Taxation Material 4

Philippine Taxation Questions
QUALIFYING ROUND
EASY ROUND - Question 1
Which of the following statement/s is/are correct?
I. A member of the private sector participating in socialized housing projects is exempt from Capital
Gains Tax (CGT) on the transfer of raw lands used for such projects.
II. The 12% VAT imposed on all sales of goods and services, including those sales to government,
shall be assumed by the Philippine Government or its executing agencies pursuant to the Exchange
of Notes.
III. Input taxes arising from transactions attributable to activities unrelated to the OECF-funded project
shall be allowed or be credited against the output tax on gross receipts from the project.
IV. A person with disability availing promotional fares for domestic air travel today shall be entitled to
20% discount and VAT exemption.
ANSWER: I and II
Reference:
 I and II are correct pursuant to BIR Ruling No. 414-16 and RMC No. 08-17, respectively.
 III is wrong since RMC No. 08-17 specifically provides that in no case shall input taxes arising from
transactions attributable to activities unrelated to the OECF-funded project shall be allowed or be
credited against the output tax on gross receipts from the project.
 Pursuant to RMC No. 135-2016 as implemented by Republic Act No. 10754, Section 12 of Rule IV
provides that in the purchase of goods and services which are on promotional discount, persons with
disability can avail of the offered discount or the 20% discount provided herein, whichever is higher and
more favorable.

MSG Company is a VAT-registered entity engaged in grocery and supermarket business. Its affiliate, ATM
Company is also a VAT-registered entity and is a manufacturer of food products. ATM Company supplies its
manufactured food products to MSG Company for sale to end-users. Based on their agreement, ATM
Company is under obligation to pay MSG Company service fees for the display of ATM Company’s food
products in MSG Company’s store premises.
Assuming ATM Company sold to MSG Company food products worth PhP 133,190.50 per month and issued
sales invoice for the same amount. On settlement date (which happens at the end of each month), MSG
Company paid PhP 111,690.50 only (net of PhP 21,500.00 service fees pursuant to the said agreement).
In the above transaction, how much will MSG Company report in BIR Form No. 2550Q?
ANSWER: PhP 399,571.50
Reference:
 It was emphasized in RMC No. 61-2016 that in all cases, the principle of "substance over form"
shall apply in delineating a transaction, hence, service fee disguised as discounts shall be
considered as revenue on the part of payor of the income payment notwithstanding the "netting"
arrangement or agreement between the payor and the payee. Hence, for VAT purposes, the entire
consideration of the sale of food products supported by a sales invoice shall be reported in the
month such invoice was issued.
 Note further that RMC No. 127-16 lifted the suspension of RMC No. 61-2016.
I. Income payments made to GPPs for its professional services are not subject to income tax and,
consequently, to withholding tax.
II. Income payments to companies which sustained net operating losses during the immediately preceding
three tax years are not exempt from EWT.
III. The obligation of the payor to deduct and withhold the tax arises at the time an income payment is paid.
IV. The obligation to withhold is imposed upon the buyer-payor of income although the burden of tax is
really upon the seller-income earner, hence, unjustifiable refusal of the latter to be subjected to
withholding shall be a ground for the mandatory audit of his income tax liabilities (including withholding
tax) upon verified complaint of the buyer-payor.
A. Only a statement is incorrect

B. Only a statement is correct
C. All of the statements are incorrect
D. All of the statements are correct
E. None of the foregoing choices
ANSWER: E.
 Statements I and IV are correct.

 Statement II is wrong because BIR Ruling No. 84-99 dated June 22, 1999 provides that income
payments to companies which sustained net operating losses during the immediately preceding two tax
years are not exempt from EWT.
 Statement III is wrong because it was The obligation of the payor to deduct and withhold the tax arises
at the time an income payment is paid, or payable, or accrued or recorded as an expense or asset,
whichever is applicable, in the payor’s books, whichever comes first, pursuant to Section 2.57.4 of RR
No. 2-98, as amended by Section 4 of RR No. 12-2001.

AST Corporation has the following data for the years 2016 and 2017:
2016:
Gross income PhP240,000
Business expenses 180,000
Capital loss (capital asset was acquired on January 15, 2016 50,000
and was sold on March 15, 2016)
Capital gain (capital asset was acquired on January 15, 2015 30,000
and was sold on March 31, 2016)
2017:
Gross income PhP 500,000

Business expenses 400,000
Capital gain (capital asset held for 12 months) 60,000
Capital loss (capital asset held for more than 20,000
12 months)
How much is the taxable net income in 2016 and 2017?
2016 2017
A. PhP 60,000 PhP 140,000
B. 60,000 120,000
C. 10,000 100,000
D. 10,000 90,000
ANSWER: A.
Solution:
2016
Gross income P 240,000
Other income:
Capital gain (P30,000 X 100%) P 30,000
Capital loss (P50,000 X 100%) ( 50,000 )
Net capital loss ( 20,000 ) -
Total gross income 240,000
Less: Business expense ( 180,000 )
Taxable net income P 60,000
2017
Other income:
Capital gain (P60,000 X 100%) P 60,000
Capital loss (P20,000 X 100%) ( 20,000 )
Net capital gain 40,000
Total gross income 540,000
Less: Business expense ( 400,000 )
Taxable net income P 140,000
GSM Corporation assigned Mr. Bantigue, one of its employees, in the Makati head office. The Company
provided for the residential house of the manager paying a monthly condominium rental and condominium
dues amounting to PhP 34,000 and PhP 6,000, respectively. In addition, one of the cars which was acquired
by the Company at a cost of PhP 1,228,629 was allowed as service vehicle of Mr. Bantigue. Its book value
during the year amounted to PhP 634,000 with a remaining useful life of 6 years.
Compute for the deductible expense from the gross income of GSM Corporation in CY 2016.
Solution:
Condominium rentals::
Grossed-up monetary value PhP 300,000
Tax Rate 32%
Fringe Benefit Tax PhP 96,000
Fringe Benefit Expense 408,000
Condominium dues:
Grossed-up monetary value PhP 105,882.35
Tax Rate 32%
Fringe Benefit Tax 33,882.35
Fringe Benefit Expense 72,000
Car:
Grossed-up monetary value PhP 180,680.74
Tax Rate 32%
Fringe Benefit Tax 57,817.84
Fringe Benefit Expense 122,862.90
Deductible expense PhP 790,563.09
Which of the following is/are considered as priority cases of BIR’s issue-based audit/investigation of VAT
liabilities of VAT taxpayers for the taxable quarters of CY 2015 and thereafter?
I. Taxpayers with VAT returns reflecting erroneous input tax carry-over.

II. Taxpayers with zero-rated and/or exempt sales due to availment of tax incentives or exemptions.
III. Taxpayers whose gross sales/receipts per income tax returns are greater than gross sales/receipts
declared per VAT returns.
IV. Claims for issuance of Tax Credit Certificates/refunds.
V. VAT returns selected for audit by the National Investigation Division under the Enforcement and
Advocacy Services and by the Regional Investigation Division of the Revenue Regional Offices.
ANSWER: II and III only
Reference:
 RMO No. 59-2016
 Statement I is a mandatory case while Statements IV and V are exceptions.

Which of the following discount/s may be deductible from gross selling price for VAT purposes?
I. Prompt payment discount

II. 5% discount, if paid within 7 days after delivery
III. Discounts for meeting quota
IV. Trade discount granted at the time of sale and stated on the face of the invoice
V. Bulk purchase orders
ANSWER: IV only
Reference:
 Sales Discount - may only be deducted from gross sales or receipts within the same month/quarter it
was given provided:
a. It is determined and granted at the time of sale

b. The discount is expressly indicated in the invoice
c. Amount thereof should form part of gross sales duly recorded in the books
d. The granting of the discount does not depend on the happening of a future event.

Ms. MinChin sold a personal property, a capital asset, for PhP600,000 on March 27, 2016 payable as follows:
Down payment PhP 100,000

Installment due, 2017 200,000
Installment due, 2018 200,000
The property was purchased on May 19, 2015 at a cost of PhP270,000. It was mortgaged with a balance of
PhP100,000, which was to be assumed by the buyer. The commission on the sale was PhP30,000.
How much was the returnable capital gain of Ms. Chin in 2016?
ANSWER: PhP 60,000
Solution:
Selling price P 600,000

Less: Cost P 270,000
Commission 30,000 ( 300,000 )
Capital gain (short term) P 300,000
2016 – P300,000/P500,000 X P100,000 P 60,000
a.) Selling price
Cash received P 100,000
FMV, property received -
Installment obligations 400,000
Mortgage assumed 100,000
b.) Contract price
Less: Mortgage assumed ( 100,000 )
Balance 500,000
Add: Excess of mortgage assumed over cost -
Contract price P 500,000
c.) Initial payments
Downpayment P 100,000
Add: Installments, year of sale -
Excess of mortgage assumed over cost -
Initial payments P 100,000
d.) Initial payments over selling price (P100,000/P600,000) = 16.67%

Filipinos exercising the option to be taxed at fifteen percent (15%) preferential rate for occupying the same
managerial or technical position as that of an alien employed in an ROHQ or RHQ must meet which of the
following requirements?
I. The employee must occupy a managerial position or technical position or actually exercising such
managerial or technical functions pertaining to said position.
II. The employee must have received or is due to receive under a contract of employment, a gross
annual taxable compensation of at least PhP 975,000.
III. The Filipino managerial or technical employee must be working for the ROHQ as a consultant or
contractual personnel.
ANSWER: II only
Reference:
 RR No. 11-2010

