Business Taxation Problems

REVIEWER IN TAXATION
PART III
BUSINESS TAXATION
Reviewer in Taxation Part III Preliminaries
TAX RATES: VALUE-ADDED TAX
Tax
Coverage Basis
Rate
On sale of goods and properties gross selling price or gross value in money 12%
of the goods or properties sold, bartered or
exchanged
On sale of services and use or gross receipts derived from the sale or 12%
lease of properties exchange of services, including the use or
lease of properties
On importation of goods based on the total value used by the 12%
Bureau of Customs in determining tariff
and customs duties, plus customs duties,
excise taxes, if any, and other charges,
such as tax to be paid by the importer prior
to the release of such goods from customs
custody; provided, that where the customs
duties are determined on the basis of
quantity or volume of the goods, the VAT
shall be based on the landed cost
plus excise taxes, if any.
On export sales and other zero- 0%
rated sales
Transitional Input Tax beginning inventory of goods, materials 2%
and supplies, an input tax equivalent to 2%
of the value of such inventory or the actual
value-added tax paid on such goods,
materials and supplies, whichever is
higher, which shall be creditable against
the output tax.
Presumptive Input Tax Credit gross value in money of their purchases of 4%
primary agricultural products which are
used as inputs to his production(sardines,
mackerel, and milk, and in manufacturing
refined sugar and cooking oil and packed
noodle-based instant meals).
USC FERVID Page 1 of 40

TAX RATES: OTHER PERCENTAGE TAX
Coverage Basis Tax Rate

Persons exempt from VAT under Gross Receipts on sale or lease of goods, 3%
Section 109 (W) properties or services
Domestic carriers and keepers of Gross Receipts on transport of 3%
garages passengers by land (except those through
animal drawn two-wheeled vehicles)
International Carriers:
International air/shipping carriers Gross Receipts from transport of cargo 3%
doing business in the Philippines from the Philippines to another country
Franchise Grantees:
Gas and water utilities Gross Receipts 2%
Radio and television Gross Receipts 3%
broadcasting companies whose
annual gross receipts of the
preceding year do not exceed P
10,000,000 and did not opt to
register as VAT taxpayer
Overseas dispatch, message or Gross Receipts 10%
conversation originating from the
Philippines
Banks and non-bank financing On interest, commissions and discounts from lending
intermediaries performing quasi- activities as well as income from financial leasing, on the
banking functions basis of remaining maturities of instruments maturities
of instruments from which receipts are
derived:
• Maturity period is five years or less 5%
• Maturity period is more than five years 1%
On dividends and equity shares and net 0%
income of subsidiaries
On royalties, rentals of property, real or 7%
personal, profits from exchange and all
other items treated as gross income under
Sec. 32 of the Tax Code, as amended
On net trading gains within the taxable 7%
year of foreign currency, debt securities,
derivatives and other similar financial
instruments
Other non-bank financial Interest, commissions and discounts and 5%
intermediaries all other items treated as gross income
under the Tax Code, as amended
Interest, commissions and discounts from lending
activities, as well as income from financial leasing on
the basis of remaining maturities of instruments:
• Maturity period is five years or less 5%
• Maturity period is more than five years 1%
Life Insurance Companies Total premiums collected 2%
(except purely cooperative
companies or associations)
Agents of foreign insurance companies (except reinsurance premium):
Insurance agents authorized Total premiums collected 4%
under the Insurance Code to
procure policies of insurance for
companies not authorized to
transact business in the

