for estate tax purposes?
a. No effect.
b. The P500,000 payment reduces the amount of claimable deduction.
c. The entire P2,000,000 will no longer be considered as claimable.
d. The P500,000 payment shall be removed from the gross estate of the decedent
44. Which of the following transfers is subject to estate tax?

a. Transfer passing under general power of appointment
b. Merger of usufruct to the owner of naked title
c. Transfer of property from fiduciary heir to fideicommissary heir
d. Irrevocable donation inter vivos
Niels Bohr died with a receivable collectible from Ernest Rutherford. Ernest Rutherford have
assets amounting to P400,000, and liabilities amounting P1,000,000, and included among
Ernest’s liabilities is an obligation payable to Niels amounting to P300,000, and an obligation on
unpaid taxes payable to the government amounting to P100,000.
Niels also mortgaged his property to the bank in consideration for a loan worth P1,000,000. The
property is worth P1,500,000. P300,000 of the loan was paid by Niels before her death.
45. Which of the following statement is true regarding Niels’ gross estate?
a. Niels is insolvent; hence, there is no requirement for Niels to declare anything in his
gross estate
b. The receivable of Niels from Ernest should be included as part of Niels’ gross estate
in its full amount.
c. Considering that Ernest is insolvent, the receivable of Niels from Ernest should be
excluded from Niels’ gross estate.
d. Considering that Ernest is insolvent, the receivable of Niels from Ernest should be
proportionately reduced for purposes of determining the valuation of Niels’ gross estate.
46. How much may Niels’ estate claim as deduction for claims against insolvent persons?
a. 100,000
b. 120,000
c. 180,000
d. 200,000
Solutions:
Assets Liabilities
Beginning balance 400,000 1,000,000
Less: Preferred credit (Taxes) (100,000) (100,000)
Remaining assets to common credits 300,000 900,000
Remaining assets 300,000

Common credits 900,000
Collectible portion 33.33%
100.00%
Uncollectible portion 66.67%
Claim of Niels against Ernest 300,000
Uncollectible amount 200,000
47. In relation to the mortgage, how much may be claimed as deduction?

a. 700,000
b. 1,000,000
c. 1,200,000
d. 1,500,000
Solution:
Amount of mortgage 1,000,000
Paid before death (300,000)
Unpaid mortgage 700,000
Situational Problem No. 6: For items 48 to 49, refer to the following situation:
A married decedent had the following properties:

I. A car that was owned by the decedent before marriage and earned through industry
II. Rentals from a building that was inherited by the decedent during marriage
48. Under the conjugal partnership of gains, which of the following would be considered as
exclusive property?
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
49. Under the absolute community of property, which of the following would be considered as
exclusive property?
a. I only.
b. II only.
c. Both I and II.
50. Which of the following transfers of property is subject to donor’s tax?

a. Conditional donation when the fulfillment of condition has been waived.
b. Revocable donation when the donation was not revoked until the death of the transferor.
c. Donations between spouses on occasion of family celebrating
d. Transfers for inadequate consideration
51. Statement 1: An unborn child may become a donee.

Statement 2: If the donee does not accept what is given to him by the donor, although it has
already been delivered, the donor is not liable to pay any donor’s tax.
52. A, B, C, D, and E are the legal heirs of Z. If A renounces her share in favor of B and C, then:
a. The renunciation is not subject to donor’s tax nor estate tax.
b. The renunciation is subject to donor’s tax.
c. The renunciation is subject to estate tax.
d. The renunciation is subject to both donor’s tax and estate tax.
53. VAT is imposed on:

I. Sale of goods or properties not in the course of business
II. Sale of goods or properties in the course of business
III. Importation of goods or properties in the course of business
IV. Importation of goods or properties not in the course of business
a. I and III only.

b. I, III, and IV only.
c. I, II, and III only.
d. I, II, III, and IV.
54. Which among the following taxpayers can avail of the 8% flat rate of income tax?
a. A non-VAT registered taxpayer whose annual VAT-subject gross sales or receipts
exceed P3,000,000
b. A non-VAT registered taxpayer whose annual VAT-subject gross sales or receipts
do not exceed P3,000,000
c. A VAT registered taxpayer whose annual VAT-subject gross sales or receipts exceed
P3,000,000
d. A VAT registered taxpayer whose annual VAT-subject gross sales or receipts do not
exceed P3,000,000
55. All of the following are requisites for discount to be allowed as a deduction from the selling
price, except:
a. Determined and granted at the time of sale
b. Recorded in the seller’s books of accounts
c. Subject to condition
d. Amount of discount is reflected in the invoice
56. In order to be zero-rated, the sale and actual shipment of goods from the Philippines to a
foreign country:
a. Must be paid for in Philippine pesos.
b. Must be paid for in acceptable foreign currency
c. Must be FOB Shipping Point
d. Must be FOB Destination
57. Which of the following is an attachment to the quarterly VAT return?

a. Alphalist of payees
b. Summary list of sales
c. Audited financial statements
d. Certificate of registration
Situational Problem No. 7: For items 58 to 60, refer to the following situation:
Philippine Airlines is a domestic corporation engaged in the transport of cargo and passengers.
The following are the routes that PAL flew and the corresponding amounts it received for the
rendering of such services:
Route Amount
Manila to Cebu P 2,300,000
Cebu to Manila 7,460,000
Manila to Davao 8,490,000
Davao to Manila 5,900,000
Manila to Seoul 6,060,000
Seoul to Manila 5,870,000
Manila to Tokyo 4,550,000
Tokyo to Manila 5,650,000
Total P 46,280,000
58. How much are the zero-rated sales?

a. 0
b. 10,610,000
c. 11,520,000
d. 22,130,000
Solutions:
Manila to Seoul 6,060,000
Manila to Tokyo 4,550,000
Total 10,610,000
59. How much is Philippine Airlines’ output VAT?

a. 0
b. 2,898,000
c. 4,280,400
d. 5,553,600
Solutions:
Output VAT
Manila to Cebu 2,300,000 12% 276,000
Cebu to Manila 7,460,000 12% 895,200
Manila to Davao 8,490,000 12% 1,018,800
Davao to Manila 5,900,000 12% 708,000
Manila to Seoul 6,060,000 0% -
Manila to Tokyo 4,550,000 0% -
Total 2,898,000
60. How much is Philippine Airlines’ common carriers tax?

a. 0
b. 724,500
c. 1,070,100
d. 1,388,400
Farm Solutions, Inc., sold the following items to farmers for the taxable quarter ending June 30,
2021:
Fertilizers 3,040,000
Pesticides 2,260,000
Seeds 3,200,000
Seedlings 6,050,000
Farm equipment 18,730,000
Total 33,280,000
61. How much is Farm Solutions, Inc.’s output VAT?

a. 0
b. 2,247,600
c. 2,518,800
d. 3,244,800
Solutions:
Pesticides 2,260,000
Farm equipment 18,730,000
Total 20,990,000
VAT rate 12%
Output VAT 2,518,800
62. When should Farm Solutions file its VAT return for the taxable quarter ending June 30, 2021?
a. July 10, 2021
b. July 20, 2021
c. July 25, 2021
d. August 29, 2021
63. Assuming Farm Solutions is an agricultural cooperative, which of the following sales are
exempt from VAT?
I. Sale of processed meat products to non-members of the cooperative. The meat
products are produce of the members.
II. Sale of processed meat products to members of the cooperative. The meat products
are produce of non-members.
a. I only.
b. II only.
c. Both I and II.
64. Assuming Farm Solutions is an agricultural cooperative and the farmers are its members,
how much is Farm Solutions’ output VAT?
a. 0
b. 2,247,600
c. 2,518,800
d. 3,244,800
65. Transport of cargoes by air from Philippines to abroad by international carriers

a. Subject to 3% common carriers tax
b. Subject to 12% value-added tax
c. Subject to 0% value-added tax
d. Exempt from both common carriers tax and value-added tax
66. Which of the following franchisees is not subject to franchise tax?

a. Radio franchisees
b. Television franchisees
c. Electric utility franchisees
d. Water utility franchisees
67. Which of the following transactions is subject to the overseas communications tax?
a. Outbound calls
b. Inbound calls
c. Outbound payments to postal services
d. Inbound payments to postal services
68. Who is the taxpayer for tax on winnings?

I. Owner of the winning horse
II. Holder of the winning ticket
a. I only.
b. II only.
c. Both I and II.
69. Sabungan sa Bambang is operated by Alfred Hitchcock. During the first quarter of 2019, it had
the following receipts:
Entrance fees for audience P 5,150,000

Registration fees for cockfighters 5,930,000
Receipts from restaurants owned by Hitchcock inside the cockpit 3,580,000
Lease payments made by private concessionaire with places inside
the cockpit 4,270,000
Advertisement fees 4,200,000
Total P 23,130,000
How much is the amusement tax due?

a. 2,638,800
b. 2,775,600
c. 3,407,400
d. 4,163,400
Solutions:
Entrance fees for audience 5,150,000
Registration fees for cockfighters 5,930,000
Receipts from restaurants owned by Hitchcock inside the cockpit 3,580,000
Lease payments made by private concessionaire with places inside the
4,270,000
cockpit
Advertisement fees 4,200,000
Total 23,130,000
Amusement tax rate 18%
Amusement tax due 4,163,400
70. Which of the following taxes have been repealed by the Bayanihan to Recover as One Act?
a. Overseas Communications Tax
b. Stock Transaction Tax
c. Tax on Initial Public Offerings
d. Amusement Tax
De La Salle University - Dasmarinas
Preboard Examinations – Set B
Kenneth L. Manuel, CPA, JD
1. Statement 1: Inherent powers arise from a grant of the Constitution.

Statement 2: Without the Constitution, the inherent powers of the government cannot be
exercised.
2. Which of the following is an example of the State’s exercise of police power?

a. Collection of taxes on sweetened beverages as enacted by the Congress
b. Congress’s prohibition of illegally copying pirated movies.
c. The government’s taking of a privately owned land for the construction of a railway
d. Conduct of the State of elections for positions in the national government.
3. Tax evasion is:

a. Also known as tax avoidance, and is the illegal way of not paying taxes.
b. Also known as tax avoidance, and is the legal way of not paying taxes.
c. Also known as tax dodging, and is the illegal way of not paying taxes.
d. Also known as tax dodging, and is the legal way of not paying taxes.
4. Withholding is:
a. A method of reducing a taxpayer’s income
b. A method by which the government collect taxes at the time of its deadline
c. A method by which the government collect taxes in advance
d. A method of increasing a taxpayer’s income
5. Substituted filing of income tax returns is a manifestation of which principle of a sound tax
system?
a. Equality
b. Theoretical justice
c. Fiscal adequacy
d. Administrative feasibility
6. Which stage of taxation will the legislative department be involved with?

a. Levy
b. Assessment
c. Collection
d. Imprisonment
7. Statement 1: Under the non-establishment clause, the government cannot support any
religion.
Statement 2: Taxes may be used to establish a park in honor of a saint or a religious figure.
8. Statement 1: The Constitution provides that the Congress must enact a regressive system of
taxation.
Statement 2: Due process in taxation is observed when taxes are enacted to favor the poor.
9. The Bureau of Internal Revenue is under which department of the Executive Branch of the
government?
a. Department of Agriculture
b. Department of Finance
c. Department of Public Works and Highways
d. Department of CPAs
10. Which of the following issuance is signed by the Secretary of Finance?

a. Revenue Regulations (RR)
b. Revenue Memorandum Orders (RMO)
c. Revenue Memorandum Circular (RMC)
d. BIR Rulings
11. The CIR may inquire into bank deposits of the following, except:
a. decedent to determine his gross estate; and
b. any taxpayer who has filed an application for compromise of his tax liability by reason
of financial incapacity to pay his tax liability
c. a specific taxpayer or taxpayers subject of a request for the supply of tax information
from a foreign tax authority pursuant to an international convention or agreement on tax
matters to which the Philippines is a signatory
d. any taxpayer who has not signed a waiver of the secrecy of bank deposits but is
before the Senate for an impeachment inquiry or with a pending case before the
courts for bribery or dereliction of duty
12. Statement 1: Assessments are presumed to be correct.