Which of the following transaction/s shall be subject to VAT?
I. Corporation’s use of its own lumber produced to repair its administrative building
II. Donation of real properties by Company A which is engaged in real estates to a religious
corporation
III. Consignment of goods the actual sale of which is not made within 60 days following the date such
goods were manufactured
IV. 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
ANSWER: II and IV
Reference:
 VAT Ruling No. 049-90 - The lumber of your own manufacture and used to repair the Corporation's
administration building is not a "deemed sale" transaction, since the Corporation's use and
consumption thereof is in the course of its business, (i.e., to repair its administration building). Hence,
this is not subject to VAT.
 Consignment of goods the actual sale of which is not made within 60 days following the date such
goods were consigned
AVERAGE ROUND – Question 1

Please refer to the following assumptions:
A. Ow Co., an advertiser shall pay PhP 100,000 to the Denver Co., the media supplier, inclusive of 12%
VAT;
B. Denver Co. is a TV and radio block timer selling TV and radio commercial spot and payments to it are
subject to the 2% creditable withholding tax; and
C. The advertising agency, G Co., will receive a commission of 15% of the advertising contract price,
inclusive of 12% VAT, from the media supplier.
Upon receipt of income payment, Denver Co. issued VAT Official Receipt (OR) to Ow Co.. Meanwhile, G Co.
issued VAT OR to Denver Co. for the amount of commission received. Based on the foregoing, how much is
VAT due from Denver Co. on the particular transaction?
Reference:
 RMC No. 63-2012
Entries in the books of Denver Co.:
Billing to Client-Advertiser for the Media placement

Accounts Receivable-Advertiser 100,000
Income/Fees-Media Placement 89,285.71
Deferred VAT Payable 10,714.29
Receipt of Income Payment from Advertiser

Cash 98,214.29
Creditable IT Withheld 1,785.71
Accounts Receivable-Advertiser 100,000
Deferred VAT Payable 10,714.29
Output VAT 10,714.29
Receipt of Billing from Ad Agency for Commission (inclusive of VAT)

Commissions-advertising (PhP 15,000/1.12) 13,392.86
Deferred Input VAT 1,607.14
Accounts Payable – Ad Agency 15,000
Payment for Commission to Ad Agency

Accounts Payable – Ad Agency 15,000
Creditable IT Withheld 267.86
Cash 14,732.14
Input VAT 1,607.14
Deferred Input VAT 1,607.14
VAT-registered public works contractor has the following data on services rendered in the Philippines for the
first quarter of the current year (VAT-exclusive):
Contract price (foreign clients doing business

outside the Philippines) ($1:P50) $ 100,000
Contract price (private sector clients) P 5,000,000
Contract price (Government) 3,000,000
Collections from foreign clients $ 100,000
Collections from Government contracts 1,000,000
Collections from private sector clients 2,000,000
Purchases during the quarter
(used in private sector clients contracts) 800,000
Payments for services of a VAT-registered sub-
contractor (used in Government contracts) 400,000
Purchases during the quarter (used in
private sector clients and
government contracts only) 300,000
How much is the VAT payable for the quarter using 12% VAT?
ANSWER: P 120,000
Solution:
Government Private
Output tax P 120,000 P 240,000
Less: Input taxes
Standard input tax ( 70,000) ( - )
Purchases (directly attributed to
private contracts) ( - ) ( 96,000)
Purchases (ratably allocated to
private contracts) ( - ) ( 24,000)
VAT payable P 50,000 P 120,000
Less: Withholding VAT ( 50,000) ( - )
Tax payable P - P 120,000
Collections from foreign clients (P 5,000,000 X 0%) P -
Collections from private clients (P 2,000,000 X 12%) 240,000
Output tax on private client contracts P 240,000
Collections from Government (P 1,000,000 X 12%) P 120,000
Standard input tax (P 1,000,000 X 7%) P 70,000
Withholding VAT (P 1,000,000 X 5%) P 50,000
Input tax on purchases ratably attributed to private
clients contracts(P 2,000,000/P 3,000,000 X P 36,000) P 24,000

Which of the following information/s is/are required in the preparation of Summary List of Importations (SLI)?
I. Date of payment of landed cost

II. Dutiable value
III. Date of importation
IV. Date of VAT payment
V. Country of origin
ANSWER: II, III, IV, V
Reference:
 RR No. 01-2012

Who are not qualified for substituted filing of ITR?
I. Individuals deriving compensation from two or more employers concurrently or successively at

anytime during the taxable year
II. Employees whose monthly gross compensation income does not exceed P5,000 or the statutory
minimum wage, whichever is higher, and opted for non-withholding of tax on said income
III. Employees deriving compensation income, regardless of the amount, whether from a single or
several employers during the calendar year, the income tax of which has not been withheld
correctly (i.e., tax due is not equal to the tax withheld) resulting to collectible or refundable return
IV. Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation
income, or compensation income and other non-business, nonprofession-related income
ANSWER: I, III and IV
Reference:
 RMC No. 01-2003 and RR No. 10-08

Consider the following:
 Amount of tax due is PhP 923,410

 No return was filed for CY 2015.
 A trouble ticket was secured.
 Filed the annual income tax return and paid the tax thereon in full on April 30, 2016.
 Received an assessment notice and demand from BIR to pay a deficiency tax of PhP 700,298.
 Date of Final Decision on Disputed Assessment (FDDA) is October 15, 2016.
Assuming that the tax was paid on March 31, 2017, the total amount payable excluding compromise penalty is:
(Use 365 days)
ANSWER: PhP 1,447,351.25
Solution:
Deficiency Tax PhP 700,298.00

Surcharge for a fraudulent return 350,149.00
Interest (700,298x20%x183/365) 70,221.66
Amount due as of October 15, 2016 PhP1,120,668.66
Surcharge for late payment (1,120,668.66x20%) 224,133.73
Interest (1,120,668.66x20%x167/365) 102,548.86
Amount due as of March 31, 2017 PhP1,447,351.25

Which of the following is/are correct with regard incentives of BOI-registered enterprises?
I. For the first five (5) years from registration a registered enterprise shall be allowed an additional
deduction from the taxable income of fifty percent (50%) of the wages corresponding to the
increment in the number of direct labor for skilled and unskilled workers if the project meets the
prescribed ratio of capital equipment to number of workers set by the Board.
II. The provision of law to the contrary notwithstanding, exports by a registered enterprise of its non-
traditional export products shall be exempted from any wharfage dues, and any export tax, duty
impost and fee.
III. Registered export-oriented enterprises shall have access to the utilization of the bonded
warehousing system in all areas required by the project subject to such guidelines as may be
issued by the Board upon prior consultation with the Bureau of Customs.
IV. For six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer
firms, new registered firms shall be fully exempt from income taxes levied by the national
government.
ANSWER: All of the above
Reference:
 Article 39, Title III of Executive Order No. 226

How much advance payment of VAT is required in order to release a refined sugar from the refinery?
A. None, sale of refined sugar is always exempt from VAT irrespective of the seller and buyer pursuant to
Sec. 109 (A) of the Tax Code, as amended.
B. 12% of PhP 1,000 per 50 kg
C. The VAT due or payable in the recently concluded taxable year
D. 12% of PhP 1,400 per 50 kg
ANSWER: D.
Reference:
 RR No. 06-15

Which of the following individuals shall be subjected either to 10% or 15% EWT depending on the current
year’s gross income?
I. G, a director of GSM Company but not an employee thereof

II. James Yap, a PBA player
III. Tyke Wando, an instructor of martial arts
IV. Paul Soriano, a director of Kid Kulafu
ANSWER: I, II, III, IV
References:
 Section 2.57.2 (A) of RR 02-1998
 RMC No. 34-2008
 BIR Ruling (DA-499-06) dated 15 August 2006
 RMC No. 72-2004

Kapatidz Corporation, domestic, had the following selected data in the preceding year:
Cash Sales P 3,390,000

Cost of sales 1,400,000
Operating Expenses 900,000
Dividend received from adomestic corporation 50,000
Proceeds from sale of equipment 150,000
Assessed value of land 500,000
Assessed value of building 700,000
Assessed value ofmachinery 1,500,000
How much would be the total basic and additional community taxes in the current year?
ANSWER: PhP 3,016
Solution:
Basic community tax P 500

Additional community tax
Cash sales (3,390,000/5,000) x 2 P 1,356
Dividend (50,000/5,000) x 2 20
Proceeds from sale of equipment
(150,000/5,000) x 2 60
Assessed value, land
(500,000/5,000) x 2 200
Assessed value, building
(700,000/5,000) x 2 280
Assessed value, machinery
(1,500,000/5,000) x 2 600 2,516
Total community tax P 3,016

The taxpayer did not file his income tax return for the calendar year 2015 which was due for filing on April 15 of
the following taxable year. He was notified by the BIR of his failure to file the tax return, for which reason, he
filed his tax return and paid the tax, only after the said notice, on June 30, 2017. The tax due per return was
PhP 543,112.
How much is the total amount due excluding suggested compromise for late filing and late payment of the tax?
Solution:
Income tax due per return P 543,112.00