Philippines
Owners of property obtaining Total premiums paid 5%
insurance directly with foreign
insurance companies
Proprietor, lessee or operator of the following:
Cockpits Gross receipts 18%
Cabarets, Night or Day Clubs Gross receipts 18%
videoke bars, karaoke bars,
karaoke televisions, karaoke
boxes and music lounges
Boxing exhibitions Gross receipts 10%
Professional basketball games Gross receipts 15%
Jai-alai and race track (operators Gross receipts 30%
shall withheld tax on winnings)
Winnings on horse races  Winnings or 'dividends' 10%
 Winnings from double 4%
forecast/quinella and trifecta
bets
 Prizes of owners of winning 10%
race horses
Sale, Barter, Exchange of Shares of Stock Listed and Traded through the Local
Stock Exchange or Through Initial Public Offering
Sale, barter, exchange or other Gross selling price or gross value in ½ of 1%
disposition of shares of stock money
listed and traded through the
Local Stock Exchange other than
the sale by a dealer of securities
[Sec. 127 (A)]
Sale, barter or exchange or other Gross selling price or gross value in money
disposition through initial public
offering (IPO) of shares of stock
Proportion of disposed shares to total outstanding
in closely-held corporations [Sec.
shares after the listing in the local stock exchange:
127 (B)]
 Up to 25% 4%
 Over 25% but not over 33 1/3% 2%
 Over 33 1/3% 1%
Source(s): Bureau of Internal Revenue Website

QUESTIONNAIRE SOURCE BREAKDOWN
Number
Source Name Author Type of
Questions
Business &
Rex Banggawan Textbook 14
Transfer Taxation
Transfer & Valencia &
Textbook 8
Business Taxation Roxas
Transfer, Business
Omar Ampongan Textbook 8
& Local Taxes
CPA Reviewer in
Omar Ampongan Textbook 4
Taxation
Other Sources Various - 36
Total Number of Questions 70
QUESTIONNAIRE TOPIC BREAKDOWN
Number of
Topic Type
Questions
Theories 18
Value-Added Tax
Problems 17
Theories 18
Other Percentage Tax
Problems 17
Total Number of Questions 70

Reviewer in Taxation Part III Value-Added Tax
Instructions: Select the best answer for each of the following

questions. The number and type of questions are tailored so that
this reviewer will serve as a simulation of the board exam wherein
3 hours is the ideal time to finish the test. Good luck!
VALUE-ADDED TAX
1. This refers to a stall or outlet which is not permanently fixed to
the ground and is normally set up in places like shopping malls,
hospitals, office buildings, hotels, villages or subdivisions,
churches, parks, streets and other public places, for the
purpose of selling a variety of goods/services for short durations
of time or during special events (including festivals, fiestas, etc.)
A. Businesses for mere subsistence
B. OPT subject establishments
C. Privilege stores
D. None of the above
Source(s): Section 2 (a) of RR No. 016-2013
2. A VAT-registered taxpayer treated the excess of output VAT

over input VAT as expense and was shown in the Statement of
Income and Expenses. Is it the proper treatment of VAT?
A. Yes. VAT is treated as expense and is properly shown
in the Statement of Income and Expenses.
B. No. VAT payable is considered as current liability and
must be shown in the Statement of Financial Condition.
C. Yes. But the taxpayer has the option to show it in the
Statement of Financial Condition if it is favorable to him.
D. No. There is no clear rule on how to treat VAT payable.
Source(s): NMBE 2017
3. GLD Pharma Corporation is considered a large taxpayer and

uses the eFPS for filing its tax returns. It is a VAT-registered

entity engaged in manufacturing of medicines. When is the

deadline for e-filing of output VAT of GLD Pharma Corporation
for the first quarter of 2018?
A. April 15, 2018
B. April 20, 2018
C. April 25, 2018
D. April 30, 2018
Source(s): 2016 ANC Tax Cup sponsored by SGV & Co.
4. Under the VAT law, what is “Relief?”