Statement 2: Assessments are discretionary on the part of the Commissioner.
13. It is an official document that empowers a Revenue Officer (RO) to examine and scrutinize a
taxpayer’s books of accounts and other accounting records, in order to determine the
taxpayer’s correct internal revenue tax liabilities.
a. Preliminary Assessment Notice (PAN)
b. Warrant of Inspection (WOI)
c. Letter of Authority (LA)
d. Arrest Warrant (AW)
14. In which of the following cases will a PAN not be required?

a. There is deficiency income tax due.
b. There is a mathematical error in the computation of taxes.
c. In cases involving documentary stamp tax
d. When there is discrepancy between tax payable and tax due
15. Within how many days should a taxpayer reply to the PAN?
a. Ten (10) days.
b. Fifteen (15) days.
c. Twenty (20) days.
d. Thirty (30) days.
16. It is defined as the contract between the government and the taxpayer to settle the liability at
a lower amount.
a. Abatement
b. Compromise
c. Settlement
d. Remission
17. When the administration and collection costs involved do not justify the collection of the
amount due, the tax due may be:
a. Compromised
b. Abated
c. Surcharged
d. Cancelled
18. When is an amendment of a return considered substantial?

a. When there is underdeclaration exceeding 20%
b. When there is underdeclaration exceeding 25%
c. When there is underdeclaration exceeding 30%
d. When there is underdeclaration exceeding 40%
19. The Court of Tax Appeals is composed of a Presiding Justice and ____ associate Justices.
a. Seven
b. Eight
c. Nine
d. Ten
20. Which of the following is not an administrative remedy of BIR Commissioner to collect tax?
a. Distraint of personal property
b. Civil case to collect a sum of money
c. Garnishment of bank deposit
d. Levy of real property
Tim McGraw owns a chain of fifteen (15) convenience stores in Brgy. Nashville, Quezon City.
The convenience stores had an aggregate sale of Php4,800,000, as a result, Tim McGraw
registered as a VAT-registered taxpayer.
For taxable year 2021, Tim McGraw paid income taxes amounting to P320,000. His income tax
due was P600,000, and Tim McGraw was able to make prior quarter’s payments amounting to
P280,000, resulting in an income tax payable of P320,000. A month after filing his annual income
tax return on the day of the deadline, Tim McGraw saw in his records that there were
Certificates of Creditable Tax Withheld (BIR Form No. 2307) pertaining to taxable year 2021 that
were not claimed. On May 27, 2022, Tim McGraw filed an amended return and sought for the
refund of the amount of the Certificates of Creditable Tax Withheld.
The BIR denied Tim McGraw’s claim for refund on the following grounds. First, the BIR officer
stated that according to the irrevocability rule, Tim McGraw is barred from claiming refund.
Second, the amended return was filed out of time. Third, the time has lapsed for Tim McGraw
to claim for refund. Finally, the BIR officer informed Tim McGraw that the principle of estoppel
applies, and Tim McGraw can no longer amend his return later on to reflect a refund.
Tim McGraw, knowing that you are a student of tax, sought your counsel.
21. Is the BIR correct in denying the claim for refund on the ground of the application of the
irrevocability rule?
a. It cannot be determined. Reference must be had on last year’s income tax return to
determine whether the irrevocability rule applies.
b. Yes, the irrevocability rule applies specifically to overpayments of income tax.
c. No, the irrevocability rule only applies with respect to errors in computation.
d. No, there was no option to claim for tax credit in the first place.
22. When is the last day to amend Tim McGraw’s annual income tax return?
a. April 15, 2022
b. April 15, 2023
c. April 15, 2025
d. April 15, 2027
23. Statement 1: The principle of estoppel bars a taxpayer from amending his/her own return.
Statement 2: The principle of estoppel is applicable in Tim McGraw’s case because the
declaration in the income tax return amounts to a deliberate false representation in which
the BIR has made reliance.
24. When is the last day for Tim McGraw to file a claim for refund before the Bureau of Internal
Revenue?
a. April 15, 2022
b. April 15, 2023
c. April 15, 2024
d. April 15, 2025
25. When is the last day for Tim McGraw to file a claim for refund before the Court of Tax
Appeals should the Bureau of Internal Revenue deny his claim for refund on April 2, 2024?
a. April 15, 2024
b. April 17, 2024
c. May 2, 2024
d. June 1, 2024
26. Statement 1: Income tax is a national tax.

Statement 2: Considering that the impact and incidence of taxation in income tax rests on the
same person, income tax is considered as a direct tax.
27. Under BIR regulations, income in long-term construction contracts is recognized through:
a. Percentage of completion method only.
b. Completed contract method only.
c. Zero-profit method only.
d. Either of the above methods at the option of the taxpayer.
28. Big Hit Corporation is a domestic corporation. Which of the following items of income is
subject to tax?
I. Gain from sale of personal property in the Philippines.
II. Gain from sale of personal property in South Korea.
a. I only.
b. II only.
c. Both I and II.
29. Assuming the taxpayer follows the calendar year, the deadline for the filing of the second
quarter Quarterly Remittance Return of Creditable Income Taxes Withheld (BIR Form No.
1601EQ) is:
a. June 30
b. July 15
c. July 31
d. August 15
Situational Problem No. 2: For items 30 to 31, refer to the following situation
Vincenzo earned the following items of income for the calendar year ending 2021:
Interest income, debtor resides in Hong Kong, payment made in the Philippines 420,000
Interest income, debtor resides in the Philippines, payment made in China 330,000
Gain from sale of real property, real property situated in America 440,000
Gain from sale of personal property, sale made in UK, property is in the
Philippines 290,000
Gain from sale of shares of stock of a domestic corporation, residence of buyer is
Taiwan, sale made in Argentina 225,000
1,705,000
30. If Vincenzo is a resident citizen, how much of his income is subject to Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000
Solution: All items of income are subject to Philippine income tax.
31. If Vincenzo is a resident alien, how much of his income is subject to Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000
Solution:
Interest income, debtor resides in the Philippines, payment made in China 330,000
Gain from sale of shares of stock of a domestic corporation, residence of
buyer is Taiwan, sale made in Argentina 225,000
Philippine income 555,000
32. Seamen are classified as:

a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien engaged in trade or business
33. Who among the following taxpayers can avail of the special income tax rate?
a. VAT registered domestic corporations
b. Non-VAT registered non-resident alien not engaged in trade or business
c. VAT-registered resident citizens
d. Non-VAT registered non-resident citizens
34. Who among the following is most likely to be classified as a mixed income earner?
a. Sakura, who is a part-time service crew at a fastfood store and a part-time saleslady at
two different department stores.
b. Tomoyo, who earns income from her freelance photography stints and is engaged on a
per-contract basis by different companies
c. Yukito, who is a full-time Vice President for Human Resources at a multinational
company and a lessor of a five-floor apartment.
d. Toya, who is still a college student and has income from his gigs with his rock band.
35. All of the following can be deducted from a purely compensation income earner’s income,
except:
a. Union dues
b. Mandatory PAGIBIG contributions
c. Private health insurance contributions
d. Mandatory SSS contributions
36. All of the following items of interest income are subject to final tax for a resident citizen
income earner, except:
a. Interest income from government securities
b. Interest income from privately issued promissory note
c. Interest income from deposits under expanded foreign currency deposit system
d. Interest income from short-term currency bank deposit
37. Which of the following gains is subject to capital gains tax?

a. Gain on sale of shares of stocks of domestic corporation by dealer of securities
b. Gain on sale of unquoted shares of stocks of domestic corporation by nondealer of
securities
c. Gain on sale of quoted shares of stocks of domestic corporation thru the facilities of
Philippine Stock Exchange
d. Gain on sale of quoted shares of stocks of foreign corporation directly to buyer
Kara sold to Mia shares of stock of a foreign corporation at a selling price of P1,000,000 with an
acquisition cost of P380,000. On the same date, Kara sold to Mia shares of a stock of a domestic
corporation at a selling price of P600,000, and an acquisition cost of P400,000.
38. If Kara is a resident citizen and is not a dealer in securities, and the shares were sold directly
to Mia, how much is the capital gains tax due of Kara from the transaction?
a. 0
b. 30,000
c. 93,000
d. 123,000
Solutions:
Selling price 600,000
Less: Acquisition cost (400,000)
Net capital gain 200,000
x CGT rate 15%
CGT due 30,000
Only the sale of shares of a domestic corporation is subject to capital gains tax.
39. If Kara is a resident citizen and is not a dealer in securities, and the shares were sold directly
to Mia, how much of Kara’s income is subject to regular income tax?
a. 0
b. 200,000
c. 620,000
d. 820,000
Solutions:
Selling price 1,000,000
Less: Acquisition cost (380,000)

Net capital gain 620,000
40. If Kara is a resident citizen and is a dealer in securities, and the shares were sold directly to
Mia, how much is the capital gains tax due of Kara from the transaction?
a. 0
b. 30,000
c. 93,000
d. 123,000
Discussion:
The transactions are subject to regular income tax, considering that for a dealer in securities, the
shares are presumed to be ordinary assets.
41. Which of the following statements is true?

a. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, any gain from the sale is subject to capital gains tax.
b. If Kara is a dealer in securities and she sold the shares of a domestic corporation
through the local stock exchange, the sale is subject to value-added tax.
c. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, the sale is subject to stock transaction tax.
d. If Kara is a dealer in securities and she sold the shares of a domestic corporation through
the local stock exchange, any gain from the sale is subject to final withholding tax.
42. Statement 1: Kara’s sale of the shares of a foreign corporation will never be subject to capital
gains tax under any circumstance.
Statement 2: If Kara sold the shares of a domestic corporation through the local stock
exchange, it will always be subject to stock transaction tax.
43. Under the CREATE Act, which of the following taxes is no longer imposed?
I. Minimum Corporate Income Tax (MCIT)
II. Optional Corporate Income Tax (OCIT) of 15%
III. Improperly Accumulated Earnings Tax (IAET)
a. I and II only.
b. I and III only.
c. II and III only.
d. I, II, and III.
44. Chromatica Corporation was incorporated on 2020. SEC issued its Certificate of
Incorporation on June 30, 2020. Chromatica Corporation follows the calendar year. When
will the imposition of the minimum corporate income tax commence?
a. First quarter of 2023.
b. Third quarter of 2023.
c. First quarter of 2024.
d. Third quarter of 2024.
45. The reduced rate of 20% corporate income tax may apply to:
a. Domestic corporations
b. Resident foreign corporations
c. Domestic corporations and resident foreign corporations
d. Domestic corporations, resident foreign corporations, and non-resident foreign
corporations
46. Past service costs are

a. Claimable in full.
b. Amortized over a period of 3 years
c. Amortized over a period of 5 years
d. Amortized over a period of 10 years
47. Which of the following tax is an allowable deduction from gross income of a VAT-Registered
Taxpayer?
a. Stock transaction tax
b. Real property tax
c. Value added tax
d. Estate tax
48. Up to what extent may wagering losses be claim as deductions?

a. Up to 100% of wagering gains
b. Up to 25% of wagering gains
c. Up to 50% of wagering gains
d. Up to 75% of wagering gains
49. Estate tax is imposed on:

a. The death of the decedent
b. The making of the will of a decedent
c. The transfer of properties by the decedent to the heirs, legatees, or devisees.
d. The duration of the life of the decedent
50. Reciprocity primarily affects the taxability of

a. Tangible personal property located without the Philippines.
b. Tangible personal property located within the Philippines.
c. Intangible personal property located without the Philippines.
d. Intangible personal property located within the Philippines.
51. What is the rule in relation to claims against insolvent persons?

a. The amount that is collectible must be included in the gross estate of the decedent, and
the amount that is uncollectible may be claimed as a deduction from gross estate
b. The amount that is collectible need not be included in the gross estate of the decedent,
and the amount that is uncollectible may be claimed as a deduction from gross estate
c. The full amount of the receivable must be included in the gross estate of the
decedent, and the amount that is uncollectible may be claimed as a deduction from
gross estate
d. The full amount of the receivable need not be included in the gross estate of the
decedent, and the amount that is uncollectible may be claimed as a deduction from gross
estate
52. In the absence of any agreement, the default property regime is:
a. Absolute community of property
b. Conjugal partnership of gains
c. Complete separation of property
d. Ang sa’yo ay akin at ang akin ay akin pa rin regime
53. What is the amount of the standard deduction from gross estate?
a. P500,000
b. P5,000,000
c. P10,000,000
d. P1,000,000
Gemma obtained six life insurance policies, each having different terms. When Gemma died on
October 19, 2017, the following were paid out:
Life insurance with Lea, her sister, as a revocable beneficiary P 5,210,000

