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True or False 1

1. To be zero-rated, all forms of export sales must be paid for in acceptable


foreign currencies.
2. VAT exemption results in total tax relief while zero-rating results in partial tax
relief.
3. Input taxes on zero-rated sales are deductible as part of costs or expenses.
4. Input taxes on zero-rated sales are claimable as tax credit or tax refund.
5. As a rule, effectively zero-rated sales require prior application with the BIR for
zero-rating.
6. Sales to tax-exempt persons will be subject to 12% VAT in default of an
approved application for zero-rating.
7. The foreign currencies must be inwardly remitted and accounted for under
the rules of the BSP to be zero-rated.
8. The 60-day rule on deemed sales of consignment applies with export sales.
9. The sale of gold to the BSP must be paid for in acceptable foreign currencies
to be subject to zero-rating.
10.The sale to a local export oriented enterprise is subject to zero-rating only if
paid for in acceptable foreign currencies.
11.Legal title over exported goods must pass abroad to be subject to zero-rating.
12.Export sales that are not paid for in acceptable foreign currencies are subject
to the 12% VAT.
13.The export sales by non-VAT person are exempt from VAT but are subject to
the 3% percentage tax.
14.When the remittance of the foreign currency denominated sale is not
accounted for under BSP rules, the same shall be considered VAT exempt.
15.An export oriented enterprise is an entity that exports at least 70% of its total
annual production.

True or False 2
1. The direct export by an export trader shall be considered an export sale
subject to 12% VAT.
2. Hk
3. The commission income from export sales by export traders is exempt from
VAT.
4. The sale to a bonded manufacturing warehouse of an export-oriented
enterprise is subject to effective zero-rating.
5. The sales of goods or services to export processing zones are subject to an
automatic zero-rating without the need for a BIR application for effective
zero-rating.
6. The sales t diplomatic missions are exempt from VAT.
7. The sale to BOI-registered manufacturer is subject to zero-rated VAT so
operations is subject to zero-rated VAT.
8. The sale of goods or services to a domestic carrier for its international
operations is subject to zero-rated VAT.

9. The sale of good s or services to a domestic carrier for its domestic operation
is exempt from VAT.
10.The transport of domestic carriers of passengers, baggage and mails from the
Philippines to a foreign country is subject to zero-rated VAT.
11.The transport of passengers by an international carrier from the Philippines to
a foreign country is exempt.
12.The transport of cargoes, baggage or mails from b an international carrier
from the Philippines to a foreign country is subject to zero-rated VAT.
13.The sale to overseas Filipinos of locally manufactured goods is subject to an
effective zero-rating if paid for in acceptable foreign currencies.
14.The sale to the Asian Development Bank is subject to zero-rated VAT.
15.The sale to embassies with VEC and embassy personnel with VEIC is not
subject to the zero-rated VAT.

Multiple Choice- Theory: Part 1


1. Which statement is correct?
a. Zero- rated sales are taxable but will not result in an output VAT.
b. Zero-rated sales are non-taxable; hence, they will not result in an
output VAT.
c. VAT zero-rating and VAT exemption are synonymous concepts.
d. All of these.
2. Which is correct regarding the treatment of input VAT?
a. Input VAT on zero-rated sales is deductible from gross income.
b. Input VAT on zero-rated sales is creditable against output VAT or
refundable.
c. Input VAT on zero-rated sales is both deductible from gross income and
creditable against output VAT.
d. Input VAT on exempt sales is refundable or creditable.
3. Prior BIR application for effective zero-rating is required to which of the
following?
a. Sales to PEZA locators
b. Direct export sales
c. Foreign currency denominated sales
d. Sales to export-oriented enterprises
4. What sale is not subject to zero-rating?
a. Sale to a senior citizen
b. Sale to a registered export trader
c. Sale to a bonded manufacturing warehouse of an export trader
d. Sale to an export processing zone
5. Which is not a constructive export?
a. Direct export to a foreign country
b. Sale to ecozones
c. Sales to diplomatic missions
d. Sales to export-oriented enterprises
6. Which is non-vatable?
a. Sales to a domestic shipping company