Add: Surcharge for willful neglect to file
the return and late payment of
tax (P543,112 X 50%) P 81,466.80
Interest In Delinquency 131,190.06 212,656.86
Total Amount Due P 755,768.86
Computation Of Interest
April 15, 2016 to April 15, 2017 (1 Year)
(P543,112 X 20%) P 108,622.40
April 15, 2017 to June 15, 2017 (2 Months)
(P543,112 X 20% X 2/12) 18,103.73
June 15, 2017 to June 30, 2017 (15 Days)
(P543,112 X 20% X 15/365) 4,463.93
Total P 131,190.06
DIFFICULT ROUND – Question 1

Which of the following criteria must a Company satisfy to become one of the top 20,000 private corporations
determined and notified by the BIR?
I. VAT payment or payable, whichever is higher, of at least PhP100,000 for the current year
II. Annual income tax due of at least PhP200,000 for the current year
III. Classified and duly notified by the Commissioner as a large taxpayer under RR No. 01-98, as
amended
IV. Gross sales of PhP10,000,000 and above for the current year
V. Gross purchases of PhP5,000,000 and above for the current year
ANSWER: III only
Reference:
 RR No. 14-2008

Which of the following is/are incorrect with regard the Personal Equity and Retirement Account (PERA)?
I. The aggregate maximum qualified PERA contribution in one calendar year for an unmarried Filipino
citizen is PhP 200,000.
II. The employer can claim the actual amount of its qualified employer’s contribution as a deduction
from its gross income regardless of the amount contributed.
III. The qualified employer’s contribution to its employee’s PERA shall not form part of the employee’s
taxable gross income but shall be subject to either withholding tax on compensation or benefits
should the employer opt to claim its contribution.
IV. In case of early withdrawals not falling under any of the circumstances under Section 10 (B) of RR
No. 17-2011, the Contributor shall pay the withholding tax on compensation/final withholding tax on
fringe benefits due on the qualified employer’s contribution.
ANSWER: I, II, III, IV
Reference:
 RR No. 17-2011 and RR No. 10-2016

A single taxpayer has the following data for the year 2016 (in thousands):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Gross compensation income PhP 40 PhP 40 PhP 40 PhP 40
Gross receipts 600 400 280 600
Cost of services 100 100 80 200
Business expenses (total 100
First Second 150
Third Fourth 100 200
itemized) Quarter Quarter Quarter Quarter
Share, business partnership 10 0 10 0
Share, GPP, gross of 10% 20 20 20 20
withholding tax
Yield on deposit substitute P 40 P 405 P 40 5 40
P 5 5
How much is the tax payable for the entire year assuming the taxpayer uses the more beneficial method of
deduction?
ANSWER: PhP87,100
Solution:
Itemized Deductions
Quarterly Declarations (Returns)
First Q Second Q Third Q
Gross receipts P 600,000 P 400,000 P 280,000
Less: Cost of services ( 100,000) ( 100,000) ( 80,000 )
Gross income 500,000 300,000 200,000
Add: Share in net income
of GPP 20,000 20,000 20,000
Total gross income 520,000 320,000 220,000
Less: Deductions ( 100,000) ( 150,000) ( 100,000 )
Taxable income, this quarter 420,000 170,000 120,000
Add: Taxable income,
previous quarters - 420,000 590,000
Taxable income to date P 420,000 P 590,000 P 710,000
Tax due Section 24 (A) P 101,000 P153,800 P 192,200

Less: Tax credits/payments
Prior year’s excess tax credit ( - ) ( - ) ( - )
Tax payments, previous Qs ( - ) ( 99,000) ( 149,800 )
Creditable tax withheld,
previous quarters ( - ) ( 2,000) ( 4,000 )
this quarter ( 2,000) ( 2,000) ( 2,000 )
Tax payable (overpayment) P 99,000 P 50,800 P 36,400
Annual Return
Gross taxable compensation income P 160,000
Less: Deductions
Premium paid on health and/or
hospitalization insurance P -
Basic personal exemption 50,000
Additional exemption - 50,000
TCI (excess of deductions over GTCI) P 110,000
Gross receipts P 1,880,000
Less: Cost of services ( 480,000 )
Gross taxable business/
professional income P 1,400,000
Add: Other taxable income 80,000
Total P 1,480,000
Less: Deductions ( 550,000 )
Net income P 930,000
Less: Excess of deductions over GTCI -
Taxable business income 930,000
Total taxable income P 1,040,000
Tax due Section 24 (A) P 297,800
Prior year’s excess credits ( - )
Tax payments, first 3 quarters ( 186,200 )
Creditable tax withheld, first 3 Qs ( 6,000 )
Creditable tax withheld, fourth quarter ( 2,000 )
Tax withheld on salary (on TCI of P110,000) ( 16,500 )
Foreign tax credits ( - )
Tax payable (overpayment) P 87,100
Optional Standard Deduction (OSD)

Gross receipts (GR) P 600,000 P 400,000 P 280,000
Less: OSD
(40% X Total GR) 240,000 160,000112,000
Gross income 360,000 240,000 168,000
Add: Share in net income
of GPP 20,000 20,000 20,000
Taxable income this quarter 380,000 260,000 188,000
Taxable income to date P 380,000 P 640,000 P 828,000
Tax due Section 24 (A) P 89,000 P169,800 P 229,960

Prior year’s excess tax credit ( - ) ( - ) ( - )
Tax payments, previous Qs ( - ) ( 87,000 ) ( 165,800 )
this quarter ( 2,000) ( 2,000) ( 2,000 )
Tax payable P 87,000 P 78,800 P 58,160
Annual Return
Gross taxable compensation income P 160,000
Less: Deductions
Premium paid on health and/or
hospitalization insurance P -
Basic personal exemption 50,000
Additional exemption - 50,000
TCI (excess of deductions over GTCI) 110,000
Gross receipts P 1,880,000
Less: OSD (40% X P1,880,000) ( 752,000 )
Net 1,128,000
Add: Other taxable income 80,000
Net income P 1,208,000
Less: Excess of deductions over GTCI -
Taxable business income 1,208,000
Total taxable income P 1,318,000
Tax due Section 24 (A) P 386,760

Creditable tax withheld, first 3 Qs ( 6,000 )
Creditable tax withheld, fourth quarter ( 2,000 )
Tax withheld on salary (on TCI of P110,000) ( 16,500 )
Foreign tax credits ( - )
Tax payable P 138,300

Which of the following is/are true with regard final withholding taxes (FWT)?
I. Payee may be domestic, resident foreign or non-resident foreign

II. Payee is NOT required to file an ITR for the particular income subjected to FWT
III. Creditable against payee’s income tax liabilities
IV. Payee must be resident of the Philippines (except in case of payments to NRAETB in the
Philippines)
V. Payee is required to file an income tax for the particular income subjected to EWT
ANSWER: I and II only
Reference:
 RR No. 02-1998
 Note that Statements III to V pertain to expanded withholding tax (EWT).

Don Tiburshaw established two trust for the benefit of his 10 year old daughter, Polla. During CY 2015, Trust 1
and Trust 2 started to earn income through the following properties:
Trust 1 – Car (leased for six months earning an average income of PhP 25,000 per month)
Trust 2 – Condominium unit (leased for one year, received 2 months advance, 1 month refundable deposit on
July 1, 2015, monthly rentals amounting to PhP 30,000 was then paid every end of the month starting July 31,
2015)
Moreover, Trust 1 and Trust 2 incurred ordinary trust expenses amounting to PhP 50,000 and PhP 80,000,
respectively. Both trusts also distributed income amounting to PhP 20,000 each to Polla during the year.
Based on the foregoing, how much will be the income tax liabilities of Trust 1 and Trust 2 for CY 2015,
respectively?
ANSWER: PhP 13,636 and PhP 23,864
Reference:
• Section 60 of the 1997 Tax Code, as amended
Where, in the case of two or more trusts, the creator of the trust in each instance is the same person,
and the beneficiary in each instance is the same, the taxable income of all the trusts shall be
consolidated and the tax provided in this Section computed on such consolidated income, and such
proportion of said tax shall be assessed and collected from each trustee which the taxable income of
the trust administered by him bears to the consolidated income of the several trusts.
Trust 1 Trust 2 Consolidated

Gross income PhP 150,000 PhP 240,000 PhP 390,000
Less: Ordinary trust expenses 50,000 80,000 130,000
Income distribution 20,000 20,000 40,000
Taxable income before exemption PhP 80,000 PhP 140,000 PhP 220,000
Less: Exemption 20,000
Consolidated taxable income PhP 200,000
Less: 140,000
Excess over PhP 140,000 PhP 60,000
Multiply: Tax rate on excess over
PhP 140,000 25%
Tax on excess over PhP 140,000 PhP 15,000
Add: Tax on first PhP 140,000 22,500
Consolidated income tax due PhP 37,500
Allocation of consolidated income tax due:
Trust 1 – PhP 37,500 * (PhP 80,000/PhP 220,000) = PhP 13,636

Trust 2 – PhP 37,500 * (PhP 140,000/PhP 220,000) = PhP 23,864

The following data were provided by Air America, international carrier doing business in the Philippines:
Gross receipts, sales of tickets in the Philippines