A. Reconciliation of listing for enforcement
B. Tax immunity available to international taxpayers
C. Tax remedy obtained under reciprocity
D. Tax remedy to avoid double taxation by non-residents
Source(s): CPAR Taxation Reviewer 2017 Preweek Batch 81

by Jack De Vera
5. This principle mandates that no VAT shall be imposed to form

part of the cost of the goods destined for consumption outside
the territorial border of the taxing authority. This is also the
reason why under our VAT Law, goods, property or services
destined, used or consumed in the Philippines are subject to the
12% VAT whereas those destined, used or consumed abroad
are subject to 0% VAT.
A. Cross Border Doctrine
B. Pre-emption Rule
C. Doctrine of Hot Pursuit
D. Cohan Rule
Source(s): BIR Ruling DA-127-06 dated March 16, 2016; See

also Consolidated Mining Development Corp. v. Commissioner
of Internal Revenue, G.R. Nos. 141104 & 148763, June 08,
2007

6. Your VAT-registered client sold locally manufactured,

assembled or re-packed products to diplomatic missions and
other agencies and/or instrumentalities granted tax immunities.
You are asked whether or not the sales are VAT exempt. What
will your answer be?
A. Sales to diplomatic missions and other agencies and/or
instrumentalities granted tax immunities, of locally
manufactured, assembled or re-packed products are not
VAT-exempt but subject to regular VAT if paid for in
Philippine Peso.
B. Sales to diplomatic missions and other agencies and/or
manufactured, assembled or re-packed products are not
VAT-exempt but subject to zero VAT only if paid for in
foreign currency.
C. Sales to diplomatic missions and other agencies and/or
manufactured, assembled or re-packed products
whether paid for in foreign currency or not are not VAT-
exempt but subject to zero rate because they are
considered export sales under E.O. No. 226.
D. Sales to diplomatic missions and other agencies and/or
manufactured, assembled or re-packed products
whether paid for in foreign currency or not are exempt
from VAT per regulations.

entity engaged in manufacturing of medicines. When is the
deadline for submitting the first quarter summary list of sales,
purchases and importations of GLD Pharma Corporation to the
BIR?
A. April 15, 2017
B. April 25, 2017

C. April 30, 2017

D. None of the Above
8. In “Oplan Kandado,” the BIR temporarily closed the business

establishments including New Dynasty Corporation that failed
to comply with VAT regulations. New Dynasty contends that it
should not be temporarily closed since it has a valid and existing
VAT registration, it faithfully issued VAT receipts, and filed the
proper VAT returns. The contention may be rejected if BIR
investigation reveals that:
A. There was an understatement of taxable purchases by
30% or more for the taxable quarter
B. The taxpayer used falsified documents to support its
application for refund of taxes
C. The taxpayer deliberately filed a false and fraudulent
return with deliberate intention to evade taxes
D. There was an understatement of taxable sales or
receipts by 30% or more for the taxable quarter
Source(s): CPA Reviewer in Taxation by Omar Ampongan

(2015 Ed., p. 524)
9. Which of the following entities fall under the category of Group

A in accordance with BIR Revenue Regulation 1-2013?
A. Air Transport
B. Farming of Animals
C. Intermediation
D. Metallic Ore Mining
Source(s): Business and Transfer Taxation by Rex

Banggawan (2016 Ed., p. 328)

10. One of your clients sells roasted chicken and canned fish.
During 2018, his gross sales are as follows:
Gross sales, roasted chicken ₱ 1,750,000

Gross sales, canned fish 3,919,500
He wants to know if he is subject to VAT. He has not

registered yet under VAT system. What will your answer be?
A. He is subject to VAT because his total sales exceeded
the VAT threshold amount.
B. He is not subject to VAT because he sells chicken and
fish in their original state.
C. He is subject to VAT because the canned fish is no
longer in its original state and the gross sales exceed
the VAT threshold amount.
D. He is not subject to VAT because he is not VAT-
registered.
11. A VAT-registered hotel owner contends that the sale of fresh

fruits and other agricultural food products to the hotel guests are
not subject to VAT. Is his contention correct?
A. Yes. His contention is correct because, as a rule, the
sale of agricultural products is exempt from VAT.
B. No. His contention is not correct because the sale of
agricultural products is incidental to the sale of services
of the hotel which is, therefore, subject to VAT.
C. Yes, his contention is correct because his gross receipts
may not exceed the VAT threshold amount.
D. No. His contention is not correct since it requires a clear
BIR Ruling.