b. Sales to an international carrier


c. Sale of goods to a BOI-registered manufacture which exports 80% of its
annual production
d. Sales to senior citizen
7. Statement 1: The export of VAT-exempt goods is subject to zero-rated VAT.
Statement 2: The domestic sale of VAT-exempt goods is subject 12% VAT.
Which is incorrect?
a. Statement 1
c. Both statement
b. Statement 2
d. Neither statement
8. Which is subject to a zero-rated VAT?
a. Sale of fruits and vegetable to an embassy personnel with VEIC
b. Sale of fruits and vegetables to senior citizens
c. Sale of fruits and vegetables to persons with disability
d. Sales of any goods to the government
9. What is the requirement for zero-rating of sales to BOI- registered
enterprises?
a. At least 70% of production must be exported
b. More than 70% of production must be exported
c. 100% of production must be exported
d. Kk
10.What is the requirement for zero-rating of sales to PEZA- registered
enterprises?
a. The goods must be actually imported
b. Export sales must exceed 70% of annual production
c. Production must be 100% exported
d. None
11.What is the requirement for zero-rating of sales to an export-oriented
enterprise?
a. The goods must be actually imported
b. Export sales must exceed 70% of annual production
c. At least 70% of production must be exported
d. Production must be 100% exported
12.Which is not subject to zero-rating?
a. Sale under the internal export program of the government
b. Export of automobiles to a local export-oriented enterprise
c. Sale of goods to an international transport operator
d. Sale to the USAID
13.Which is correct with constructive export?
a. Must be paid for in acceptable foreign currencies
b. Must be actually exported
c. Must be sold to a non-resident
d. None of these
14.Which of the following is not subject to zero-rated VAT?
a. Sales to diplomatic missions
b. Sale of gold to the BSP
c. Export sales paid for in the local currency
d. All of these
15.Prior BIR application for effective zero-rating is not required for
a. Direct export to a foreign country.

b. Sales to tax exempt persons.


c. Sales to international air transport operations.
d. Sales to an export-oriented enterprise.
16.Which of the following may not qualify as export sale?
a. Export by an export producer
b. Export by an export producer to another export producer
c. Sale to an export trader
d. None of these
17.Which is not a constructive export?
a. Sale to bonded manufacturing warehouse of an export-oriented
enterprise
b. Sale to export processing zones
c. Sales to diplomatic missions
d. Sale to a foreign customer abroad
18.A non- large taxpayer shall file the application for effective zero-rating with
the
a. Regional director where the
b. Revenue district officer having jurisdiction with their principal place of
business
c. Audit Information, Tax Exemption and Incentive Division
d. International Tax Affair Division
19.An approved application for effective zero-rating is given
a. A retrospective effect.
b. A prospective effect.
c. A and B
d. No effect.
20.An approved application for zero-rating is valid for
a. One quarterly only.
c. 3 years
b. 2 years
d. 5 years.

Multiple Choice- Theory: Part 2


1. The sale of services to the following cannot qualify for zero-rating
a. Sale to a resident person doing business in the Philippines
b. Sale to a non-resident person engaged in business abroad
c. Sale to a non-resident not engaged in business abroad
d. Sale to a resident export- oriented enterprise
2. Statement 1: Services to non-residents is always subject to zero-rated VAT if
rendered abroad
Statement 2: Services to residents may be subject to zero-rating if paid for in
acceptable foreign
currencies.
Which is incorrect?
a. Statement 1
b. Statement 2
3. Which is correct?

c. Both statement
d. Neither statement

a. All service rendered in the customers territory is subject to the 12%


VAT,
b. Service rendered to an ecozone entity is subject to 12% VAT.
c. Service rendered abroad is subject to 0% VAT.
d. Service rendered abroad is exempt from any business tax.
4. Which is subject to zero-rating
Customer
Place rendered
Amount
a. Resident alien
Philippines

150,000
b. Non-resident foreign corp.
Philippines
$
10,000
c. Non-resident alien
Abroad
P
1,000,000
d. Non-resident citizen
Abroad

2,000,000
5. Which is not required in the zero-rating of services rendered to a nonresident?
a. The services must be performed in the Philippines
b. The non-resident alien must be resident in the Philippines at the time
services were rendered
c. The services must be paid in acceptable foreign currencies
d. The payment must be accounted for under the rules and regulation of
the BSP
6. Sale of services to this entity is subject to the 12% VAT.
a. Development Bank of the Philippines
b. International Rice Research Institute
c. Philippines National Red Cross
d. Philippines Amusement and Gaming Corporation
7. Which is not subject to zero-rating?
a. Services to an export-oriented enterprise
b. Sale of services to a BOI-registered enterprise
c. Sale of services to PEZA locators
d. Sale of services to ambassies with VEC
8. Sales to which of the following is not subject to zero-rated VAT?
a. Philippines Amusement and Gaming Corporation
b. Philippines National Red Cross
c. Ecozone entities
d. Government agencies
9. Which is not subject to zero-rating?
a. Sale to a domestic air carrier on its international operations
b. Sale to a domestic sea carrier on its domestic operations
c. Sale to an international air carrier
d. Sale to an international sea carrier
10.Which is incorrect with effectively zero-rated sales?
a. The sale must be rendered in the Philippines
b. The sale must be rendered to a person with indirect tax exemption
c. The sale need not be paid for in acceptable foreign currencies
d. The sale must be made by a VAT-exempt person