(Manila to Taipei flight) PhP 8,000,000
Gross receipts, sales of tickets in Japan
(Manila to Tokyo flight) 5,000,000
Gross receipts, sales of tickets in Japan
(Tokyo to Manila flight) 3,000,000
(Manila to Hongkong flight), passengers were
endorsed to another international airline which
airlifted them from Manila 1,000,000
(Manila to Los Angeles flight), passengers were
transshipped in Tokyo to Los Angeles by another
airline (flight from Manila to Tokyo – 5 hours;
flight from Tokyo to Los Angeles – 10 hours) 4,500,000
Expenses, Philippines 4,000,000
How much was the Philippine income tax due and payable?
ANSWER: PhP 387,500
Solution:
Gross receipts, Philippines (Manila to Taipei) P 8,000,000

Gross receipts, Japan (Manila to Tokyo) 5,000,000
Gross receipts, Philippines (Manila to Hongkong) 1,000,000
Gross receipts, Philippines (Manila to Los Angeles)
(5/15 X P4,500,000) 1,500,000
Gross Philippine billings P 15,500,000
Tax rate 2 ½%
Income tax due and payable P 387,500
Which of the following is not an incentive to regional or area headquarters and Regional Operating
Headquarters?
I. Regional operating headquarters shall be subject to a tax rate of ten percent (10%) of their taxable
income and any income derived from Philippine sources by the ROHQ when remitted to the parent
company shall be subject to the tax on branch profit remittances.
II. The regional or area headquarters and regional operating headquarters of multinational companies
shall be exempt from all kinds of local taxes, fees, or charges imposed by a local government.
III. The regional or area headquarters and regional operating headquarters established in the
Philippines by multinational companies shall be exempted from the value-added tax.
IV. Regional or area headquarters and regional operating headquarters shall be entitled to the
importation of new motor vehicles subject to the payment of the corresponding taxes and duties.
ANSWER: II and III only

Based on the details below, compute the deductible retirement expenseof RRR Company for CY 2017:
Provision for retirement expense during CY 2017 PhP12,000,500

Normal Cost in Actuarial Valuation Report (AVR) for PAS 19 9,221,155
requirements - CY 2017
Current Service Cost for CY 2017 8,650,000
Contribution to the fund per AVR PAS 19 requirementsduring the year* 11,500,000
Contribution to the fund per AVR for CY 2016* 12,000,000
Amortization of past service cost – CY 2015 550,550
*Funding requirement is not available in the prior year.
ANSWER: PhP12,335,550
Solution:
Contribution to the fund per AVR PAS 19 requirements during PhP11,500,000

the year
Current year past service cost PhP2,850,000
Divided by: 10
Amortization of current year past service cost PhP 285,000
Amortization of past service cost 550,550
Contribution to the fund per AVR PAS 19 requirements during 11,500,000
the year
Deductible retirement expense PhP 12,335,550
Which of the following benefit/s is/are subject to FBT?
I. A housing unit which is situated inside or located within a maximum of fifty (50) meters from the
perimeter of the business premises
II. Expenses incurred or paid by the employee but which are paid or reimbursed by his employer
III. Personal expenses of the employee (like purchase of groceries for the personal consumption of the
employee and his family members) paid for or reimbursed by the employer to the employee
whether or not the same are duly receipted for in the name of the employer
IV. The use of aircraft (including helicopters) owned and maintained by the employer
V. The cost of premiums borne by the employer for the group insurance of his employees
ANSWER: II only
Reference:
 Revenue Regulations No. 03-1998

Which of the following transaction/s is/are subject to zero (0%?) VAT?
I. Processing, manufacturing or repacking goods for other persons doing business in 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
BSP
II. Services other than processing, manufacturing or repacking rendered to a person engaged in
business conducted in the Philippines or to a non-resident person not engaged in business who is
in 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
III. Transactions which are exempt under international agreements to whichthe Philippines is a
signatory or under special laws, except those underPresidential Decree No. 529
IV. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of the
total production
V. Revenue from gaming operations of a PAGCOR’s contractee
ANSWER: None of the above
Reference:
1. Revenue Regulations No. 16-05
 The following services performed in the Philippines by a VAT-registered person shall be subject to zero
percent (0%) VAT rate:
1. Processing, manufacturing or repacking 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 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 (0%) rate;
4. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of the total
annual production;
2. General Register (GR) No. 212530 dated August 10, 2016 [Bloomberry Resorts and Hotels, Inc. (BRHI)
vs. Bureau of Internal Revenue (BIR)]
 All contractees and licenses of PAGCOR, upon payment of the 5% franchise tax, shall likewise be
exempted from all other taxes, including the 12% VAT.
EXTRA QUESTIONS
CLINCHER ROUND – Question 1
The following condensed data were taken from Quarterly income statements of Jacques Corporation, which
was registered with the BIR in 2009. The data were for the year 2015.
First Second Third Fourth

Quarter Quarter Quarter Quarter
Sales P 1,200,000P 1,000,000 P2,200,000 P1,500,000
Beginning inventory 500,000 - - -
Purchases 300,000 200,000 400,000 500,000
Ending inventory 200,000 300,000 300,000 600,000
Rent income, gross
of 5% withholding
tax 150,000 150,000 200,000 -
Selling expenses 250,000 350,000 150,000 300,000
How much is the tax payable for the entire year assuming the taxpayer uses itemized deduction method?
ANSWER: P 300,000

Sales P 1,200,000 P 1,000,000 P 2,200,000
Less: Cost of sales ( 600,000) ( 100,000 ) ( 400,000 )
Gross income P 600,000 P 900,000 P 1,800,000
Add: Other income 150,000 150,000 200,000
Total gross income P 750,000 P 1,050,000 P 2,000,000
Less: Deductions ( 250,000) ( 350,000 ) ( 150,000 )
Taxable income,
this quarter P 500,000 P 700,000 P 1,850,000
previous quarters - 500,000 1,200,000
Total taxable income
to date P 500,000 P 1,200,000 P 3,050,000
Tax rate 30% 30% 30%
Tax due P 150,000 P 360,000 P 915,000
Prior year’s excess
tax credit ( - ) ( - ) ( - )
Tax payments, previous
quarters ( - ) ( 142,500 ) ( 345,000 )
previous quarters ( - ) ( 7,500 ) ( 15,000 )
this quarter ( 7,500) ( 7,500 ) ( 10,000 )

Beginning inventory P 500,000 P 200,000 P 300,000
Add: Purchases 300,000 200,000 400,000
Goods available for sale 800,000 400,000 700,000
Less: Ending inventory ( 200,000) ( 300,000 ) ( 300,000 )
Cost of sales P 600,000 P 100,000 P 400,000
Annual Return
Sales P 5,900,000
Less: Cost of sales ( 1,300,000 )
Gross income from operation P 4,600,000
Add: Non-operating and other income 500,000
Total gross income P 5,100,000
Less: Deductions ( 1,050,000 )
Taxable income P 4,050,000
Tax rate (except MCIT rate) 30%
Income tax P 1,215,000
Creditable tax withheld, first 3 quarters ( 25,000 )
Creditable tax withheld, fourth quarter ( - )
Computation of the Cost of Sale for the Whole Year

Beginning inventory P 500,000
Add: Purchases 1,400,000
Goods available for sale P 1,900,000
Less: Ending inventory ( 600,000 )
Cost of sales P 1,300,000

Which of the following statements is not true?
A. If a taxpayer is acquitted in a criminal violation of the Tax Code, this acquittal does not exonerate
him from his civil liability to pay the taxes.
B. A conviction for tax evasion is not a bar for collection of unpaid taxes
C. A tax assessment is necessary to a criminal prosecution for willful attempt to defeat and evade
payment of taxes
D. Criminal proceedings under the Tax Code is now a mode of collection of internal revenue taxes,
fees or charges.
ANSWER: C.

The VAT accrues on the sale of services upon the occurrence of the following event:
A. issuance of a statement of account by the supplier to the customer

B. completion of the service by the supplier to the customer
C. payment by the customer of the complete price of the service
D. payment by the customer for any part of the service.
ANSWER: D.

Ms. Macy Pag had recently joined the Ban Kropff General Merchandising Corp. as a sales executive. She was
advised that she has to be retrenched as the company was losing heavily but that she should be given a
substantial and generous separation pay. The general manager, however, suggested to Macy fo file a letter of
resignation from the company to document the separation instead of being involuntarily terminated as the latter
would have serious implications of inefficiency on her part. Macy chose to resign from the company and she
received the sum of P15,000,000 as a separation pay. The amount received by Macy is
A. Taxable in full.
B. Exempt from tax since she was forced to resign.
C. Non-deductible expense of the Company since it is already about to close.
D. Answer not given.
ANSWER: A

Jeopardy assessment is a valid ground to compromise a tax liability.
A. Involving deficiency income taxes only, but not for other taxes
B. Because of doubt as to the validity of the assessment
C. If the compromise amount does not exceed 10% of the basic tax
D. Only when there is an approval of the National Evaluation Board
ANSWER: B
Philippine Taxation Questions
FINAL ROUND
Which of the following may qualify for tax exemption of separation benefits received by an official or employee
as a consequence of separation from employment?
I. Redundancy
II. Retrenchment
III. Installation of cost-savings devices
IV. Cessation of Operation
ANSWER: I, II, IV
Reference:
 RMO No. 66-2016