Life insurance with her estate as a irrevocable beneficiary 6,340,000
Life insurance with Gemmina, her daughter, as a irrevocable
beneficiary 5,700,000
Life insurance with a friend Georgina as a revocable beneficiary 3,570,000
Life insurance with executor Ghemwhelyn as a revocable
beneficiary 6,770,000
P 27,590,000
54. How much of the proceeds shall be part of the gross estate?
a. 15,550,000
b. 18,320,000
c. 21,890,000
d. 27,590,000
Solutions:
Life insurance with Lea, her sister, as a revocable beneficiary 5,210,000
Life insurance with her estate as a irrevocable beneficiary 6,340,000
Life insurance with Ghemwhelyn, a stranger, as a revocable beneficiary 3,570,000
Life insurance with executor as a revocable beneficiary 6,770,000
21,890,000
55. Which of the following statements is correct with respect to the liability for the payment of
estate tax.
a. Gemmina and Ghemwelyn are solidarily liable for the payment of estate tax
b. Gemmina and Ghemwelyn are jointly liable for the payment of estate tax
c. Gemmina is primarily liable for the payment of estate tax, while Ghemwelyn is
solidarily liable.
d. Ghemwelyn is primarily liable for the payment of estate tax, while Gemmina is
subsidiarily liable.
56. Donor’s tax credit

a. Seeks to avoid international double taxation.
b. Seeks to decrease donor’s tax payable by removing items already subjected to income
tax.
c. Can be claimed by all individual donors.
d. Can only be claimed by a non-resident alien donor.
57. Debts attached to properties donated are deductible from gross gift if:
a. Assumed by the donor.
b. Assumed by the donee.
c. Paid by the donor before donation.
d. Paid by the donee before donation.
58. Donations to which of the following institutions are exempt from donor’s tax?
I. Educational institution
II. Cultural institution
III. Religious institution
a. I and II only.
b. I and III only.
c. II and III only.
d. I, II, and III.
59. What is the donor’s tax rate for taxable donation made by an individual to his or her
relative?
a. 2%-15%
b. 30%
c. 5%
d. 6%
60. Which of the following taxpayers is barred from cancelling its optional VAT registration?
a. International common carriers
b. Operators of amusement places
c. Export-oriented enterprises
d. Radio and television franchisees
61. Gross receipts is the appropriate VAT base for all of the following, except:
a. Sale of services
b. Lease of properties
c. Sale of securities
d. Importation
62. Consignment of goods are transactions deemed sale:

a. If actual sale is not made within sixty (60) days following the date such goods were
consigned
b. If actual sale is not made within ninety (90) days following the date such goods were
consigned
c. If actual sale is not made within thirty (30) days following the date such goods were
consigned
d. If actual sale is not made within one hundred twenty (120) days following the date such
goods were consigned
63. Which of the following is an export-oriented enterprise?
a. Demi Corporation. Its export sales exceed 50% of the total annual production of the
preceding taxable year.
b. Ariana Corporation. Its export sales exceed 70% of the total annual production of the
preceding taxable year.
c. Miley Corporation. Its export sales exceed 50% of the total annual production of the
three preceding taxable year.
d. Selena Corporation. Its export sales exceed 70% of the total annual production of the
three preceding taxable year.
64. Lydia Mila is engaged in the sale of chicken in various forms. The following are Lydia Mila’s
sales:
Live chickens P 8,510,000

Fighting cocks 300,000
Fresh chicken meat 210,000
Cut chicken meat 7,700,000
Boiled chicken meat 2,220,000
Roasted chicken meat 510,000
Smoked chicken meat 5,310,000
Salted chicken meat 4,640,000
Chicken nuggets 2,130,000
Chicken cubes 4,970,000
Chicken hotdog 4,500,000
Total P 41,000,000
How much are the VAT-exempt sales?

a. 8,720,000
b. 16,350,000
c. 29,100,000
d. 29,400,000
Solutions:
Live chickens 8,510,000
Fresh chicken meat 210,000
Cut chicken meat 7,700,000
Boiled chicken meat 2,220,000
Roasted chicken meat 510,000
Smoked chicken meat 5,310,000
Salted chicken meat 4,640,000
Total 29,100,000
65. In order to claim input VAT from purchases of services, the proper documentation is:
a. VAT invoice
b. VAT official receipt
c. VAT statement of account
d. VAT delivery receipt
66. Which of the following sale of medicine is subject to VAT?

a. Sale of drugs and medicines prescribed for diabetes
b. Sale of drugs and medicines prescribed for flu
c. Sale of drugs and medicines for high cholesterol
d. Sale of drugs and medicines for hypertension
67. Who is the taxpayer for tax on winnings?

I. Owner of the winning horse
II. Holder of the winning ticket
a. I only.
b. II only.
c. Both I and II.
68. All of the following are subject to 18% amusement tax, except:
a. Cockpits
b. Cabarets
c. Day clubs
d. Jai-alai
69. In general, the percentage tax return is required to be filed:

a. Within ten (10) days from the close of the taxable quarter
b. Within fifteen (15) days from the close of the taxable quarter
c. Within twenty (20) days from the close of the taxable quarter
d. Within twenty five (25) days from the close of the taxable quarter
70. Which of the following is an excisable article?

a. Milk
b. Coffee
c. Energy drink
d. Distilled water
ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
TAXATION February 16, 2021(Tuesday)

First Pre-Board Examination 06:00 PM to 09:00 P.M.
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following questions.
Mark only one answer for each item by shading the box corresponding to the
letter of your choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED.
Use pencil no. 2 only.
1. (Estate Tax) Mr. Faustino Santos, testator, appointed Mr. Generoso Cruz as the
executor of the estate. Mr. Santos was a citizen of Argentina and a resident of
Buenos Aries, Argentina. He was in Manila visiting his son when he died. He
owned a Mercedes sports car and had several bank deposits in the USA. The
executor asked you whether or not the car and the bank deposits in the USA will
still have to be declared as part of the Philippine gross estate of Faustino
Santos. Argentina does not impose transfer taxes of any kind. What answer will
you give him?
a. The car and the bank deposits in the USA have to be declared as part of the
Philippine gross estate because the decedent was in Manila at the time of his
death and, as such, properties wherever situated are included in the gross
estate.
b. The car and the bank deposits in the USA need not be declared as part of the
Philippine gross estate because when Mr. Santos died he was a non-resident
alien.
c. The car and the bank deposits in the USA have to be declared as part of the
Philippine gross estate only when the decedent specified in his will and
testament that such properties must form part of his gross estate.
d. The car and the bank deposits in the USA need not be declared as part of the
Philippine gross estate because Argentina does not impose transfer tax of any
kind.
2. (Estate Tax) The amounts withdrawn from the deposit accounts of a decedent
subjected to the 6% final withholding tax imposed under Section 97 of the
NIRC, shall be:
a. excluded from the gross estate for purposes of computing the estate tax.
b. included from the gross estate for purposes of computing the estate tax.
c. claimed as tax credit against estate tax due.
d. claimed as deduction from the gross estate.
3. (Estate Tax) A property was transferred mortis causa. The following data were
gathered from the transaction:
Fair market value, time of transfer – P500,000
Fair market value, time of death – P300,000
Consideration received when transferred – P350,000
How much shall be included in the gross estate?

a. P500,000 c. P150,000
b. P300,000 d. None of the choices
4. (Estate Tax) The following data pertain to a decedent who is a married man with a
surviving spouse died on February 1, 2019:
Conjugal real personal properties P 10,000,000
Conjugal personal properties (including P800,000 bank
deposit which was withdrawn and subjected to 6% final
withholding tax) 4,800,000
Exclusive family home 30,000,000
Conjugal ordinary deductions claimed (including P200,000
funeral expenses and P300,000 judicial expenses) 2,500,000
The taxable net estate is:
a. P42,000,000. c. P27,000,000.
b. P32,000,000. d. P21,000,000.
ReSA: The Review School of Accountancy Page 2 of 16
5. The decedent is a resident unmarried head of family with the following data:
Ordinary deductions

a. P 42,000,000. c. P 27,000,000.
b. P 32,000,000. d. P 23,000,000.
6. The decedent is a married man with a surviving spouse with the following data:
Conjugal real properties P 6,000,000
Conjugal family house 1,000,000
Exclusive family lot 400,000
Other exclusive properties 4,500,000
Conjugal ordinary deductions 1,500,000
Exclusive ordinary deductions 500,000

a. P 9,900,000. c. P 3,500,000.
b. P 3,750,000. d. P 1,250,000.
7. Using the same data in the preceding number, how much is the estate tax payable?
a. P 594,000 c. P 210,000
b. P 225,000 d. P 75,000
8. (Estate Tax) Under the TRAIN, when is the time for filing of the estate tax
return?
a. Thirty (30) days from the decedent’s death
b. Two (2) months from the decedent’s death
c. Six (6) months from the decedent’s death
d. One (1) year from the decedent’s death
9. (Estate Tax) Which of the following statements is incorrect in connection with

cash installment payment of estate tax?
a. The cash installments shall be made within two (2) years from the date of
filing of the estate tax return.
b. The estate tax return shall be filed within one year from the date of
decedent’s death.
c. The frequency (i.e., monthly, quarterly, semi-annually or annually), deadline
and amount of each installment shall be indicated in the estate tax return,
subject to the prior approval by the BIR.
d. In case of lapse of two years without the payment of the entire tax due, the
remaining balance thereof shall be due and demandable without the applicable
penalties and interest.
10. (Estate Tax) Mr. Primitivo Primero died and was survived by his wife and two (2)
children, Faye and Faith. After getting her share in the conjugal property, the
surviving spouse renounced her share in the hereditary estate in favor of Faith
to the exclusion of Faye. Was the renunciation subject to donor’s tax?
a. Yes, because the renunciation was made categorically in favor of identified
heir to the exclusion or disadvantage of the other co-heirs.
b. No. because the renunciation was considered a general renunciation.
c. Yes, because , as a rule, renunciation of share in the hereditary estate is
always subject to donor’s tax.
d. No, because, as a rule, the surviving spouse cannot renounce her share in the
hereditary estate.
11 to 13 are based on the following: A resident decedent, single, died February 14,
2018. The estate’s decedent showed the following:
Real property in the Philippines P4,000,000.00
Personal property outside the Philippines 2,000,000.00
Proceeds of life insurance upon the life of
decedent, decedent’s estate designated as
irrevocable beneficiary 1,000,000.00
Proceeds of life insurance, decedent’s spouse
designated as irrevocable beneficiary 500,000.00
TAXATION – FIRST PRE-BOARD EXAMINATION (BATCH 41)

Medical expenses one year prior to decedent’s
death (including unpaid amount of P400,000) 700,000.00
Funeral expenses (only P100,000 paid) 250,000.00
Claims against the estate 1,000,000.00
11. (Estate Tax) How much was the taxable net estate?
a. P4,300,000.00 c. P1,000,000.00
b. P4,100,000.00 d. None of the choices
12. (Estate Tax) How much was estate tax payable?