11.Which is incorrect with foreign currency denominated sales?


a. The goods must be destined for consumption abroad
b. Title to the goods must pass to the buyer outside Philippine territory
c. The sale must be paid for in acceptable foreign currency
d. The remittance of the proceeds of the sale must be accounted for
under Central bank rules
12.Which is subject to zero-rating?
a. Outgoing transport of passengers by an international carrier
b. Outgoing transport of mails, cargoes or baggage by an international
carrier
c. Outgoing transport of passengers, cargoes, excess baggage or mails
by a domestic carrier
d. Incoming transport of passengers, cargoes, excess baggage or mails
by a domestic carrier
13.Which of these services is subject to zero-rating?
a. Incoming transport by an international sea carrier
b. Incoming transport by a domestic sea carrier
c. Incoming transport by a domestic air carrier
d. None of these
14.Which of these entities is subject to zero-rating on the sale of renewable
sources of energy?
a. Generation power plant
b. Hydro power plant
c. Solar power plant
d. Coal power plant
15.The sale of generated power from which of the following is not subject to a
zero-rating treatment?
a. Geothermal power plant
b. Hydro power plant
c. Solar power plant
d. Coal power plants
Multiple Choice Problem 1
1. A business payer reported the following sale during a period:
Domestic sales
Deemed sales
Export sales
Total

P
P

200,000
100,000
300,000
600,000

Compute the zero-rated sales assuming the seller is a VAT taxpayer and a
non-VAT taxpayer, respectively?
a. P 600,000; P 0
c. P 600,000; P 300,000
b. P 300,000; P 0
d. P 300,000; P 300,000
2. An export trader purchased and sold an equipment. The detail of the
purchase and sale were as follows:
Export sales
P
400,000

Purchases
Input VAT

200,000
12,000

Compute the gross income for taxation purposes.


a. P 188,000
c. P 212,000
b. P 200,000
d. P 224,000
3. For a taxpayer subject to a 30% tax rate, compute the tax benefit of a
P60,000 input VAT deduction and a P40,000 input VAT credit, respectively.
a. P 60,000; P 40,000
c. P 60,000; P 12,000
b. P 18,000; P 40,000
d. P 18,000; P12,000
4. A Philippine Company exported goods for $140,000 to a non-resident
customer. The payment; however, was not inwardly remitted. The same was
remitted to its home office abroad.
Which is correct?
a. The sale is a zero-rated sale.
b. The sale is an exempt sale.
c. The sale is subject to 12% VAT.
d. The sale is subject to 3% percentage tax.
5. A VAT-registered taxpayer made the following
Sales destination
China
Malaysia
Hong Kong
Philippines
The applicable exchange

Terms
Payment
FOB destination
$ 10,000
FOB destination
P 450,000
FOB shipping point
800,000
FOB shipping point
P 300,000
rate to the Peso was $1:P42 and 1:P0.50.

Compute the total zero-rated sales.


a. P 420,000
b. P 820,000
6. Compute the output VAT.
a. P 0
b. P 36,000
7. An exporter entered into the following
Type of transaction
portion
Export sales
Export sales
Consignment abroad

c. P 1,270,000
d. P 1,570,000
c. P 54,000
d. P 90,000
transaction during the months:
Amount

Unsold

P 1,000,000
$ 100,000
$
50,000

40%

Forex rate = $1: P42.50


Compute the zero-rated sales.
a. P 0
c. P 6,100,000
b. P 4,250,000
d, P8,525,000
8. Export Co. made the following export and foreign consignments:
Type of transaction

Amount

Exports sales 1
Exports sales 2
Consignment 1
Consignment 2

P 1,000,000
$
80,000
$
50,000
$
10,000

Export sales pertain to goods owned by another entity which Export Co. was
granted 10% export commission. Consignment 1 was sold by foreign
consignees during the month. Consignment 2 remained unsold 75 days as of
the end of the current month. The applicable exchange rate is P43: $1.
Compute the total zero-rated sales or receipts.
a. P 2,494,000
c. P 3,494,000
b. P 2,924,000
d. P 5,590,000
9. A PEZA locators sold scraps to a domestic business for $ 12,000. Which is
correct?
a. The sale is subject to zero-rated VAT.
b. The sale is subject to the regular 12% VAT.
c. The sale is exempt from VAT.
d. The sale is subject to the VAT on importation to the domestic business.
10.Which is an export-oriented enterprise in 2015?