On December 10 of CY 2012, Aljonh purchased a car worth PhP 2.45 M as a birthday gift for himself. Which of
the following is/are correct?
I. Aljohn may claim input taxes on expenses incurred for the repair and maintenance of said car in CY
2013.
II. Aljohn may claim as deduction expenses incurred for the purchase of oil and lubricant of said car
for income tax purposes.
III. In CY 2014, Aljonh decided to sell the car. In doing so, he incurred a loss amounting to PhP
200,000. Accordingly, such loss incurred may be deductible in arriving at his taxable income for the
year.
IV. The premium paid for insurance covering said car and the registration fee paid are allowed as
deduction for income tax purposes.
ANSWER: None of the choices
Reference:
 RR No. 12-2012, as clarified by RMC No. 02-2013

The following data pertain to a VAT-registered taxpayer for February:
Sales, total invoice price P 1,223,419.56

Domestic purchases from a VAT supplier,
gross of VAT 400,820.15
In January, there is an importation of goods to be sold, with a landed cost of P 512,000. There are no sales in
January.
How much is the value-added tax due in February?
ANSWER: P 26,695.65
Solution:
Output tax (P 1,223,419.56 X 12/112) P 131,080.67

Less: Input taxes
VAT on importation carried over from
previous period (P512,000 X 12%) P 61,440.00
Purchases (P 400,820.15 X 12/112) 42,945.02104,385.02
VAT payable P 26,695.65

Badette Corporation has the following income and expenses for the years 2015 and 2016:
2015 Income PhP 100,000
Less: Bad debts PhP 10,000
Other expenses 40,000 (50,000)
Net income/ (Loss)_ PhP 50,000
2016 Income PhP 120,000

Less: Expenses 70,000
Net income PhP 50,000
During 2015, bad debts worth PhP10,000were written off and allowed as deductions by the BIR. The whole
amount, however, was recovered during 2016.
How much is the additional tax in 2016 as a consequence of bad debts recovery?
ANSWER: PhP 3,000
Reference:
• Section 34 (E) (1), NIRC, as amended

Which of the following is/are exempt from paying Annual Registration Fee (ARF)?
I. Cooperatives duly registered with the Cooperative Development Authority (CDA)

II. Individual residents earning purely compensation income
III. Marginal Income Earners
IV. Persons subject to tax under one-time transactions
Reference:
 RR No. 07-2012, amending RR No. 11-2008

Which of the following BIR issuances pertains to revenue memorandum circular (RMC)?
A. Refers to functions delegated by the Commissioner to revenue officials in accordance with law
B. Issuances that cover subject matters dealing strictly with the permanent administrative set-up of the
Bureau, more specifically, the organizational structure, statements of functions and/or responsibilities of
BIR offices, definitions and delegations of authority, staffing and personnel requirements and standards
of performance.
C. Issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal
Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the
provisions of the National Internal Revenue Code (NIRC) and related statutes
D. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules,
regulations and precedents issued by the BIR and other agencies/offices
ANSWER: D.

Consider the following statements:
I. The power of taxation involves the promulgation of rules.

II. The State has the power to impose taxes even without a constitutional grant.
III. Taxes are based upon the lifeblood theory.
IV. There should be no improper delegation of the power to tax.
Choose the correct answer from among the following choices:
A. Statements I and II are both manifestations of taxation being legislative in nature.

B. Statements II and IV are both manifestations of taxation being legislative in nature.
C. Statements I and IV are both manifestations of taxation being inherent in nature.
D. Statements II and III are both manifestations of inherent nature of taxation.
ANSWER: D.

The 2015 income tax return (ITR) of MSG Corporation shows the following data:
Income tax due P 250,000

Less: Tax credits
Quarterly payments for the first three quarters( 300,000)
Excess tax payments ( P 50,000)
MSG Corporation opts to claim the excess payments in 2015 as tax credit to be carried over to succeeding
quarters of 2016.
The following cumulative data are presented:

First Second Third
Quarter Quarter Quarter Year
Sales, gross of 1%
withholding tax P 500,000 P1,100,000 P1,500,000 P2,200,000
Cost 250,000 650,000 800,000 1,200,000
Operating expenses 50,000 150,000 300,000 500,000
How much is the income tax due to the BIR in April 15, 2017?
ANSWER: P 23,000
Solution:
Annual Return
Sales P 2,200,000
Less: Cost of sales ( 1,200,000)
Gross income from operation P 1,000,000
Add: Non-operating and other income -
Less: Deductions ( 500,000)
Taxable income P 500,000
Tax rate 30%
Income tax due P 150,000
Prior year’s excess credits ( 50,000)
Tax payments, first 3 quarters ( 55,000)
Creditable tax withheld, first 3 quarters ( 15,000)
Creditable tax withheld, fourth quarter ( 7,000)

Sales P 500,000 P 600,000 P 400,000
Less: Cost of sales ( 250,000) ( 400,000) ( 150,000 )
Gross income 250,000 200,000 250,000
Add: Other income - - -
Total gross income 250,000 200,000 250,000
Less: Deductions ( 50,000) ( 100,000) ( 150,000 )
Taxable income, this quarter 200,000 100,000 100,000
Total taxable income to date P 200,000 P 300,000 P 400,000
Tax rate 30% 30% 30%
Tax due P 60,000 P 90,000 P 120,000
Prior year’s excess tax credit ( 50,000) ( 50,000) ( 50,000 )
Tax payments, previous Qs ( - ) ( 5,000) ( 29,000 )
this quarter ( 5,000) ( 6,000) ( 4,000 )

Which of the following is not incorrect with regard VAT on PEZA-registered entities under 5% GIT regime?
I. Export sales of registered products shall be zero-rated.

II. Sale of services to a buyer from customs territory shall be subject to VAT.
III. Sale of registered services to a PEZA-entity under ITH regime shall be zero-rated.
IV. Importation of goods shall be zero-rated.
ANSWER: II only
Reference:
 I is incorrect since exports sales of registered products shall be exempt from VAT.
 III is incorrect since sale of services to other PEZA-entities shall be exempt.
 IV is incorrect since importation of goods shall be VAT-exempt.

Capital gains presumed to have been realized from the sale or disposition of their principal residence by
natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence
within eighteen (18) calendar months from the date of sale or disposition, shall be:
A. Subject to the 6% capital gains tax.

B. Subject to the 5% capital gains tax.
C. Exempt from the capital gains tax.
D. None of the choices.
ANSWER: C
Reference:
 Section 24 (D) (2), NIRC, as amended

Which of the following is/are considered as exempt transaction/s for VAT purposes?
I. Sale of marinated bangus

II. Sale or importation of feeds for aquarium fish
III. Services rendered by domestic common carriers by land for the transport of passengers and
keepers of garages
IV. Purchase of motor vehicle by the Director of World Health Organization (WHO) from the Senior
Social Specialist of the Asian Development Bank (ADB)
V. Sale of patented invention of an accredited member of the Filipino Inventors Society (FIS) through
Corporation S
ANSWER: III only
Reference:
 The sale of marinated milkfish is not exempt from VAT pursuant to Section 4.109-1 (B) (1) (a) RR No.
16-05 which provides that the sale of agricultural and marine food products in their original state is
exempt from VAT.
 Sale or importation of specialty feeds is not am exempt transaction.
 While WHO is an organization exempt from VAT, such exemption applies only to vehicles purchased
under the name of WHO for its official use. Thus, sale by privileged seller, the Senior Specialist of ADB
to the Director of WHO, being non-privileged buyer, is subject to VAT pursuant to Section 106 of the
Tax Code.
 The sale of patented invention is not exempt from VAT since the only tax exemption granted to an
accredited member of the FIS merely refers to income tax [Final Resolution of the Office of the
President (OP), OP Case No. 03-g-422 dated February 2, 2004].

The following information taken from the books of a VAT-registered enterprise was provided to you:
Domestic sales of goods P 3,000,000

Sales of packaging materials to an export-
oriented enterprise whose export sales did not
exceed 70% of the total annual production 2,000,000
Local sales of goods to Asian Development
Bank (ADB) 500,000
Consignment of goods (not returned within
60 days following the date of consignment) 200,000
Goods transferred for the personal use of the owner 100,000
Compute for the output tax.
ANSWER: P636,000
Solution:
Taxable sales Rate Output tax
Domestic sale of goods P 3,000,000 12% P 360,000
Sales of packaging materials
to export-oriented enterprise 2,000,000 12% 240,000
Local sales of goods to ADB 500,000 0% -
Consignment of goods (deemed sold) 200,000 12% 24,000
Goods transferred for the personal
use of the owner (deemed sold) 100,000 12% 12,000
Total P 5,800,000 P 636,000

Which of the following returns require to be filed with Monthly Alphalist of Payees (MAP)?
I. BIR Form No. 1601E

II. BIR Form No. 2550M
III. BIR Form No. 1702Q
IV. BIR Form No. 1601F
ANSWER: I and II
Reference:
 RR No. 02-2006

JKL, Inc. has a principal office in Iligan City. Its products include paper rolls and corrugated carton boxes. JKL,
Inc. has manufacturing plants in (1) Cagayan de Oro, which manufactures paper rolls of scrap carton boxes as
raw materials, and (2) Bukidnon, where such paper rolls undergo further processing to produce corrugated
carton boxes. No sales were made in Bukdnon plant. All sales were made in Iligan City but there is nothing in
the books of JKL, Inc. in Iligan City to determine the gross sales in Cagayan de Oro and Bukidnon.
What is the allocation (in percentage) of sales to be subjected to local business tax (LBT) to each Local
Government Unit (LGU)?
ANSWER: Iligan City – 30%, CDO – 35%, Bukidnon – 35%
Reference:
 DOF-BLGF Opinion dated February 12, 2007

A VAT-registered taxpayer has the following information on his importations:
For For
sale own use
Invoice cost (US$ 1 = P50) $ 50,000 $ 10,000
Based on cost:
Freight and insurance 4% 4%
Other expenses before the goods are
released from Bureau of Customs 6% 6%
Expenses incurred after the goods are
released from Bureau of Customs ½% ½%
The imported goods are sold within the same taxable period the importation is made for P7,840,000, VAT
inclusive. The Company has no other sales during the year.
How much is the VAT payable?
ANSWER: PhP 510,000

Solution:
Sale Personal Use

Invoice value P 2,500,000 P 500,000
Add: Freight charges 100,000 20,000
Other expenses before the release 150,000 30,000
Total P 2,750,000 P 550,000
Tax rate 12% 12%
VAT on importation P 330,000 P 66,000
Total VAT on importation P 396,000
Output tax (P7,840,000 X 12/112) P 840,000

Less: Input tax
VAT on importation on goods for sale 330,000
VAT payable P 510,000
There is no input tax on expenses incurred after the goods are released from the Bureau of Customs because the
problem does not state that there is passed-on VAT on those expenses.