a. P443,000.00 c. P60,000.00
b. P388,000.00 d. None of the choices
13. (Estate Tax) How much were the total deductible items for estate tax
purposes?
a. P6,000,000.00 c. P1,700,000.00
b. P2,700,000.00 d. None of the choices
14. (Donor’s Tax) Under the TRAIN, the donor’s tax for each calendar year shall
be:
a. six percent (6%) computed on the basis of the total gifts made during
the calendar year.
b. six percent (6%) computed on the basis of the total gifts in excess of
Thee hundred thousand pesos (P300,000) exempt gift made during the
calendar year.
c. six percent (6%) computed on the basis of the total gifts including
those made in the previous calendar year in excess of Two hundred fifty
thousand pesos (P250,000) exempt gift made during the calendar year.
d. six percent (6%) computed on the basis of the total gifts in excess of
Two hundred fifty thousand pesos (P250,000) exempt gift made during the
calendar year.
15. (Donor’s Tax) First statement: The computation of the donor’s tax is on a
cumulative basis over a period of one calendar year.
Second statement: Husband and wife are considered as separate and distinct
taxpayers for purposes of the donor’s tax.
16. (Donor’s Tax) Patricia donated P110,000.00 to her friend Kimberly who was getting
married. Patricia gave no other gift during the calendar year. What is the
donor's tax implication on Patricia’s donation?
a. The P100,000.00 portion of the donation is exempt since given in consideration
of marriage.
b. A P10,000.00 portion of the donation is exempt being a donation in
consideration of marriage.
c. Patricia shall pay a 6% donor's tax on the P110,000.00 donation.
d. The P110,000.00 donation is exempt from donor's tax.
17. (Donor’s Tax) Mr. Gerardo Ireneo transfers inter vivos a personal property to his
son on March 15, 2018. His son who lives in another province let his father know
that he is accepting the gift on March 31, 2018. The personal property was
delivered and received on April 15, 2018. When shall be the last day to file the
donor’s tax return and pay the donor’s tax to avoid penalties?
a. April 14, 2018 c. May 15, 2018
b. April 30, 2018 d. None of the choices
18. to 20. are based on the following: The following donations during the
calendar year 2018 are made to relatives:
Date Amount
January 30, 2018 P 2,000,000
March 30, 2018 1,000,000
August 15, 2018 500,000
18. (Donor’s Tax) How much is the tax due on the gift made on January 30, 2018?
a. P 204,000 c. P 80,000
b. P 105,000 d. P 50,000

19. (Donor’s Tax) How much is the tax due on the gift made on March 30, 2018?
a. P 204,000 c. P 60,000
b. P 124,000 d. P 50,000
20. (Donor’s Tax) How much is the tax due on the gift made on August 15, 2018?
a. P 204,000 c. P 80,000
b. P 124,000 d. P 30,000
21. to 22. are based on the following: Mr. Jose Mapagbigay donated P500,000 to the
City of Manila and P100,000 to his best friend who graduated summa cum laude.
21. (Donor’s Tax) For donor’s tax purposes, how much should be the gross gifts?
a. P 600,000 c. P 400,000
b. P 500,000 d. None of the choices
22. (Donor’s Tax) For donor’s tax purposes, how much should be the deductions?
a. P 500,000 c. P 100,000
23. (Donor’s Tax) On one date, Lara made donations of property in the Philippines to a
non-stranger, and of property outside the Philippines to a stranger. In taking a
credit for the foreign donor’s tax paid, the credit shall be against the
Philippine donor’s tax on the:
a. donation to the non-stranger plus that to the stranger.
b. donation to the non-stranger.
c. donation to the stranger.
d. none of the options given.
24. (Donor’s Tax) On June 10, 2018 Mr. Paolo Sao donated P50,000 cash to his favorite
grandson who is getting married on June 16, 2018. For donor’s tax purposes the
exempt dowry shall be:
a. P50,000. c. P5,000.
b. P10,000. d. none.
25. (VAT) Mr. Andres, VAT-registered real estate dealer, transferred a parcel of land
held for sale to his son as gift on account of his graduation. For VAT purposes,
the transfer is:
a. not subject to VAT because it is a gift.
b. subject to VAT because it is a deemed sale transaction.
c. not subject to VAT because it is subject to gift tax.
d. subject to VAT because it is considered an actual sale.
26. (VAT) Sale of orchids and other ornamental plants is:

a. subject to 12% VAT. c. exempt from VAT.
b. subject to 0% VAT. d. none of the choices
27. (VAT) A VAT-registered taxpayer has the following transactions during a

particular month:
a. Sale of two (2) adjacent condominium units, P2,500,000
b. Sale of one (1) residential lot, P1,500,000
c. Sale of one (1) parking lot in the condominium, P500,000
d. Sale of fresh fruits, vegetable and fish, P2,000,000
He approaches you to ask how much shall be subject to VAT. What will your answer
be?
a. P4,500,000 c. P500,000
b. P3,000,000 d. None of the choices
28. (VAT) A lessor leases his 15 residential units for P14,500 per month and the
other 15 residential units for P15,500 per month. During the taxable year, his
accumulated gross receipts amounted to P5,400,000. How much is the output VAT?
a. P648,000 c. P313,200

29 to 30 are based on the following: (VAT) The Anong Pizza Na, VAT-registered issued
the following official receipt to a customer who was with a senior citizen:
Ordered by a senior citizen

Parma pizza P880.00
Mango basil 180.00 P1,060.00
Ordered by the non-senior citizen
House salad 420.00
Beef rendang 590.00
Avocado smoothie 190.00 1,200.00
Total sales (VAT inclusive) P2,260.00
29. (VAT) How much is the VAT-exempt sale?

a. P2,017.85 c. P946.43
30. (VAT) How much is the sales discount for senior citizen?
a. P403.57 c. P189.29
b. P212.00 d. None of the choices
31 to 34 are based on the following: A VAT subject real estate dealer sells a
residential lot on January 15, 2018. The following information are made available on
the terms of the sale:
Gross selling price P 3,000,000
Initial payments on January 15, 2018
(consisting of down payment and installments
in the year of sale) 900,000
Balance to be paid in equal installment,
installments starting February 15, 2018 2,100,000
The zonal value of the residential lot was P2,800,000.
31. (VAT) Does the sale qualify under installment plan?
a. Yes, because the sale has initial payments and, therefore, qualify under
installment plan.
b. No, because the initial payments exceed 25% of the selling price.
c. Yes, because the initial payments include installments in the year of sale.
d. No, because the initial payments exceed 25% of the zonal value.
32. (VAT) What is the tax base for VAT purposes?

a. P3,000,000 c. P2,100,000
33. (VAT) How much was the output tax on January 15, 2018 using 12% VAT rate?
a. P 360,000 c. P 108,000
b. P 300,000 d. None
34. (VAT) How much was the output tax on February 15, 2018 using 12% VAT rate?
a. P 360,000 c. P 108,000
b. P 300,000 d. None
35. (VAT) If a VAT-registered person issues a VAT invoice or VAT official receipt for
a VAT-exempt transaction, but fails to display prominently on the invoice or
receipt the words “VAT-exempt sale”, the transaction shall:
a. still be exempt from value-added tax.
b. become taxable and the issuer shall be liable to pay VAT thereon.
c. be effectively subject to zero percent.
d. be considered erroneous transaction and must be disregarded.
36. (VAT) Suppose the accounting period adopted by the taxpayer is fiscal year ending
October 2018, when is the due date for the filing of his monthly VAT declarations
for the first and second month of the first fiscal quarter?
a. November 20, 2018 and December 20, 2018
b. August 20, 2018 and September 20, 2018
c. November 20, 2017 and December 20, 2017
d. December 20, 2017 and January 20, 2018

37 to 39 are based on the following: (VAT) A taxpayer is engaged in VAT-subject
transactions but his annual gross sales do not exceed the VAT threshold. Hence, he
did not register under VAT system. However, during the current year, his quarterly
gross sales follow:
First quarter P1,000,000

Second quarter 1,000,000
Third quarter 1,000,000
Fourth quarter 1,000,000
37. (VAT) Which of the following statements is correct?

I – The taxpayer is required to update his registration from
non-VAT to VAT taxpayer in the fourth quarter.
II - The taxpayer is required to update his registration from non-
VAT to VAT taxpayer until taxpayer is liable to VAT.
III - VAT shall be imposed prospectively.
IV - Percentage tax due on the non-VAT portion of the
sales/receipts shall be collected without penalty, if
timely paid on the due date immediately following the
month/quarter when taxpayer ceases to be a non-VAT.
a. I, II, III and IV are correct

b. I, II and III are correct
c. Only I and II are correct
d. Only III and IV are correct
38. (OPT) How much is the percentage tax due?

a. P480,000 c. P90,000
39. (VAT) How much is the VAT due?

a. P480,000 c. P90,000
40. (OPT) Who of the following is not subject to tax on winnings under Section 126?
a. Person who wins in horse races
b. Winners from double, forecast/quinella and trifecta bets
c. Winners in cockfighting
d. Owners of winning race horses
41 to 44 are based on the following: (OPT) Vanderwoodsen, VAT-registered, is a radio-

TV broadcasting franchise grantee. The previous year, its gross receipts did not
exceed P 10,000,000. In the first month of the current year, it had the following
data:
Gross receipts, sale of airtime P2,000,000
Payments received from user of radio station’s
communications facilities for overseas communications 500,000
Rentals of office spaces 3,500,000
Business expenses 700,000
41. (OPT) How much was the franchise tax due?
a. P 75,000 c. P 50,000
42. (OPT) How much was the overseas communications tax?

a. P 250,000 c. P 75,000
b. P 200,000 d. P 50,000
43. (VAT) How much is output VAT, if any?

a. P720,000 c. P420,000
44. (OPT) Can the franchise grantee register under the VAT system?
a. Yes. Franchise grantees of radio and/or television broadcasting whose annual
gross receipts of the preceding year do not exceed P10,000,000 derived from
the business covered by the law granting the franchise may opt for VAT
registration.
b. No. Franchise grantees of radio and/or television broadcasting whose annual
gross receipts of the preceding year do not exceed P10,000,000 derived from

the business covered by the law granting the franchise cannot opt for VAT
registration.
c. Yes. As a rule, it is mandatory for franchise grantees of radio and/or
television broadcasting whose annual gross receipts of the preceding year do
not exceed P10,000,000 to register under the VAT system.
d. No. It is unwise to register because the taxpayer cannot claim input tax
credits.
45. (OPT) A proprietor of bowling alleys has the following gross receipts during the
month of July, 2018:
Gross receipts from bowling operation P2,000,000
Gross receipts from sale of food and drinks inside the
bowling alley 1,000,000
Gross receipts from rental of stalls inside the bowling alley 500,000
How much is the amusement tax?
a. P1,050,000 c. P525,000
46. (OPT) Which of the following statements is incorrect?

a. The percentage taxes are basically on sale of services.
b. The percentage taxes are generally paid monthly.
c. The percentage taxes may be shifted to customers or clients.
d. An isolated transaction not in the course of trade or business will not result
in a liability for a percentage tax.
47. (IND) A nonresident alien individual who shall come to the Philippines and stay
therein for an aggregate period of more than 180 days during the calendar year
shall be deemed a “nonresident alien doing in the Philippines”:
a. regardless of whether or not he is actually engaged in business in the
Philippines.
b. only when he is actually engaged in business in the Philippines.
c. when his income does not come from the performance of personal services in the
Philippines.
d. when he comes to the Philippines for a definite purpose which in its nature
would require an extended stay and to that end makes his home temporarily in
the Philippines, although it may be his intention at all times to return to
his domicile abroad.
48. (IND) Under the TRAIN, the term ‘taxable income’ as applied to individuals means:
a. the pertinent items of gross income specified in the Tax Code, less
deductions if any, authorized for such types of income by the Tax Code or
other special laws.
b. the pertinent items of gross income specified in the Tax Code, less
deductions including personal exemptions, if any, authorized for such
types of income by the Tax Code or other special laws.
c. the pertinent items of gross income specified in the Tax Code.
d. the pertinent items of gross income specified in the Tax Code excluding
salaries received from employment.
49 and 50 are based on the following: (IND) Ms. Cyril is employed in MAFD Corporation
and is also a part-time real estate agent for a real estate broker. In addition to
the SMW of ₱180,000 she received from her employer, she likewise received ₱75,000 as
commissions from her real estate dealings for the year 2018.
49. (IND) How much is the exempt income?
a. P255,000 c. P75,000
50. (IND) How much is the taxable income?
a. P255,000 c. P75,000
51. (IND) To be considered physically present abroad most of the time during the
taxable year, a contract worker must have been outside the Philippines for not
less than:
a. 180 days c. 185 days
b. 183 days d. 190 days