Exporter
sale
a. ABC Co.
300M
b. BCD Co.
350M
c. CDE Co.
126M
d. DEF Co.

2014
Production
Export cost
cost

Export cost

2015
Production

of sale

cost

of

P 200M

P 120M

P 400M

P 400M

P 280M

P 500M

P 150M

P 108M

P 180M

P 250M

P 125M

P 300M

P 300M

Multiple Choice Problem 2


1. Johnny Company, a maintenance contractor, had the following receipts from
the following clients in June 2015:
Receipts from Development Bank of the Philippines
Receipts from Oceania, an international carrier
Receipts from International Rice Research Institute

P 1,000,000
1,200,000
800,000

Compute the total zero-rated sales or receipts?


a. P 0
c. P 2,000,000
b. P 800,000
d. P 3,000,000
2. A BSP assay report on a sale of gold nugget discloses the following:

Gold content (850 x P1,800/gram)


Silver content (250 x P38/gram)
Total

P 1,530,000
9,500
P 1,539,000

What is the total vatable sales and the output VAT?


a. P 1,539,500; P 184,740
b. P 1,539,500; P 1,140
c. P 9,500; P 1,140
d. P 1,530,000; P 183,600
3. A non-VAT taxpayer had the following sales during the month:
Direct export sales
Domestic sales

2,000
P
250,000

Assuming the exchange rate is P43.20: $1, compute the zero-rated sales,
a. P 0
c. P 250,000
b. P 86,400
d. P 336,400
4. Carefree, security service provider had the following receipt during the
month:
Receipt from clients inside PEZA
P 3,000,000
Receipt from clients in the customs territory:
- From the government agencies and GOCCs
1,000,000
- From the Asian Development Bank
1,200,000
- From non-profit clients
1,500,000
- From private clients
2,000,000
What is the total amount of zero-rated sales?
a. P 3,000,000
c. P 4,200,000
b. P4,000,000
d. P 5,200,000
5. A VAT-registered service provider had the following receipt from services
rendered in the Philippines in February 2015:
Paid for in foreign currencies (Peso equivalent)
Services rendered to non-residents
Services rendered to residents

500,000
400,000

Paid for in the local currency


Services rendered to non-residents
Services rendered to residents

800,000
1,200,000

What is the total zero-rated sale?


a. P 400,000
c. P 900,000
b. P 500,000
d. P 1,300,000
6. Legazpi Corporation had the following sales in March 2015:
Sale to an export-oriented enterprise
Sale to a BOI-registered enterprise

P 2,000,000
3,000,000

40% of the sale to the export-oriented enterprise is eventually exported. The


sale to the BOI enterprise is eventually exported.
Compute the total effectively zero-rated sales.
a. P 2,000,000
c. P 3,800,000
b. P 3,000,000
d. P 5,000,000
7. A domestic enterprise made the following sales:
Sale to diplomatic missions
Sale to an ecozone-registered enterprise

P
$

2,000,000
50,000

Conversion rate = P42: $1


Compute the zero-rated sales.
a. P 0
c. P 2,100,000
b. P 2,000,000
d. P 4,100,000
8. DrimPhil Enterprises, a VAT taxpayer, sold the following to various exporters
during the month:
Sale to BOI-registered entity with domestic sales
P
2,000,000
Sale to BOI-registered entity with no domestic sales
2,500,000
Sale to export-oriented enterprise (with 60% export last year)
1,000,000
Sale to export-oriented enterprise (with 90% export last year)
1,500,000
Total
P
7,000,000
Compute the zero-rated sales.
a. P 1,500,000
c. P 4,000,000
b. P 2,500,000
d. P 5,000,000
9. A PEZA locators made the following sales to entities within the custom
territories:
Sale of goods to a Philippine firm
Sale of scrap materials to a Philippine firm

P
$

4,000,000
100,000

Forex rate: P43.00: $1


What is the zero-rated sales
a. P 0
c. P 4,300,000
b. P 4,000,000
d. P 8,300,000
10.An electric cooperative sold the following during the month:
Sales of electricity from renewable source of energy
Sale of electricity generated from coal and natural gas
1,000,000
What is the zero-rated sale of the electric cooperative?
a. P 0
c. P 2,000,000

2,000,000

b. P 1,000,000

d. P 3,000,000