Which of the following is/are requirement/s for the deductibility of interest?
I. Treated as capital expenditure.

II. Actually sustained and charged off during the taxable year
III. Connected with the taxpayer's trade, business or exercise of profession
IV. It must be for property arising out of its use in the trade or business, or out of its not being used
temporarily during the year
ANSWER: III only

Mr. and Mrs. Juan Jose made the following donations during the calendar year 2011 (common property unless
otherwise stated):
Date Donations
January 2 To Alice, legitimate daughter, on account of her forthcoming marriage, 10,000
shares which are not traded in the stock exchange. The book value at the time of
donation was P50 per share.
To Jewel, family friend of couple, on account of her birthday, P20,000.
February 3 To Aevon, legitimate daughter, on account of her marriage on February 1, 2010,
a piece of antique jewelry from the capital property of Mr. Jose. The pawn value
of the jewelry was P50,000.
To Janina, legitimate daughter, on account of her graduation, a piece of land
costing P500,000.
The fair market value per BIR at the time of donation was P1,000,000. Its
assessed value was P1,200,000. The piece of land had an unpaid mortgage of
P100,000which was assumed by the donee.
To Anna, Mrs. Jose’s sister, on account of her forthcoming marriage, cash
P100,000.
October 4 To ReSA Colleges, a non-profit educational institution, P250,000.
To Belmont Shipping Company, a piece of land valued at P700,000.
To John, legitimate son, on account of his forthcoming marriage, cash of
P200,000.
How much is the tax due and payable of Mr. Juan Jose on gifts made on October 4?
ANSWER: PhP 111,000
Solution:
STRANGER RELATIVE
JANUARY 2:
TO ALICE (P500,000 X ½) P - P 250,000
TO JEWEL (P20,000 X ½) 10,000 -
GROSS GIFTS P 10,000 P 250,000
LESS: DOWRY - 10,000
TAXABLE NET GIFTS P 10,000 P 240,000
TAX DUE P 3,000 P 3,600
AGGREGATE TAX DUE P 6,600
FEBRUARY 3:
TO AEVON (P50,000 X 3) P - P 150,000
TO JANINA (P1,200,000 X ½) - 600,000
TO ANNA (P100,000 X ½) 50,000 -
GROSS GIFTS P 50,000 P 750,000
LESS: DEDUCTIONS
UNPAID MORTGAGE ASSUMED BY
DONEE (P100,000 X ½) - 50,000
NET GIFT P 50,000 P 700,000
ADD: PRIOR NET GIFTS 10,000 240,000
TOTAL TAXABLE NET GIFTS P 60,000 P 940,000
TAX DUE P 18,000 P 40,400

LESS: PAYMENTS FOR PRIOR GIFTS 6,600
TAX PAYABLE P 51,800
OCTOBER 4:
TO RESA COLLEGE (P250,000 X ½) P 125,000 P -
TO BELMONT SHIPPING (P700,000 X ½) 350,000 -
TO JOHN (P200,000 X ½) - 100,000
GROSS GIFTS P 475,000 P 100,000
LESS: DEDUCTIONS
DOWRY - 10,000
DONATION TO NON-PROFIT
EDUCATIONAL INSTITUTION 125,000 -
NET GIFTS P 350,000 P 90,000
ADD: PRIOR NET GIFTS 60,000 940,000
TOTAL TAXABLE NET GIFTS P 410,000 P 1,030,000
TAX DUE P 123,000 P 46,400
LESS: PAYMENTS FOR PRIOR GIFTS 58,400
TAX PAYABLE P 111,000

Which of the following industries fall under Group C of the staggered e-filing?
I. Real Estate Activities

II. Computer and Related Activities
III. Air Transport
IV. Banking Institutions
V. Retail Sale
VI. Wholesale Trade and Commission Trade
ANSWER: I, II, V, VI
Reference:
 RR No. 26-2002
Which of the following holds true as to date?
I. Submission of hard or physical copies of alphalists is no longer allowed.

II. Unutilized creditable input taxes attributable to zero-rated sales can only be recovered through
application for refund or tax credit.
III. Once an electronic Letter of Authority or any other notice of audit is received, taxpayers are barred
from making amendments.
IV. In all principal and supplementary receipts/invoice which can still be used until October 31, 2013,
the term “valid until October 31, 2013 only” shall be stamped prominently on the face of the receipts
or invoices.
References:
 RMC No. 05-2014
 RMC No. 57-2013
 RMC No. 50-2013
 RMC No. 52-2013

The following data were provided by the Estate of AmerIka, head of family, a resident of New York, Cubao.
Mr. Ika died intestate on September 30, 2016.
Land and house (family home) P 3,000,000

Agricultural land inherited from his father
who died 2 ½ years before his death 800,000
Other real properties 1,000,000
Other tangible personal properties 200,000
Bank deposit, PNB-Manila representing amount
received by heirs under R.A. No. 4917 500,000
Obligations of and charges against certain properties follow:
Medical expenses of last illness (unpaid as of
the time of death, supported by bills and
statements from hospital) P 600,000
Actual funeral expenses (30% paid for from the
estate, 70% paid for by relatives) 500,000
Judicial expenses incurred within six (6) months
after death 100,000
Claims against the estate other than
unpaid mortgage 250,000
Unpaid mortgage on inherited agricultural land 30,000
Claims against insolvent persons 100,000
Unpaid real estate tax for the 4th quarter of 2016 20,000
The agricultural land was inherited by the present decedent. Its value at the time of inheritance was P500,000.
It had an unpaid mortgage of P 80,000.
How much was the taxable net estate?
ANSWER: P1,711,339
Solution:
Personal property (P200,000 + P500,000 + P100,000) P 800,000

Real property (P3,000,000 + P800,000 + P1,000,000) 4,800,000
Gross estate P 5,600,000
Less: Deductions ( 1,388,661 )
Estate before special deductions P 4,211,339
Less: Family home (maximum) ( 1,000,000 )
Standard deduction ( 1,000,000 )
Medical expenses ( 500,000 )
Taxable net estate P 1,711,339
Schedule of deductions:
Funeral expenses (actual) (P500,000 X 30%) P150,000
Judicial expenses 100,000
Claims against the estate 250,000
Taxes 20,000
Claims against insolvent 100,000
Unpaid mortgage 30,000P650,000
Vanishing deduction 238,661
Amount received under RA 4917 500,000
Total P 1,388,661

Which of the following transactions are exempt for VAT purposes?
I. Sale of ingredients of finished feeds

II. Sale of house and lot utilized for socialized housing with a unit price of PhP500,000
III. Interest income from loans extended to an affiliated incorporated in Singapore
IV. Sale of fuel, goods, and supplies by persons engaged in international shipping or air transport
operations
V. Services rendered by individuals pursuant to an employer-employee relationship
ANSWER: V only
Reference:
 Some ingredients of finished feeds may also be used for the production of food for human consumption
and shall be subject to VAT. To be exempt from VAT, there must be a proof that the feeds or ingredients
sold are unfit for human consumption or that the ingredients cannot be used for the production of food
for human consumption as certified by the Food and Drug Administration (FDA). (RMC No. 55-2014,
RMC No. 66-2014)
 Sale of real properties utilized for socialized housing as definedunder RA No. 7279 and other related
laws, such as RA No.7835 and RA No. 8763, wherein the price ceiling per unit isP225,000* or as may
from time to time be determined by theHUDCC and the NEDA and other related laws (HUDCC
MemorandumCircular No. 1, dated December 11, 2008 and RMC No. 30-2009dated May 14, 2009)
 Interest income from loans extended to non-residents shall be zero-rated.
 Importation of fuel, goods and supplies by persons engaged ininternational shipping or air transport
operations

1. Mr. Devin, CPA practitioner, is also employed with a retailer company and receives the following for the year:
Salary PhP 216,000

Overtime Pay 53,400
13th Month Pay One month basic pay
Rice subsidy per month 2,000
Birthday gift (i.e., cake) 2,200
Renewal of CPA license borne by the employer 3,500
Performance-based bonus 9,800
Foregone interest on loans extended by the employer 15,000
to Mr. Devin
Retainer fee per month 72,000
How much is subject to withholding tax on compensation?
ANSWER: PhP 362,100
Solution:
Salary PhP 216,000