52. (IND) Denzell Wetta, an American management expert is hired by a Philippine
corporation to assist in its organization and operation for which he has to stay
in the Philippines for 5 months. He came to the Philippines for this definite
purpose but the nature of his job may require him to extend his stay and live
temporarily in the Philippines. The American management expert intends to leave
the Philippines as soon as his job is done.
For income tax purposes, the American management expert shall be classified as:
a. resident alien.
b. nonresident alien engaged in trade or business.
c. nonresident alien not engaged in trade or business.
d. resident citizen.
53. (IND) First statement: The husband and wife shall compute their individual
income tax separately based on their respective total taxable income.
Second statement: If any income cannot be definitely attributed to or
identified as income exclusively earned or realized by either of the spouses, the
same shall be divided equally between the spouses for the purpose of determining
their respective taxable income.
54. Ms. Allyza is employed in JBC Corporation, She the following for the
current year:
Statutory minimum wage,
inclusive of the 13th month pay P175,000
Overtime pay 40,000
Night-shift differential 25,000
Commission from the same employer 20,000
Total P260,000
(IND) How much is the exempt amount?
a. P260,000 c. P20,000
55 and 56 are based on the following: A married resident citizen has five (5)
qualified dependent children. The following information pertains to his income and
expenses in the year 2018:
Salary, net of P20,000 withholding tax P 380,000
Interest income, bank deposit-BPI, Manila 50,000
Yield from money market placement,
State Investment House, Manila 30,000
Rent expense, apartment house 36,000
Health insurance premium paid 5,000
55. (IND) How much is the taxable compensation income?

a. P400,000 c. P250,000
b. P336,000 d. P230,000
56. (IND) How much is the tax due?

a. P80,000 c. None, exempt from tax
57 and 58 are based on the following: A single resident citizen has two (2) qualified
dependent children. During a particular year, he earns and spends the following:
Gross income from practice of profession P 250,000
Expenses in connection with the practice
of profession 50,000
Hospitalization insurance premium paid 2,000
57. (IND) How much is the taxable net income?
a. P250,000 c. P100,000
b. P200,000 d. P 98,000
58. (IND) How much is the tax due?

a. P50,000 c. None, exempt from tax

59. (Excise Tax) Which of the following is an example of ad valorem excise tax?
a. Excise tax on Cigarettes Packed by Hand
b. Excise tax on Cigarettes Packed by Machine
c. Excise tax on petroleum products
d. Excise tax on alcoholic products
60 and 61 are based on the following: To improve her body shape Paz Seksi decided to
undergo procedure and sought the services of Body Beautiful, a clinic operated
outside the hospital and owned by Bello Medical Group, Inc. Body Beautiful charged
Ms. Pax Seksi the amount of P112,000 (inclusive of 12% VAT but exclusive of 5% excise
tax) for the service rendered.
60. (Excise Tax) How much is the excise tax?

a. P5,250.00 c. P4,761.90
61. (Excise Tax) How much is the VAT?

a. P12,600.00 c. P10,714.29
62. (Corp) Aliw Service Corporation, registered with BIR in 2010, has the following
data for the year 2018:
Gross receipts P 1,000,000
Discounts given 100,000
Returns and allowances 150,000
Salaries of personnel directly involved in the
Fees of consultants directly involved in the
Rental of equipment directly used in the
Operating expenses 420,000
How much is the income tax due and payable?

a. P 27,000 c. Zero
63 and 44 are based on the following: XYZ Corporation is a foreign corporation

engaged in business in the Philippines. During the year 2018, its income and expenses
are shown below:
Gross income, Philippines P 20,000,000
Business expenses, Philippines 5,000,000
Gross income, South Korea 70,000,000
Business expenses, South Korea 3,000,000
Interest income on dollar deposit,
PNB-Manila, Philippines 500,000
Yield on money market placement in South Korea 1,000,000
63. (Corp) How much is the Philippine income tax due and payable using 30% income tax
rate?
a. P6,000,000 c. P4,500,000
64. (Corp) Assuming the corporation is not engaged in business in the Philippines, how
much is the final withholding tax in the Philippines?
a. P6,000,000 c. P4,500,000
65. (Sources of Income) It is important to know the source of income for tax purposes
(i.e., from within and without the Philippines) because:
a. some individuals and corporate taxpayers are taxed on their worldwide income
while others are taxable only upon income from sources within the Philippines.
b. the Philippines imposes income tax only on income from sources within.
c. some individual taxpayers are citizens while others are aliens.
d. export sales are not subject to income tax.

66. (Sources of Income) Which of the following shall be treated as derived entirely
from sources without the Philippines?
a. Gains, profits and income derived from the purchase of personal property
within and its sale without the Philippines
b. Gains, profits and income derived from the purchase of personal property
without and its sale within the Philippines
c. Gain from the sale of shares of stock in a domestic corporation regardless of
where the said shares are sold
d. All of the choices
67. (Gross Income) Which of the following is not taxable?

a. Living quarters or meals furnished to an employee for the convenience of the
employer
b. Tips or gratuities paid directly to an employee by a customer of the employer
which are not accounted for by the employee to the employer
c. Pensions, retirement and separation pay, in general
d. Fixed or variable transportation, representation and other allowances which
are received by a public officer or employee or officer or employee of a
private entity, in addition to the regular compensation fixed for his position
or office, in general
68. (Gross Income) Which of the following statements is incorrect?

a. Gains, profits, and income are to be included in the gross income for the
taxable year in which they are received by the taxpayer, unless they are
included when they accrue to him in accordance with approved method of
accounting followed by him.
b. If a person sues in one year on a pecuniary claim or for property, and money
or property is recovered on a judgment therefore in a later year, income is
realized in that year, assuming the money or property would have been income
in the earlier year if then received.
c. Bad debts or accounts charged off because of the fact that they were
determined to be worthless, which are subsequently recovered, whether or not
by suit, constitute income for the year in which recovered, regardless of the
date when amounts were charged off.
d. None of the choices.
69. (Gross Income) A property was received as donation from Charlwin when its fair
market value was P300,000. Charlwin in turn received this property as donation
from Jose when its fair market value was P350,000. This property was purchased by
Marceliano for P200,000 and was donated to Jose. The property was sold for
P500,000.
How much gain (loss) shall be recognized from the sale?

a. P 300,000 c. P 150,000
70. (Fringe) Which of the following fringe benefits shall not be subject to the fringe
benefit tax?
a. Benefits given to the rank and file employees, whether granted under a
collective bargaining agreement or not
b. Fringe benefits required by the nature of, or necessary to the trade, business
or profession of the employer
c. Fringe benefit given for the convenience or advantage of the employer
d. All of the choices
END OF EXAMINATION
NOTE: Solutions to selected items are found on the next page (Page 11).

1. B 11. C 21. A 31. B 41. D 51. B 61. A

2. A 12. C 22. A 32. A 42. D 52. A 62. B
3. D 13. A 23. A 33. A 43. B 53. A 63. C
4. D 14. D 24. D 34. D 44. A 54. B 64. A
5. C 15. A 25. B 35. B 45. D 55. A 65. A
6. D 16. D 26. A 36. D 46. D 56. B 66. A
7. D 17. C 27. C 37. A 47. A 57. B 67. A
8. D 18. B 28. D 38. C 48. A 58. C 68. D
9. D 19. C 29. C 39. B 49. B 59. D 69. A
10. A 20. D 30. C 40. C 50. C 60. B 70. D
SUPPORTING COMPUTATIONS
4. D
Gross estate P30,000,000 P14,000,000 P44,000,000

Less: Deductions (2,000,000)
- (2,000,000)
Net estate before special 30,000,000 12,000,000* 42,000,000
deductions
Less: Special ded
Maximum 10,000,000 10,000,000)
Standard deduction (5,000,000)
Net estate after special
deductions 27,000,000
Less: Share of surviving
spouse (1/2 x (6,000,000)
12,000,000*)
Net taxable estate P 21,000,000
5. C
Less: Deductions ( 2,000,000)
Less: Family home deduction (maximum) 10,000,000
Standard deduction 5,000,000 15,000,000
6. D

Gross estate P4,900,000 P7,000,000 P9,900,000
Less: Deductions 500,000
1,500,000) (2,000,000)
Net estate before
special deductions 4,400,000 5,500,000* 9,900,000
Less: Special ded
Family house(1/2) 500,000

Family lot (full)) 400,000
Total 900,000
Maximum 10,000,000 (900,000)

Net estate after

special deductions 4,000,000
Less: Share of
surviving spouse
(1/2 x
5,500,000*) (2,750,000)
7. D
Tax rate 6%
Tax payable P 75,000
11. C
Real property in the Philippines P4,000,000.00
Personal property outside the
Philippines 2,000,000.00
Proceeds of life insurance upon the life
of decedent, decedent’s estate
designated as irrevocable beneficiary 1,000,000.00
Total taxable gross estate P7,000,000.00
Less: Deductions
Claims against the estate (1,000,000.00)
Net estate before special deductions 6,000,000.00
Less: Special deduction
Standard deduction (5,000,000.00)
Taxable net estate P1,000,000.00
12. C
Estate tax payable (1,000,000 x 6%) P60,000.00
13. A
Answer: A
Claims against the estate P 1,000,000.00
Standard deduction 5,000,000.00
Total P6,000,000.00
18. B
January 30, 2018
Total net gifts P2,000,000
Less: Exempt gift 250,000
Total net gifts subject to tax 1,750,000
Applicable Donor’s Tax Rate 6%
Total donor’s tax P105,000
19. C
March 30, 2018
Total net gifts in this return P1,000,000
Add: Total Prior net gifts during the calendar year 2,000,000
Total net gifts 3,000,000
Less: Exempt gift (250,000)
Applicable donor’s tax rate 6%
Total donor’s tax due 165,000
Less: Payments for prior gifts during the calendar 105,000
year
Tax payable P60,000

20. D
August 15, 2018
Total net gifts in this return P500,000
Add: Total Prior net gifts during the calendar 3,000,000
year
Total net gifts 3,500,000
Less: Exempt gift (250,000)
Applicable donor’s tax rate 6%
Total donor’s tax due 195,000
Less: Payments for prior gifts during the calendar 165,000
year
Tax payable P30,000
29. C
Answer: C
Parma pizza P880.00
Mango basil 180.00
Total VAT-exempt sales 1,060.00
Less: VAT included in the VAT-exempt sale (1,060.00 x
12/112) 113.57
VAT-exempt sale P 946.43
30. C
Answer: C
VAT-exempt sale P 946.43
Sales discount rate 20%
Sales discount to senior citizen P189.29
31. B
Answer: B
Reference: Section 3, Revenue Regulations No. 4-2007
The initial payments over the selling price exceed 25%
(900,000/3,000,000 = 30%). This is a sale on a deferred payment basis
not on the installment plan.
32. A
Answer: A
In case of sale of real property on a deferred-payment basis not on the
installment plan, the transaction shall be treated as cash sale which
makes the entire selling price taxable in the month of sale. Hence, the
tax base is selling price or fair market value whichever is higher.
33. A
Answer: A
P3,000,000 x 12% = P360,000

34. D
Answer: D
The initial payments over the selling price exceed 25%. This is a sale on
a deferred payment basis not on the installment plan.
In case of sale of real property on a deferred-payment basis not on the

installment plan, the transaction shall be treated as cash sale which
makes the entire selling price taxable in the month of sale. Payments
subsequent to “initial payments” shall no longer be subject to output VAT,
in the case of sale on a deferred payment basis.
38. C
Answer: C
First quarter P1,000,000
Second quarter 1,000,000
Third quarter 1,000,000
Total gross sales 3,000,000
Tax rate 3%
Percentage tax P 90,000
39. B
Answer: B
Gross sales (fourth quarter) P1,000,000
Tax rate 12%
Value-Added Tax P 120,000
42. D
Gross payments received P500,000
Tax rate 10%
Overseas communications tax P50,000
43. B
Answer: B
Gross receipts, sale of airtime P 2,000,000
Rentals of office spaces 3,500,000
Total gross receipts 5,500,000
Tax rate 12%
Output tax P 660,000
45. D
Operators of bowling alleys are not subject to amusement tax.
49. B
The minimum wage of P180,000 is exempt from tax even if she has
received commission from her real estate business.
50. C
The P75,000 commission is taxable income.

