BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 59

SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

CHAPTER 8

BUSINESS TRANSACTIONS
Problem 81
1.
2.
3.
4.
5.
6.
7.
8.
9.

False
True
False
True
False
True
True
False
True

Vatable transactions of non-VAT business is not allowed to deduct input VAT.

Some business transactions are VAT-exempt.
subject to OPT.

not allowed for TCC and tax refund, but allowed only for tax credit.

10. False Zero rated sales are applicable only to VAT-registered business/person. This is a VATexempt and OPT-exempt transactions.
11. True
12. False It can be claimed as a deduction from sale as part of cost of product sold.
13. True
14. False Sales of non-VAT person, exceeding P1,919,500 per year is also subject to VAT.
15. False Only those agricultural and marine food products.
Problem 82
1. False Publication of newspaper is VAT-exempt and also OPT-exempt.
2. True
3. False The exemption pertains only to Output VAT.
4. True
5. False Zero VAT transactions are applicable only to VAT-registered persons.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

False Some VAT taxable transactions have not allowed to have Input VAT particularly if the
business is a non-VAT.
False Exempt from business tax because it is considered as a subsistence livelihood.
True
False Exempt from VAT.
False zero VAT.
False VAT-exempt.
True
False VAT-exempt and OPT-exempt.
False more than P3,199,200.
True

Problem 8 3
1. B
2. B
3. C
4. D
5. B
6. C
7. D
8. B
9. C
10. A

Problem 8 4
1. A
2. C
3. D
4. B
5. A
6. B
7. A
8. D
9. C
10. D

Problem 8 5
1. D
2. B
3. A
4. C
5. C
6. B
7. A
8. A
9. C
10. C

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 60
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

Problem 8 6
1.
A
2.
D
3.
D
4.
A
5.
A
6.
D
7.
A
8.
C
9.
A
10. C

11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

C
E
D
C
C
A
C
D
D
E

Problem 8 7
A
Business tax payable (P2,500,000 x 12%)

P300,000

Note: The gross sales exceeds P1,919,500; hence, subject to 12% even if the taxpayer is non-VAT.
Problem 8 8
C
Domestic sales
Importation of goods
Transaction deemed sales
Total amount subject to VAT

P1,000,000
500,000
100,000
P1,600,000

In general, importations are subject to 12% VAT regardless of the business tax registration of the
taxpayer. The VAT on importation, however, is an input tax.
Problem 8 9
D
Output VAT from collections (P4,480,000/9.3333)
Less: Input VAT from supplies used (P560,000/9.3333)
Input VAT from importation (P112,000/9.3333)
VAT payable

P60,000
12,000

Problem 8 10
B
Export sales (P2,000,000 + P1,000,000)
Problem 8 11
B
Business tax payable (P2,000,000 + P7,000,000) x 3%

P480.000
72,000
P408,000
P3,000,000
P270,000

The annual gross receipts from business does not exceed P10,000,000; hence, subject to 3% OPT.
Problem 8 12

P600,000, only input VAT due or paid from purchases is allowed to apply for TCC. Transitional
input VAT and presumptive Input VAT are not allowed.
Problem 8 13

Zero-rated VAT. Sale of power or fuel generated through renewable sources of energy such as
biomass, solar, wind, hydropower, geothermal ocean energy, and other emerging energy sources
using technologies such as fuel cells and hydrogen fuels
Problem 8 14
D
Multi-purpose cooperative registered with CDA are exempt from business tax.

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 61
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

Problem 8 15
A
Passenger by sea
Cargo by land
Cargo by sea
Total VAT taxable transactions
Problem 8 16
B
Export sales
Sales of agricultural food products original state
Gross receipts derived from millings of palay
VAT-exempt transactions
Problem 8 17
D
5 commercial lots at P1,000,000 each

1,500,000
500,000
500,000
P2,500,000
P10,000,000
6,000,000
2,000,000
P18,000,000
P5,000,000

The sales of residential house and lots or residential lots are all VAT-exempt and OPT-exempt.
Problem 8 18
C
4 residential lots at P2,000,000 each
1 commercial lots at P3,000,000 each
Amount subject to business tax

P 8,000,000
3,000,000
P11,000,000

The sale of residential house and lot at P3,000,000 each is exempt from business tax.
Problem 8 19
B
Gross receipts exempt from business tax (P2,000 x 50)

P100,000

Problem 8 20
1. Output VAT (P134,400/9.3333)
Input VAT (P112,000/9.3333)
Business tax liability of X

P14,400
(12,000)
P 2,400

2. Percentage tax (P112,000/1.12) x 3%

Output VAT (P112,000/9.333)
Surcharge (P12,000 x 50%)
Business tax liability of Y

P 3,000
12,000
6,000
P21,000

Problem 8 21
1. Sales from:
Local government units (P940,000/1.06)
University of the Philippines (P564,000/1.06)
Department of Tourism (P282,000/1.06)
Total sales

P886,792
532,075
266,038
P1,684,905

Note: The total withholding per sales was 6% comprising 5% final withholding VAT
and 1% creditable withholding income tax.
2. Total income tax withheld (P1,684,905 x 1%)

P16,849

3. Total final VAT withheld (P1,684,905 x 5%)

P84,245

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 62
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

Problem 8 22
1. VAT-registered
Transport of passengers by sea
Transport of cargoes by:
Land
Sea
VAT taxable transactions
2. Non-VAT registered
Transport of passengers by sea
Transport of cargoes by:
Land
Sea
VAT taxable transactions

P2,000,000
500,000
1,000,000
P3,500,000
P2,000,000
500,000
1,000,000
P3,500,000

Note: The said non-VAT registered business shall now be subject to VAT because its total gross
receipts exceed P1,500,000. The gross receipts from transport of passengers, however, shall
remain subject to percentage tax.
Problem 8 23
1. VAT-registered
From radio ads
From TV ads
VAT taxable transactions
Multiplied by VAT rate
Value-added tax

P5,000,000
4,000,000
P9,000,000
12%
P1,080,000

2. Non-VAT registered
From radio ads
From TV ads
Amount subject to OPT
Multiplied by applicable OPT rate
Other percentage tax

P5,000,000
4,000,000
P9,000,000
3%
P 270,000

Note: A non-VAT registered franchise grantees of radio and television broadcasting with annual
gross receipts of P10,000,000 or less is not subject to VAT, unless VAT-registered.
Problem 8 24
Output VAT Zero rated because foreign denominated sales
Input VAT (P336,000/9.3333)
VAT refund
Problem 8 25
On purchases:
Local purchases from VAT-registered person
On sales:
Domestic sales to various VAT person
Domestic sales to various non-VAT person
VAT taxable transactions against X

P
- 0 ( 36,000)
(P 36,000)

P600,000
P 800,000
600,000
P1,400,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 63
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

Problem 8 26
1. P - 0 The business is non-VAT and total sales do not exceed P1,500,000/year
2.

P -0No zero-VAT sale is allowed for a non-VAT business.

3.

Domestic sales to various VAT persons

Domestic sales to various non-VAT persons
Export sales denominated in foreign currency
Total VAT-exempt sales

Problem 8 27
1. VAT-registered
Domestic sales
Export sales
Total value of sales allowed with creditable Input VAT
2.

P 50,000
100,000
200,000
P350,000

P 2,000,000
3,000,000
P 5,000,000

Non-VAT registered
a. Domestic sales VAT taxable sales

P 2,000,000

b. Zero-rated sales

c. Export sales VAT-exempt sales of a non-VAT business

P 3,000,000

- 0 -