Overtime Pay 53,400
Birthday gift (i.e., cake) 2,200
Renewal of CPA license borne by the employer 3,500
Foregone interest on loans extended by the 15,000
employer to Mr. Devin
Retainer fee per month 72,000
Total compensation subject to withholding tax PhP 362,100
A resident citizen, widower, with a dependent minor brother, has the following data on income and expenses:
Gross business income, P500,000; Business expenses, P200,000; Interest from savings deposit, BPI-Makati,
Philippines, P50,000; Prize in a literary contest he joined, P100,000; Prize received for achievement in
literature (did not join the contest), P10,000; Gain from sale of bonds (maturity is 6 years), P5,000;
Separation pay from his former job (resigned), P250,000; Cash he inherited from his uncle, P300,000;
Proceeds of his wife’s life insurance (revocable beneficiary), P1,000,000; Amount received as return of
premium (premium paid, P150,000), P200,000; Tax Informer’s Reward, P500,000; Interest income from
Government bonds, P20,000; Winnings from illegal gambling, P10,000; Fringe benefit tax expense, P68,000
How much was the total tax to be reported in the BIR Form No. 1604-CF?
ANSWER: PhP116,000
Solution:
Interest from savings deposit, BPI-Makati, Philippines

(P50,000 X 20%) P 10,000
Prize in a literary contest he joined (P100,000 X 20%) 20,000
Tax Informer’s Reward (P500,000 X 10%) 50,000
Interest income from Government bonds (P20,000 X 20%) 4,000
Total final tax P 84,000
Fringe Benefit Tax 32,000
Total tax to be reported in BIR Form No. 1604-CF P 116,000

Which of the following is/are not function/s of the Bureau of Customs?
I. Prevent smuggling and related frauds

II. Identify potential revenue sources and leakages by analyzing data from the revenue-generating
agencies attached to the DOF
III. Control the handling of foreign mails for revenues and prevention purposes
IV. Enforce tariff and customs laws
ANSWER: II only

Which of the following is/are wrong?
I. With respect to taxpayers enrolled with EFPS classified under Group A, the deadline for e-filing the
Monthly Percentage Tax Return and e-paying the tax thereon shall be 21 days following the end of
the month.
II. In the case of a person whose VAT registration is cancelled and who becomes liable to the 3% tax
on VAT-exempt persons, the tax shall accrue from the date of cancellation and shall be paid
within20 days after the end of each taxable month.
III. If done manually, the withholding 3% percentage tax shall be remitted within20 days after the end of
each taxable month.
IV. A person subject to percentage tax under Sec. 116 (Non-Vat person whose gross annual sales or
receipts do not exceed the threshold amount for VAT) is qualified to substituted filing of percentage
tax return ifthe said income recipient-payee has only one payor from whom he generates his
income.
V. Taxpayers whose gross receipts are P1,000,000 per year are not large taxpayers.
ANSWER: I only

RFB Corporation, a closely-held corporation, has an authorized capital stock of 100,000,000 shares with par
value of Php1.00/share as of January 1, 2011.
Of the 100,000,000 authorized shares, 25,000,000 thereof is subscribed and fully paid up by the following
stockholders:
Mr. Estoy B. Zabala PhP 2,000,000

Mrs. Rowena V. Posadas 3,000,000
Mr. Conrado G. Cruz 4,000,000
Mr. Benedict O. Sison 5,000,000
Mrs. Linda O. Evangelista 6,000,000
Total Shares Outstanding PhP 20,000,000
RFB Corporation finally decides to conduct an IPO and initially offers 25,000,000 of its unissued shares to the
investing public at P1.50 per share. After the IPO in March 2008, RFB Corporation’s total issued shares
increased from 25,000,000 to 50,000,000 shares.
At the IPO, one of the existing stockholders, Mrs. Linda O. Evangelista, has likewise decided to sell her entire
5,000,000 shares to the public at P1.75 per share. Thus, 25,000,000 shares have been offered in the
primary offering and 5,000,000 shares in the secondary offering.
How much is the percentage tax on the secondary offering?
ANSWER: P 210,000
Solution:
Selling price (6,000,000 shares x P1.75 per share) P10,500,000

Multiplied by: rate 2%
Percentage tax on secondary offering P 210,000
Ratio: 6,000,000/20,000,000 = 30%
the tax rates for percentage tax on primary and secondary offerings of shares of stock of a closely
held corporation under section 127 (b) of the tax code follow:
ratio rate
not over 25% 4%
over 25% but not over 33 1/3% 2%
over 33 1/3% 1%

The taxpayer did not file his income tax return for the calendar year 2015 which was due for filing on April 15 of
the following taxable year. He was notified by the BIR of his failure to file the tax return, for which reason, he
filed his tax return and paid the tax, only after the said notice, on June 30, 2017. The tax due per return was
PhP 543,112.
How much is the total amount due excluding suggested compromise for late filing and late payment of the tax?
Solution:
Income tax due per return P 543,112.00

Add: Surcharge for willful neglect to file
the return and late payment of
tax (P543,112 X 50%) P 81,466.80
Interest In Delinquency 131,190.06 212,656.86
Total Amount Due P 755,768.86
Computation Of Interest
April 15, 2016 to April 15, 2017 (1 Year)
(P543,112 X 20%) P 108,622.40
April 15, 2017 to June 15, 2017 (2 Months)
(P543,112 X 20% X 2/12) 18,103.73
June 15, 2017 to June 30, 2017 (15 Days)
(P543,112 X 20% X 15/365) 4,463.93
Total P 131,190.06

The following are the revenue items in the Income Statement of a domestic corporation for the year 2016:
Sales P1,000,000
Cost of sales 500,000
Gain from sale of an office equipment 20,000
Gain from sale of land not used in business
(selling price P300,000) 100,000
Gain from sale of shares of stock directly to
the buyer 50,000
Gain from sale of shares of stock through the
stock exchange (selling price, P200,000) 10,000
Interest income from bank deposit, Philippines 40,000
Yield from deposit substitute, Philippines 80,000
Interest income received from depository bank
under EFCDS, Philippines 60,000
Interest income from bank deposit, USA 400,000
Interest on trade notes receivable, Philippines 30,000
Advance rent for two (2) years, Philippines 600,000
Royalties, Philippines 70,000
Royalties, USA 300,000
Dividend received from domestic corporation 150,000
Dividend received from a foreign corporation 350,000
Prizes and winnings, Philippines 400,000
Refund of Philippine value-added tax 100,000
Bad debt recovery 50,000
With regard the recovery of bad debts, please note that the related write-off of bad debts was treated as non-
deductible expense in CY 2015.
Compute for the total gross income subject to regular corporate income tax (RCIT) for CY 2016.
ANSWER: P 2,600,000
Solution:
Sales P 1,000,000
Less: Cost of sales ( 500,000 )
Other income
Gain from sale of an office equipment 20,000
Interest income from bank deposit, USA 400,000
Interest on trade notes receivable, Philippines 30,000
Advance rent for two (2) years, Philippines 600,000
Royalties, USA 300,000
Dividend received from a foreign corporation 350,000
Prizes and winnings, Philippines 400,000

Anna Corporation has the following sale of goods during the first month of CY 2017:
Sale to PEZA-registered corporations formerly enjoying GIT incentive P 292,100

Sale to foreign embassies 365,190
Sale to PWDs 23,000
Sale to PEZA-registered corporations enjoying ITH incentive 76,000
Sale to private corporations 552,123
Sale of equipment to the Mayor’s Office 396,150
The following input taxes were passed on by its VAT suppliers:
Input tax on vatable goods P25,000

Input tax on zero-rated sales 10,000
Input tax on sale of exempt goods 2,500.00
Input tax on sale to government 5,000.00
Input tax on depreciable capital goods not attributable to any specific 100,000
activity
How much is the VAT still payable or excess tax credits for the month (to the nearest peso)?
ANSWER: P (9,104) [EXCESS TAX CREDITS]
Solution:
Output tax
Sales to private corporations (552,123x12%) P66,255
Sale to PEZA-registered corporations formerly enjoying GIT 35,052
incentive (292,100x12%)
Sales to foreign embassies (365,190x0%) -
Sale to PEZA-registered corporations enjoying ITH incentive -
(76,000x0%)
Sales to PWDs -
Sales to government (396,150X12%) 47,538 P 148,845
Less: Input tax

Vatable goods [(844,223/1,704,563)x100,000]=49,527+25,000 P 74,527
Zero-rated sales [(441,190/1,704,563)X100,000]=25,883+10,000 35,883
Exempt goods -
VAT withheld by the government (396,150x5%)* 19,808
Standard input VAT (396,150x7%)** 27,731 157,949
VAT payable/ (excess tax credits) P(9,104)
*5% VAT withheld by the government under RMC No. 23-2007.

**Standard input VAT of 7% on sales to government as provided in Section 4.114-2 (a) of
RR No. 04-07.
Sale of goods and services to the government adopts a withholding VAT mechanism where the seller will have zero VAT liability insofar
as the transaction is concerned. Therefore, any payment of VAT by the seller relating to the transaction would constitute erroneous
payment of tax. [CTA Case No. 8216 dated September 16, 2014 (Unisys Public Sector Services Corporation vs Commissioner of
Internal Revenue)].