54. B
Answer: B
Basic statutory minimum wage P175,000
Overtime pay 40,000
Night-shift differential 25,000
Total P240,000
55. A
Answer: A
Gross compensation income (P380,000 + P20,000) P400,000
56. B
Answer: B
Taxable compensation income P400,000
Tax due under Section 24 (A)
250,000 Exempt
150,000 x 20% P30,000
57. B
Answer: B
Gross professional income P250,000
Less: Expenses (50,000)
Taxable net income P250,000
58. C
Effective January 1, 2018, the first P250,000 taxable income is exempt
from tax.
60. B
Answer: B
Gross receipts, net of VAT (112,000/1.12) P100,000.00
Tax rate 5%
Excise tax P 5,000.00
61. A
Answer: A
Gross receipts, net of VAT P100,000.00
Add: Excise tax 5,000.00
Total 105,000.00
Tax rate 12%
VAT P12,600.00
62. B
Answer: B
Gross receipts P1,000,000
Less: Discounts 100,000
Returns and allowances 150,000 250,000
Net receipts 750,000
Less: Cost of services
Salaries of personnel 300,000
Fees of consultants 50,000
Rental of equipment 70,000 420,000

Gross income 330,000

Net operating loss (P90,000)
Regular corporate income tax -
Minimum corporate income tax (330,000 x 2%) P6,600
Tax due and payable P6,600
63. C
Gross income, Philippines P20,000,000
Less: Business expenses, Philippines (5,000,000)
Taxable net income P15,000,000
Tax due (30% x 15,000,000) P4,500,000
64. A
Gross income, Philippines P20,000,000
Tax rate 30%
Final withholding tax P60,000,000
69. A
Answer: A
Selling price P500,000
Less: Basis (basis to the last owner who did not
acquire the property by donation) 200,000*
Gain from sale P300,000
*Less than the FMV of P300,000 at the time received as donation.

ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
TAXATION May 02, 2021 (Sunday)

Final Pre-Board Examination 08:00 A.M. to 11:00 A.M.
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following
questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the sheet provided.
STRICTLY NO ERASURES ARE ALLOWED. Use pencil no. 2 only.
1. Excise tax on certain articles is an example of:

a. an indirect tax. c. a local tax.
b. a direct tax. d. a transfer tax.
Answer: A
2. Which one of the following is not a characteristic of the State’s power to tax?
a. It is inherent in sovereignty.
b. It is legislative in character.
c. It based on the ability to pay.
d. It is subject to constitutional and inherent limitations.
Answer: C
Characteristics (or Nature) of the State’s Power to Tax
a. It is inherent in sovereignty, hence, it may be exercised although
not expressly granted by the Constitution.
b. It is legislative in character, hence, only the legislature can
impose taxes (high prerogative of sovereignty).
c. It is subject to Constitutional and inherent limitations, hence, it
is not an absolute power than can be exercised by the legislature
anyway it pleases.
3. (Adapted) First statement: Symbiotic relation is the reason why the government
could impose taxes on the income of the resident citizens derived from sources
outside the Philippines.
Second statement: Jurisdiction is the reason why citizens must provide support
to the State so the latter could continue to give protection.

Answer: B
The first statement refers to jurisdiction while the second statement
refers to symbiotic relationship (reciprocal duties).
4. An annual tax of P1,000 was imposed upon all residents of the Philippines, who
are above 21 years of age, with a gross income of P250,000, whether or not they
send their children to public schools, for the purpose of raising funds in
order to improve public school buildings. The tax is:
a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
Answer: C
5. A law was passed by Congress which granted tax amnesty to those who have not
paid income taxes for a certain year without at the same time providing for the
refund of taxes to those who have already paid them. The law is:
a. valid because there is a valid classification.
TAXATION – FINAL PRE-BOARD EXAMINATION (BATCH 41)

Page |2
b. not valid because those who did not pay their taxes are favored over
those who have paid their taxes.
c. valid because it was Congress which passed the law and it did not
improperly delegate the power to tax.
d. not valid because only the President with the approval of Congress may
grant amnesty.
Answer: A
6. In case of conflict between tax laws and generally accepted accounting

principles (GAAP):
a. both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. tax laws shall prevail over GAAP.
d. the issue shall be resolved by the court.
Answer: C
7. “Schedular system of income taxation” means:

a. all types of income are added together to arrive at gross income.
b. separate graduated rates are imposed on different types of income.
c. capital gains are excluded in determining gross income.
d. compensation income and business/professional income are added together
in arriving at gross income.
Answer: B
The opposite of “scheduler system of income taxation” is called “global
system of income taxation” which is described in choice letter d. above.
8. The least source of our tax laws.

a. Statutes c. Constitution
b. Court decisions d. BIR rulings
Answer: D
9. The fair market value of real properties located in each zone or area, shall be
subject to automatic adjustment once every how many years through rules and
regulations issued by the Secretary of Finance based on the current Philippine
valuation standards?
a. 3 years c. 7 years
b. 5 years d. 10 years
Answer: A
Reference: Section 6 (E), NIRC, as amended under TRAIN
10. A decedent dies on January 1, 2019. The estate tax return is filed on June 1,
2019. When is the last day to make a valid assessment?
a. January 1, 2023 c. July 1, 2022
b. June 1, 2022 d. September 1, 2022
Answer: A
The due date for filing the estate tax return in this case is January 1,
2020 (within one year after death.) Since the return is filed on June 1,
2019 which is before the period prescribed by law, the three (3)-year period
shall be counted from the due date. (January 1, 2020)
11. Notwithstanding any contrary provision of R.A. No. 1405 and other general or
special laws, the Commissioner of Internal Revenue is authorized to inquire
into bank deposit:
Case 1 – of a decedent to determine his gross estate.
Case 2 – of any taxpayer who has filed an application for compromise of his
tax liability by reason of financial incapacity provided there is
waiver of his privilege under R.A. No. 1405 or under other general
or special laws.
a. True in both cases
b. False in both cases
c. True only in the first case
d. True only in the second case

Page |3
Answer: A
Reference: Section 6 (F), NIRC, as amended
12. Which of the following cases may not be compromised?

a. Delinquent accounts
b. Cases under administrative protest after issuance of the Final Notice of
Assessment to the taxpayer still pending in the BIR
c. Civil tax cases being disputed before the courts
d. Criminal violations involving criminal tax fraud.
Answer: D
13. The following are instances when penalties and/or interest imposed on the
taxpayer may be abated or cancelled on the ground that the imposition thereof
is unjust and excessive, except when the:
a. filing of the return or payment of the tax is made at the wrong venue.
b. taxpayer’s mistake in payment of his tax is due to erroneous written
official advice of a revenue officer.
c. assessment is brought about or a result of the taxpayer’s non-compliance
with the law due to a difficult interpretation of the said law.
d. taxpayer is declared insolvent or bankrupt.
Answer: D
14. First statement: In civil tax cases involving collection of internal revenue
taxes, prescription is construed strictly against the government and liberally
in favor of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable

under the Tax Code, prescription is construed strictly against the government.
Answer: C
References: CIR vs. Goodrich Phils., Inc. G.R. 104171, Feb. 24, 1999
Lim vs. CA, G.R. 48134-37, Oct. 18, 1990
In criminal tax cases involving tax offenses punishable under the Tax Code,
prescription is construed strictly against the taxpayer.
15. Which of the following statements is not correct?

a. A tax refund is in the nature of a tax exemption which must be construed
strictissimi juris against the taxpayer.
b. Tax refund refers to the actual reimbursement of the erroneously or
illegally collected taxes.
c. Tax refund may be utilized in the payment of internal revenue taxes,
excluding withholding taxes, for which the taxpayer is directly liable.
d. Illegally assessed or collected taxes arose when payments are made under
duress or assessment thereof having been rendered by a person who has no
power to assess the tax at all.
Answer: C
16. First statement: The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but the veto shall
not affect the item or items to which he does not object.
Second statement: The President shall have the power to veto any particular
item or items in a bill that penalizes crimes, but the veto shall not affect
the item or items to which he does not object.
a. 1st statement is correct, 2nd statement is wrong

b. 1st statement is wrong, 2nd statement is correct
c. Both statements are wrong
d. Both statements are correct

Page |4
Answer: A
The President shall have the power to veto any particular item or items in
an appropriation, revenue, or tariff bill, but the veto shall not affect
the item or items to which he does not object [Art. VI, Sec. 27 (2)].
17. Warrant of levy as distinguished from warrant of distraint.

a. It is on real property owned by and in possession of the taxpayer.
b. It is on personal property owned by and in possession of the taxpayer.
c. It is on property owned by the taxpayer but in the possession of a third party,
d. It does not required advertisement.
Answer: A
18. If at any time prior to the consummation of the sale all proper charges are
paid to the officer conducting the sale, the goods or effects distrained:
a. shall be restored to the owner.
b. shall no longer be restored to the owner.
c. shall be brought to the Revenue District Officer.
d. shall be brought to the Regional District Officer.
Answer: A
Reference: Section 210, NIRC, as amended
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. - If
at any time prior to the consummation of the sale all proper charges are
paid to the officer conducting the sale, the goods or effects distrained
shall be restored to the owner.
19. A written notice informing a Taxpayer that the findings of the audit conducted
on his books of accounts and accounting records indicate that additional taxes
or deficiency assessments have to be paid.
a. Notice of Informal Conference
b. Preliminary Assessment Notice
c. Letter of Authority
d. Formal Assessment Notice
Answer: A
In order the to expedite the processing of Letter Notice (LN) cases, the
issuance of Notice for Informal Conference may immediately commence, even
without prior issuance of Letters of Authority, as required in certain
situations, as prescribed in the existing RMOs on the LN system.
20. For requests for reconsideration, the taxpayer shall submit all relevant
supporting documents in support of his protest within how many days from date
of filing of his letter of protest, other-wise, the assessment shall become
final?
a. Sixty (60) days c. Twenty (20) days
b. Thirty (30) days d. None of the choices
Answer: D
References: Section 228, NIRC, as amended
Section 3.1.5, Revenue Regulations No. 12-99
as amended under Revenue Regulations No. 18-2013
The term “relevant supporting documents” refer to those documents
necessary to support the legal and factual bases in disputing a tax
assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting
documents shall not apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the
taxpayer is barred from disputing the correctness of the issued
assessment by introduction of newly discovered or additional evidence,
and the FDDA shall consequently be denied.
21. If the taxpayer is adversely affected by the resolution of the CTA in Division
on his Motion for Reconsideration, he may file a petition for review with the
CTA en banc within how many days?
a. Sixty (60) days c. Twenty (20) days
b. Thirty (30) days d. Fifteen (15) days

Page |5
Answer: D
Reference: Section 11, Republic Act No. 1125
22 to 25 are based on the following: In 2018, Ms. Glai Espenilla Bangug, a

financial comptroller of EB Company, earns annual compensation of P1,500,000,
inclusive of 13th month and other benefits in the amount of P80,000 and
mandatory SSS contribution of P3,500 and Philhealth contribution of P2,000.
Aside from her employment income, she owns a convenience store, 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.
22. Can she avail of the 8% income tax rate?

a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT-registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the
VAT threshold.
Answer: B
23. How much is her total taxable income?

a. P2,913,500 c. P2,464,500
Answer: C
Total compensation income P1,500,000
Less: Non-taxable 13th month and other benefits 80,000
Mandatory SSS contribution 3,500
Mandatory Philhealth contribution 2,000 85,500
Taxable compensation income 1,414,500
Gross sales 3,000,000
Less: Sales discount ( 300,000)
Sales returns and allowances ( 150,000)
Net sales 2,550,000
Gross income 1,550,000
Net income from operation 950,000
Add: Non-operating income 100,000 1,050,000
Total taxable income P2,464,500
24. How much is her tax due when she files her final tax return?
a. P338,640 c. P482,320
Answer: A
Total taxable income P2,464,500
Tax due Sec. 24 (A) 2,000,000 490,000
464,500 x 32% 148,640 P 638,640
Less: Payments, first 3 quarters 300,000
25. How much is the output VAT, if any?

a. P306,000 c. P360,000
Answer: A
Less: Sales discount (300,000)
Sales returns and allowances (150,000)
Net sales 2,550,000
Tax rate 12%
Output VAT P 306,000

Page |6
Effective January 1, 2018 up to December 31, 2022

If the taxable income is:
Over But not over The tax shall be Plus Of excess over
P 250,000 0%
P 250,000 400,000 20% P 250,000
400,000 800,000 P 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,419,000 35% 8,000,000
26 to 31 are based on the following: Ms. Queenie Matusalem signified her

intention to be taxed at 8% income tax rate on gross sales in her first
quarter return. However, her gross sales during the taxable year has exceeded
the VAT threshold.
First Second Third Fourth
quarter quarter quarter quarter
Total sales P500,000 P1,000,000 P1,500,000 P4,000,000
Cost of sales 300,000 500,000 700,000 1,500,000
Operating expenses 100,000 200,000 250,000 500,000
26. How much is the income tax due for the first quarter?
a. P40,000 c. Zero
Answer: B
Gross sales P500,000
Less: Exempt amount 250,000
Tax amount 250,000
Tax rate 8%
Tax due P 20,000
27. How much is the income tax payable for the second quarter?
a. P100,000 c. P20,000
Answer: B
Gross sales, first quarter P1,000,000
Add: Gross sales, previous quarters 500,000
Tax amount 1,250,000
Tax rate 8%
Tax due 100,000
Less: Payments, previous quarter 20,000
28. How much is the income tax payable for the third quarter?
a. P220,000 c. P120,000
Answer: C
Gross sales, third quarter P1,500,000
Add: Gross sales, previous quarters 1,500,000
Tax amount 2,750,000
Tax rate 8%
Tax due 220,000
Less: Payments, previous quarter 100,000
29. How much is income tax payable for the final return?
a. P574,000 c. P340,000

Page |7
Answer: A
Total gross sales P7,000,000
Less: Cost of sales 3,000,000
Less: Operating expenses 1,050,000
Tax due Sec. 24 (A) 2,000,000 490,000
950,000 x 32% 304,000 P 794,000
Less: 8% income tax payments, first 3 220,000
quarters
30. How much is the percentage tax under Section 116 for the third quarter?
a. P210,000 c. Not subject to Sec. 116
Answer: B
Gross sales, third quarter P1,500,000
Tax rate 3%
Percentage tax under Sec. 116 P 45,000
31. How much is output VAT for the fourth quarter, if any?
a. P840,000 c. P120,000
Answer: B
Gross sale (7,000,000 – 3,000,000) P4,000,000
Tax rate 12%
Output VAT P 480,000
32. An alien employee of an offshore banking unit has the following income for
the year 2018:
Salary received from offshore banking unit (OBU) P10,000,000
Honoraria and allowances received from the OBU 5,000,000
Interest income from a domestic bank on his peso deposits 50,000
Capital gain from sale of shares in a domestic corporation 100,000
How much is the tax from his gross income in the Philippines?
a. P4,860,000 c. P1,500,000
Answer: A
Taxable compensation income (10,000,000 + 5,000,000) P15,000,000
Tax due Section 24 (A) 8,000,000 P2,410,000
7,000,000 x 35% 2,450,000 P 4,860,000
Notes:
1) Starting January 1, 2018, all employees of RHQs/ROHQs/OBUs, and Petroleum
Service Contractors and Subcontractors shall be subject to regular income
tax rate under Section 24 (A)(2)(a) of the Tax Code, as amended, without
prejudice to the application of preferential tax rates under existing
international tax treaties, if warranted.
2) The interest income on peso deposits and the capital gain from sale of shares of
stock in a domestic corporation shall be subject to different rates of tax [See
Section 24 (B) (1) and Section 24 (C).]
33. Under the TRAIN, the books of accounts shall be audited and examined yearly
by independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which
shall contain, among others, information lifted from certified balance
sheets, profit and loss statements, schedules listing income-producing
properties and the corresponding income therefrom and other relevant
statements if the:
a. gross annual sales, earnings, receipts or output exceed Three million
pesos (P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three
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).

Page |8
Answer: A
34 and 35 are based on the following: Assume that “Mr. Era”, resident citizen,
bought shares of stock in 2017 at a cost of P100,000. He donated these shares to
“Mr. Aio”, a close resident alien friend, on January 1, 2017, during which time,
the said shares has a fair market value of P 1,000,000 and on the basis of such
fair market value, “Mr. Era” paid the corresponding donor’s tax. “Mr. Aio”, the
donee, sold the shares on February 1, 2018 for a consideration of P 2,000,000.
34. How much is the capital gain (loss) from sale of shares of stock?
a. P1,900,000 c. P950,000
b. P1,000,000 d. P500,000
Answer: A
Selling price P2,000,000
Less: Value in the hands of the donor 100,000
Capital gain P1,900,000
35. How much was the capital gains tax, if any?

a. P285,000 c. P185,000
Answer: A
Capital gain P1,900,000
Tax rate 15%
Capital gains tax P 285,000
36 to 39 are based on the following: Mr. Mark Tang is a partner of Tang Dayag
Caiga Company, a business partnership. He owns 25% interest. The gross sales of
Tang Dayag Caiga Company amounted to P10,000,000.00 for taxable year 2018. The
recorded cost of sales and operating expenses of the partnership were
P2,750,000.00 and P1,500,000.00, respectively. It had also incurred an interest
expense of P200,000 in connection with asset acquisition and interest income from
bank deposit amounting to P100,000.
36. How much is the taxable income of the partnership?

a. P5,750,000 c. P5,550,000
Answer: B
Less: Interest expense 200,000
Reduction (33% x 100,000) (33,000) (167,000)
Other operating expenses (1,500,000)
Taxable income P5,583,000
37. How much is the income tax liability of the partnership?

a. P1,725,000 c. P1,665,000
Answer: B
Tax rate 30%
Tax due P1,674,900
38. How much is the share in the partnership income of partner Mark Tang?
a. P1,058,775 c. P978,775
Answer: A
Taxable income of the partnership P5,750,000
Less: Income tax 1,674,900
Net income after tax 4,075,100
Add: Interest income, net of final tax (200,000 x 20%) 160,000
Distributable net income 4,235,100
Mark Tang’s interest in the partnership 25%

Page |9
Partner’s interest in the partnership’s distributable income P 1,058,775
39. Assuming the partnership avails of the Optional Standard deduction, how
much is the tax liability of the partnership?
a. P1,725,000 c. Zero
Answer: B
Gross Income 7,250,000
Less: Optional standard deduction (40% x 7,250,000) 2,900,000
Tax rate 30%
Tax due and payable P 1,305,000
40. Your client dies on July 14, 2018. You are appointed as administrator.
You withdraw from his bank deposit P100,000 because the estate needs cash
to settle some obligations. What is the consequence of your withdrawal from
the decedent’s bank deposit?
a. subject to final withholding tax of 6%
b. subject to creditable withholding tax of 6%
c. Not subject to withholding tax
d. Subject to penalty and interest because such withdrawal is not allowed.
Answer: A
41. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance is:
a. included in the gross estate of Mr. Julian Cruz because when the executor
of the estate is a beneficiary the proceeds are included in the gross
estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the designation
of the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of life
insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life
insurance are generally not subject to estate tax.
Answer: A
42 and 43 are based on the following: A resident decedent left the following
properties:
Real properties P10,000,000
Bank deposit (P1,000,000 was withdrawn from the account
after the decedent died) 3,000,000
42. The gross estate of the decedent was:

a. P28,000,000 c. P26,000,000
b. P27,000,000 d. P25,000,000
Answer: B
Real properties, Philippines P10,000,000
Bank deposit (P3,000,000 – P1,000,000) 2,000,000
43. The final withholding tax on amount withdrawn was:

a. P200,000 c. P60,000
Answer: C
Amount withdrawn P1,000,000
Rate 6%
Final withholding tax P 60,000

P a g e | 10
44 and 45 are based on the following: An unmarried decedent died leaving

properties he inherited 4 ½ years ago which had fair market value of P800,000 at
the time of his death (P650,000 at the time of inheritance, and unpaid mortgage
of P50,000, P20,000 of which paid by the present decedent before he died). Other
properties in his gross estate had fair market value of P1,000,000. The total
expenses, losses, indebtedness, taxes and transfer for public purpose amounted to
P300,000.
44. How much was the vanishing deduction?

a. P 225,000 c. P 102,900
b. P 108,333 d. P 100,000
Answer: C
Value to take P 650,000
Less: Mortgage paid 20,000
Less: Proportional deduction
(P630,000/P1,800,000 X P330,000) 115,500
Final basis 514,500
Rate 20%
45. Assuming that the inherited property had no unpaid mortgage when received by
the present decedent. It was the present decedent who mortgaged the property
for P50,000 when he already owned it. He paid the mortgage indebtedness
before he died. How much was the vanishing deduction?
a. P 508,333 c. P 208,333
b. P 225,000 d. P 108,333
Answer: D
Value to take P 650,000
Less: Mortgage paid -
Less: Proportional deduction (650,000/1,800,000 x 300,000) 108,333
Final basis 541,667
Rate 20%
46 and 47 are based on the following: The decedent is a resident unmarried head
of family who died on March 1, 2018. He left the following properties,
obligations and expenses:
Ordinary deductions
46. The taxable net estate if he dies in 2018 is:

a. P42,000,000. c. P27,000,000.
b. P32,000,000. d. P23,000,000.
Answer: C

Less: Deductions 2,000,000
Less: Family home (10,000,000)
47. Continuing the preceding number, the estate tax return shall be filed and the
estate tax paid on or before what date to avoid penalties:
a. March 1, 2019 c. September 1, 2018
b. March 1, 2021 d. None of the choices

P a g e | 11
Answer: A
48. On March 1, 2018, Ms. Samira Aquino donated a piece of land to her best
friend, Mar Roxas. She also donated to a non-profit religious organization.
The donation to her friend was a piece of land which had an assessed value of
P1,000,000 and zonal value of P800,000 at the time of donation. The donations
to a non-profit religious organization were cash amounting to P200,000 and an
automobile with a purchase price of P700,000. The piece of land was encumbered
with an unpaid mortgage of P300,000 which was not assumed by the donee. In
addition, the donee agreed to pay the applicable donor’s tax of P210,000.
How much was the total deductions?

a. P1,410,000 c. P 900,000
Answer: C
Gifts to a non-profit religious organization (200,000 + 700,000) P 900,000
49 and 50 are based on the following: During the current year, Jose Tugas who
resides in 158 R. Papa Street, Sampaloc Manila and with TIN 135-567-890-006 made
the following gifts:
Date Donee Amount of donation
June 1, 2018 Anton, his son, on P150,000 cash
account of his
marriage celebrated
June 1, 2018
July 10, 2018 His friend Carlos P400,000 a second-hand motor vehicle
September 30, 2018 His daughter Dana P450,000 cash dowry, on account of
her scheduled marriage on October 25,
2018
November 23, 2018 His father A parcel of land worth P180,000,
subject to the condition that his
father would assume the mortgage
indebtedness of Jose in the amount of
P40,000;
49. Using Donor’s Tax Return (BIR Form No. 1800), how much will be reflected on
line 14 for the return to be filed on November 23, 2018?
a. P1,140,000 c. P140,000
Answer: B
25 Personal property (From Part V Schedule A) P -
26 Real property (From Part V Schedule B) 180,000
27 Total gifts in this return 180,000
Less: Deductions allowed (Sum of items 28 to 32)
28 Mortgage assumed by the donee 40,000
34 Total net gifts in this return (Item 27 less Item 28) 140,000
35 Add: Total net gifts during the calendar year (Item 36 of
return previously filed with the year)
June 1, 2018 150,000
July 10, 2018 400,000
September 30, 2018 450,000 1,000,000
36 Total net gifts (Sum of Items 34 and 35) 1,140,000
38 Total net gifts subject to tax (Item 36 less Item 37) P 890,000
50. Using the Donor’s Tax Return (BIR Form No. 1800), how much will be reflected
on line 18?
a. P53,400 c. (P6,600)
Answer: B
14 Total net gifts subject to tax (From Part IV Item 38) P890,000
16 Total donor’s tax due (Item 14 x Item 15) 53,400