The distinction between actual distraint and constructive distraint is that:
a. Actual distraint may be made on the property of any taxpayer whether delinquent or not while
constructive distraint is made on the property only of a delinquent taxpayer.
b. In actual distraint, there is taking of possession, while in constructive distraint, the taxpayer is merely
prohibited from disposing of the property.
c. Actual distraint is effected by 1) requiring the taxpayer to sign a receipt of the property or 2) having the
revenue officer prepare and leave a list of the distrained property or 3) serving a warrant of distraint or
garnishment.
d. Answer not given.
ANSWER: B
Distinction between actual distraint and constructive distraint:
Actual Distraint Constructive Distraint

1) Personal property is physically taken. 1) Personal property is not physically taken.
2) The taxpayer is already delinquent in payment 2) There is no finding yet of a discrepancy, only that the
of his taxes. taxpayer is leaving the country or disposing of his
property in fraud of creditors or is in the process of
liquidation.
3) Personal property taken is sold in order to 3) Personal property is merely held as security to answer
satisfy the tax delinquency. for any future tax delinquency.
EXTRA QUESTIONS
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
ANSWER: A
Reference:
 Section 2.78.1 (A) (2) (4) (5) and (6) (a), Revenue Regulations No. 2-98

The sale of Philippine shares owned by a US resident may be subject to which of the following taxes?
I. Stock Transaction Tax

II. Capital Gains Tax
III. Documentary Stamp Tax
IV. Donor’s Tax
ANSWER: I, II, III and IV (ALL OF THE ABOVE)
 Stock Transaction Tax (STT)
If the shares are listed and traded through the Philippines Stock Exchange (PSE), such sale is subject
to STT of ½ of 1% of the gross selling price as provided under Section 127 (a) of the 1997 Tax Code,
as amended.However, please note that under Revenue Regulations (RR) No. 16-2012 dated
November 7, 2012, STT will not apply to transfer of shares of listed companies which do not meet the
minimum percentage requirement of listed securities held by the public (or "public float") of ten percent
(10%) issued and outstanding shares, exclusive of any treasury shares or the minimum public
ownership (MPO) requirement prescribed by the Securities and Exchange Commission (SEC) or the
PSE, whichever is higher.
 Capital Gains Tax (CGT)
In case of shares not listed and traded through PSE or shares owned by listed companies which do not
meet the minimum percentage requirement under RR No. 16-2012, capital gains derived from such
sales are subject to CGT at the rate of 5% on the first P 100,000 of net gain, plus 10% on the net gain
amount in excess of P 100,000 pursuant to Section 28 (b) (5) (c) of the 1997 Tax Code, as amended.
 Documentary Stamp Tax (DST)
The sale of shares is subject to DST at the rate of P 0.75 for every P 200.00 (or 0.375%) of the par
value of the shares, or a fraction thereof, under Section 175 of the 1997 Tax Code, as amended.
 Donor’s Tax
If the selling price or consideration on the sale of shares (i.e., shares not listed and traded through PSE
or listed shares sold, transferred or exchanged outside the PSE) is lower than the fair market value
(FMV) of the shares, the difference is considered as a gift subject to 30% donor's tax under Section 100
of the 1997 Tax Code, as amended.

What is the Filipino term for Bureau of Internal Revenue?
ANSWER: Kawanihan ng RentasInternas

Which of the following statements is correct regarding standard input tax?
E. Input tax that can be directly attributable to VAT on sales of goods and services to the Government shall
be credited against output taxes arising from sales to non-Government entities
F. The government or any of its political subdivisions, instrumentalities or agencies as well as purchasers in
the course of trade or business shall deduct and withhold a final VAT due at the rate of five percent (5%)
of the gross payment
G. Should actual input VAT attributable to sale to government exceeds seven percent (7%) of gross
payments, the excess must be closed to expense or cost
H. The standard input tax is in lieu of the actual input VAT directly attributable or ratably apportioned to sales
of goods or services to government or any of its political subdivisions, instrumentalities on agencies
including GOCCs
ANSWER: D.

The different types of income tax does not include a
I. unitary tax
II. composite tax
III. presumptive tax
IV. regressive tax
ANSWER: D.

When is the capital gains tax return filed by a natural or juridical person, resident or nonresident, who is not
exempt under existing laws for the sale, barter, exchange or other onerous disposition intended to transfer
ownership of shares of stocks in domestic corporation classified as capital assets, not traded through the local
stock exchange?
I. Within thirty (30) days after each cash sale, barter, exchange or other disposition of shares of stock not
traded through the local stock exchange
II. In case of installment sale, the return shall be filed within thirty (30) days following the receipt of the first
down payment and within (30) days following each subsequent installment payment
ANSWER: Both I and II are correct
Reference: BIR Form No. 1707 (Capital Gains Tax Return for Onerous Transfer of Shares of Stocks Not
Traded Through the Local Stock Exchange)

If an account in a depository bank under the foreign currency deposit system is jointly in the name of a
nonresident citizen such as an overseas contract worker, or a Filipino seaman, and his spouse or dependent
who is a resident of the Philippines, the interest on such deposit shall be:
A. exempted in its entirety.

B. subject to final withholding tax of 7 ½ % in its entirety.
C. 50% exempt and 50% subject to final withholding tax of 7 ½%.
D. subject to regular income tax rates for individuals.
ANSWER: C
Reference: Section 2.24 (A) (2), Revenue Regulations No. 10-98

Which of the following statements is incorrect?
E. Every corporation subject to tax, except foreign corporations not engaged in trade or business in the
Philippines, shall render, at least in duplicate, a true and accurate quarterly income tax return and final
or adjustment return.
F. The return shall be filed by the president, vice-president or other principal officer, and shall be sworn to
by such officer and by the treasurer or assistant treasurer.
G. A corporation may employ either calendar year or fiscal year as a basis for filing its annual income tax
return.
H. The corporation may change the accounting period employed without prior approval from the
Commissioner as long as such change is noted in the financial statements submitted by the corporation
as attachments to the income tax return filed.
ANSWER: D
Reference: Section 52 (A) and (B), NIRC, as amended

Which of the following is deductible?
a. Any amount paid out for new buildings or for permanent improvements, or betterments made to
increase the value of any property or estate
b. Intangible drilling and development costs incurred in petroleum operations
c. Any amount expended in restoring property or in making good the exhaustion thereof for which an
allowance is or has been made
d. None of the choices
ANSWER: B
Reference: Section 36 (A) (2), NIRC, as amended

A refund check or warrant issued in accordance with the pertinent provisions of the Tax Code, which shall
remain unclaimed or uncashed, shall be forfeited in favor of the Government and the amount thereof shall
revert to the general fund within how many years from the date the said warrant or check was mailed or
delivered?
ANSWER: Five Years
Reference: Section 230 (A), NIRC, as amended

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Philippine Taxation Questions

EASY ROUND - Question 2

ANSWER: PhP 399,571.50

A. Only a statement is incorrect

 Statements I and IV are correct.

EASY ROUND - Question 4

Gross income PhP 500,000

How much is the taxable net income in 2016 and 2017?

ANSWER: PhP 684,680.74

I. Taxpayers with VAT returns reflecting erroneous input tax carry-over.

ANSWER: II and III only

EASY ROUND - Question 7

I. Prompt payment discount

a. It is determined and granted at the time of sale

EASY ROUND - Question 8

Down payment PhP 100,000

ANSWER: PhP 60,000

Selling price P 600,000

EASY ROUND - Question 9

EASY ROUND - Question 10

AVERAGE ROUND – Question 1

ANSWER: PhP 9,107.15

Entries in the books of Denver Co.:

Billing to Client-Advertiser for the Media placement

Receipt of Income Payment from Advertiser

Receipt of Billing from Ad Agency for Commission (inclusive of VAT)

Payment for Commission to Ad Agency

Contract price (foreign clients doing business

AVERAGE ROUND – Question 3

I. Date of payment of landed cost

ANSWER: II, III, IV, V

AVERAGE ROUND – Question 4

I. Individuals deriving compensation from two or more employers concurrently or successively at

ANSWER: I, III and IV

AVERAGE ROUND – Question 5

 Amount of tax due is PhP 923,410

ANSWER: PhP 1,447,351.25

Deficiency Tax PhP 700,298.00

AVERAGE ROUND – Question 6

ANSWER: All of the above

AVERAGE ROUND – Question 7

AVERAGE ROUND – Question 8

I. G, a director of GSM Company but not an employee thereof

ANSWER: I, II, III, IV

AVERAGE ROUND – Question 9

Cash Sales P 3,390,000

ANSWER: PhP 3,016

Basic community tax P 500

AVERAGE ROUND – Question 10

ANSWER: PhP 755,768.86

Income tax due per return P 543,112.00

DIFFICULT ROUND – Question 1

ANSWER: III only

DIFFICULT ROUND – Question 2

ANSWER: I, II, III, IV

DIFFICULT ROUND – Question 3

Tax due Section 24 (A) P 101,000 P153,800 P 192,200

Optional Standard Deduction (OSD)

Tax due Section 24 (A) P 89,000 P169,800 P 229,960

Tax due Section 24 (A) P 386,760

DIFFICULT ROUND – Question 4

I. Payee may be domestic, resident foreign or non-resident foreign

ANSWER: I and II only