P a g e | 12
17 Less: Tax credit/payments

17A Payments for prior gifts during the taxable year
(1,000,000 – 250,000 x 6%) 45,000
18 Tax payable/Overpayment ((Item 16 less Item 17A) P 8,400
51 to 54 are based on the following: Your client, Antonio Manuel, is engaged in

various transactions that are subject to percentage taxes. His address is 143 S.
Loyola Street, Sampaloc, Manila. The TIN is 143-678-910-005. He is under RDO
032. Email ad is Antoman@gamil.com.
The following data for the first quarter of the current year are presented for
your perusal. Answer the questions by filling up the line in the actual
Quarterly Percentage Tax Return (2551Q).
Gross receipts, sale of gas and water P1,500,000
Expenses, sale of gas and water 200,000
Gross receipts, rentals of office spaces, net of 3% withholding tax 727,500
Expenses, rental of office spaces 150,000
Gross receipts, life insurance premiums 800,000
Expenses, life insurance business 100,000
51. Using line 14 of BIR Form 2551 Q, how much is total tax due?
a. P68,500 c. P30,000
Answer: A
Alpha numeric
tax code (ATC) Taxable amount Rate Tax due
PT 060 P1,500,000 2% P30,000
PT 010 750,000 3% 22,500
PT 120 800,000 2% 16,000
52. Assuming your client filed the return and paid the tax on July 25 and it was
found out that it was due to willful neglect, using line 20, how much is the
surcharge?
a. P36,305 c. P17,125
Answer: B
Surcharge rate 50%
Surcharge for willful neglect P34,250
53. Using the same information in the preceding number, using line 21, how much is
the interest?
a. P8,220 c. P2,055
Answer: C
Interest on delinquency (April 25 to July 25)
(68,500 x 12% x 3/12) P2,055
54. Using line 24, how much is the total amount payable excluding compromise
penalty?
a. P104,805 c. P82,305
Answer: C
14 Total tax due (From schedule 1 item 7) P68,500

Less: Tax credit/payment (attach proof)
15 Creditable percentage tax per BIR Form No. 22,500
2307
Tax still payable 46,000
Add: Penalties
20 Surcharge 34,250
21 Interest 2,055
Total amount payable P82,305

P a g e | 13
55 and 56 are based on the following: VAT and Percentage Taxes are based on the
following: In the year 2018, Mr. Nicko Macariola has the following transactions:
Gross receipts, lease of residential units
(monthly rental is P20,000 per unit) 2,500,000
Sale of four (4) residential lots at P1,500,000 each to
four (4) individual buyers 6,000,000
55. How much is the VAT-exempt gross receipts, assuming the taxpayer is VAT-
registered?
a. P8,500,000 c. P3,500,000
Answer: B
Sale of four (4) residential lots at P1,500,000 each to four
(4) individual buyers P6,000,000
56. How much is total VAT-subject amount, assuming the taxpayer is not VAT-
registered?
a. P8,500,000 c. P6,500,000
Answer: C
Gross receipts, lease of residential units 2,500,000
Vatable gross amount P6,500,000
57. In 2018 a stockholder of a closely held corporation owns 100,000 shares before
the IPO. The cost of the share is P1,000,000. During the IPO, the shares are
selling at P12 per share. After the IPO, the outstanding shares of the closely
held corporation are 1,000,000 shares and are now selling at P14 per share at
the local stock exchange.
Your friend asks for your advice whether to sell his shares during the IPO
through the local stock exchange or sell after the IPO not through the local
stock exchange. What advice will you give him?
a. Sell during the IPO because he will pay lesser tax.
b. Sell after the IPO but directly to a buyer so that he will pay lesser
tax.
c. Sell any time because there is no advantage as far as taxes due are
concerned.
d. Sell it below cost after the IPO directly to a buyer so he will not be
subject to tax on capital gain.
Answer: D
Sell
Sell during directly to
IPO buyer after
IPO
Gross selling price P1,200,000 P1,400,000
Less: Cost - 1,000,000
Gross selling price/net capital gain P1,200,000 P 400,000
Rate 4% 15%
Tax due P 48,000 P 60,000
Ratio = 100,000 shares/1,000,000 shares 10%
58. VAT and Percentage Taxes The VAT on importation of goods which are
subsequently used or sold in the course of trade or business by a VAT-
registered importer shall be treated as:
a. expense. c. tax credit.
b. inventoriable cost. d. none of the choices.
Answer: C

P a g e | 14
59 and 60 are based on the following: ABC Corporation, VAT-registered real estate
dealer, sold a residential lot on July 2, 2018 for P1,500,000. The down payment
was P200,000. The zonal value of the subject property at the time of sale amounted
to P2,000,000.
59. Would the sale qualify under installment plan?

a. Yes, because the initial payment did not exceed 25% of the selling price.
b. No, because the amount of the initial payments were not known.
c. Yes, because the sale had initial payments and, therefore, qualified
under installment plan.
d. No, because, as a rule, sale of real property would always be considered
sale under cash basis.
Answer: A
Initial payment/selling price (300,000/1,500,000 = 29%) does not exceed 25%.
60. How much was the output tax on the installment payment?
a. P3,600 c. P2,000
b. P2,400 d. None
Answer: D
Sale of residential lot valued at P1,500,000 and below is exempt from VAT
under the TRAIN.
61. Mr. Florence Binaluyo donates a piece of land to the City of Masbate. The
fair market value per BIR of the piece of land is P2,000,000 and its value per
Tax Declaration is P1,800,000. How much is the documentary stamp tax, if any?
a. P30,000 c. None, exempt from DST
Answer: C
Transfers exempt from donor’s tax under Section 101(a) and (b) of the
Tax Code shall be exempt from the tax imposed under this Section.
62. On every original issue, whether on organization, reorganization or for any

lawful purpose, of shares of stock by any association, company or corporation,
the documentary stamp tax is:
a. One peso and fifty centavos (P1.50) on each Two hundred pesos (P200),
or fractional part thereof, of the par value of such stock.
b. Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
c. Three pesos (P3.00) on each Two hundred pesos (P200), or fractional part
thereof, of the par value, of such shares of stock
d. Fifteen pesos (P15.00) on each Two hundred pesos (P200), or fractional
Answer: B
63. These are taxes on goods manufactured or produced in the Philippines for domestic
sales or consumption or for any other disposition and to things imported as well as
services performed in the Philippine, which tax shall be in addition to the value-
added tax.
a. Percentage Taxes
b. Income Tax
c. Documentary Stamp Taxes
d. Excise Taxes
Answer: D
64. Which of the following articles shall be subject to specific excise tax?
a. Excise tax on alcoholic products
b. Excise tax on automobiles
c. Excise tax on non-essential services
d. Excise tax on sweetened beverages
Answer: D
65. A residential building located in one of the cities in Metro Manila has a fair
market value of P10,000,000. The city ordinance fixed the actual assessment

P a g e | 15
level at 60%. How much is the basic real property tax, excluding the Special
Educational Fund (SEF)?
a. P120,000 c. P30,000
b. P 60,000 c. None of the choices
Answer: A
Fair market value P10,000,000
Multiplied by assessment level 60%
Assessed Value 6,000,000
Tax rate 2%
Basic real property tax P 120,000
66. Unless otherwise provided in the Local Government Code, the tax period of all
local taxes, fees and charges shall be:
a. calendar year.
b. fiscal year.
c. either calendar year or fiscal year at the option of the taxpayer.
d. neither calendar year nor fiscal year at the option of the LGU.
Answer: A
67. Case 1: The City of Masbate passed an ordinance granting senior citizens free
movie viewing on certain days.
Case 2: The City of Masbate passed an ordinance limiting the discount given
to senior citizens at 15% instead of 20%.
a. Only Case 1 is valid.

b. Both cases are valid.
c. Only Case 2 is valid.
d. Both cases are not valid.
Answer: A
68. The following data are taken from the books of a VAT-registered manufacturer
of cigarettes:
Sales returns 500,000
Sales discount, determinable at the time of sale 100,000
Excise tax 150,000
Value-Added Tax 540,000
Local tax passed-on to customers 100,000
For local business tax purposes, the taxable amount is:

a. P5,000,000 c. P3,710,000
Answer: C
Gross sales (4,900,000 + 100,000) P5,000,000
Less: Sales returns 500,000
Sales discount 100,000
Excise tax 150,000
Value-Added Tax 540,000 1,290,000
Taxable amount P3,710,000
69 and 70 are based on the following: A PEZA-registered entity engage as an export

enterprise provided you with the following information for the current taxable
year:
Export sales P45,500,000
Direct costs 27,000,000
Administrative expenses 5,650,000
Marketing expenses 2,720,000
Other operating expenses 1,330,000
Incidental losses 320,000
Additional information:
a. Domestic sales at P24,500,000 with direct cost at P14,700,000

P a g e | 16
b. Other expenses related to the domestic sale incurred amounted to

P3,206,400
c. PEZA Letter of Authority No. 18-ERD-LS-FP/EE-0001 provides domestic sales
limitation at 30%
69. What is the entity’s total income tax for the year?
a. P 925,000 c. P2,903,080
Answer: C
Gross sales (export) P45,500,000
Less: Direct costs 27,000,000
Tax rate 5%
Tax due P 925,000
Share of the National Government (3% x 18,500,000) P 555,000
Share of the local government (2% x 18,500,000) P 370,000
Gross sales (domestic) P24,500,000

Less: Direct costs (domestic sales) 14,700,000
Gross income (domestic sales) 9,800,000
Less: Deductible expenses 3,206,400
Taxable income P 6,593,600
Normal corporate income tax (6,593,600 x 30%) P 1,978,080
Minimum corporate income tax (9,800,000 x 2%) P 196,000
Tax due (higher) P 1,978,080
Income tax on export sales P 925,000

Income tax on domestic sales 1,978,080
Total P 2,903,080
70. What is the entity’s income tax if the PEZA Letter of Authority No. 18-ERD-LS-
FP/EE-0001 provides domestic sales limitation at 30% as a condition for fiscal
incentives?
a. P4,522,080 c. P1,978,080
Answer: A
Gross sales (45,500,000 + 24,500,000) P70,000,000
Less: Direct costs (27,000,000 + 14,700,000) 41,700,000
Less: Deductible expenses
Administrative expenses 5,650,000
Marketing expenses 2,720,000
Other operating expenses 1,330,000
Incidental losses 320,000
Other expenses related to the domestic 3,206,400 13,226,400
sale
Normal corporate income tax (15,073,600 x 30%) P 4,522,080
Minimum corporate income tax (28,300,000 x 2%) P 566,000
Tax due (higher) P 4,522,080
Domestic sales over total sales is 35% (24,500,000/70,000,000).
Since the PEZA-registered entity is an export enterprise subject to 5%

special tax regime but did not comply with the condition for fiscal
incentive, all the entity’s income shall be subject to the normal corporate
income tax of 30% under the Tax Code.
END OF EXAMINATION

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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

TAXATION FIRST PRE-BOARD EXAMINATION

1. Which of the following is not a nonresident citizen?

3. Which of the following is not subject to tax as a corporation?

4. First statement: All corporations, whether domestic or foreign, shall be taxed

5. One of the following is not a requisite of a taxable income.

How much gain (loss) shall be recognized from the sale?

7. If an individual performs services for a creditor who in consideration thereof

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10. The term “capital asset” includes:

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How much shall be included in the gross estate?

How much should be deducted from the gross estate?

How much was the vanishing deduction?

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28. Mr. J. Santos donated P500,000 to AST Foundation, a philanthropic organization.

Second statement: The status of a “VAT-registered person” as a VAT-registered

32. Which statement is incorrect? VAT on importation of goods:

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How much is the percentage tax due and payable?

39. The following data were provided by an air carrier:

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How much is the amusement tax payable?

41. Will she qualify to be taxed at 8%?

42. How much is her taxable income for the year?

43. How much is the income tax due?

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46. How much is net taxable income from related activities?

48. What corporate tax rate will it be subject to?

49. How much is the income tax payable?

50. How much is the output VAT, if any?

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66. How much is the common carrier’s tax payable?

67. When shall the Percentage Tax Return be filed?

68. How much is the Value-Added Tax?

69. When shall the Quarterly VAT be filed?

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ANSWERS & SOLUTIONS/CLARIFICATIONS

6. Selling price P500,000

23. Claim against an insolvent person (fully uncollectible P500,000

24. Value to take P 650,000

38. Gross sales P450,000

40. Cash sales P1,360,000

42. Gross sales – Convenience store P800,000.00

43. Taxable income P850,000.00

44. Gross sales – Convenience store P 800,000.00

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45. Effective January 1, 2018 to December 31, 2022

Related activities Unrelated activities Total

51. Conjugal family house P9,000,000

52. Conjugal ordinary deductions (2,300,000 – 300,000) P2,000,000

53. Standard deduction P5,000,000

Exclusive Common Total

56. Sale of canned fruits P2,000,000

57. Gross sales P5,000,000

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