12. Which of the following statements is (are) true?
Statement I - Construction in Progress (CIP) is considered,

for purposes of claiming input tax, as
a purchase of capital goods.
Statement II – The exchange of goods or properties including

real estate properties used in business or held
for sale or for lease by the transferor, for
shares of stocks, resulting in
corporate control is not subject to VAT.
A. Only statement one is true

B. Only statement two is true
C. Both statements are true
D. Both statements are false
Source(s): Sec. 4.110-3 of RR No. 16-2005, as amended by

RR No. 04-07; RR No. 10-2011
13. Which of the following is (are) included as part of gross

receipts on sale of services for VAT purposes?
I. Amount charged for materials supplied with the

services
II. Deposits whether or not applied as payment for
services rendered
III. VAT
IV. Advance payments
A. I & II Only
B. I & IV Only
C. I, II, & IV Only
D. I, II, III & IV
Source(s): Section 4.108-4 of RR 16-2005

14. How many statement is (are) true?
Statement I – Input taxes attributable to regular sales can

be claimed as input tax credits for VAT
purposes.
Statement II – Input taxes attributable to zero-rated sales

can be claimed as input tax credits for VAT
purposes.
Statement III – Input taxes attributable to exempt sales can

be claimed as input tax credits for VAT
purposes.
A. 3
B. 2
C. 1
D. 0
15. Mr. Sio Pao, a manufacturer of dimsum products to its

customers, had the following transactions during the month:
I- Sold its dimsum products to customers.

II - Due to excess funds, Mr. Sio Pao invested in the
shares of stock of MSC, a domestic corporation that
is listed and traded in the stock exchange, and
sold them during the same month to Ms. Sio Mai.
III - Mr. Sio Pao sold his family home.
Which of the following statements (is) are true?

A. Only one of the transactions is subject to business tax
B. Only two of the transactions are subject to business tax
C. All three transactions are subject to business tax
D. None of the transactions are subject to business tax

Source(s): Transfer and Business Taxation by Valencia &

Roxas (7th Ed., p. 381)
16. Which of the following statements (is) are false?
Statement I – The BIR Certificate of Registration, together

with BIR Form 0605 should be placed at a
conspicuous place of the taxpayer’s
business to avoid being subject to penalties
and fines.
Statement II – Franchise Grantees of Radio and Television

Broadcasting (FGRTBC) whose gross
annual receipts exceeds P10,000,000 in
shall be required to register within 10 days
before the beginning of the calendar quarter.
Statement III – The VAT registration of a VAT registered

business, whether optionally registered or
not, shall only be cancellable only after the
“3-year lock-in period” has lapsed.
Statement IV – A taxpayer falling under the Group E

category under BIR Revenue Regulation No.
1-2013 shall be electronically required to file
and pay its monthly VAT (or OPT,
whichever is applicable) within 20 days
following the end of the month.
A. Only 1 statement is false

B. Only 2 statements are false
C. Only 3 statements are false
D. All of the statements are false

Roxas (7th Ed., pp. 392, 404, 406 & 411)

Statement I - When a VAT exempt person imports goods

from a foreign country and sells these goods to
a VAT registered person, the VAT registered
person shall be considered the functional
importer of the goods in question.
Statement II – Immediately effective January 1, 2018, PEZA

entities and locators who are into constructive
importation; or, sale of raw materials or
packaging materials to resident export
oriented enterprises are subject to 12% VAT.
A. Only statement 1 is true

B. Only statement 2 is true
D. Neither statement 1 nor statement 2 is true
Source(s): Transfer, Business & Local Taxation by Omar

Ampongan (11th Ed., p. 419)
18. Which of the following transactions are not considered

“Transactions Deemed Sales?”
I- Cessation of Status as a VAT registered person

II - Cessation of Status as a non-VAT person
III - Distribution or transfer to creditors in payment of
debt or obligation
IV - Merger or consolidation of corporations
V- Change of control of a corporation by the
acquisition of a controlling interest of such
corporation by another stockholder or group of
stockholders
A. Four of these
B. Three of these
C. Two of these

D. Only one of these
Source(s): Business and Transfer Taxation by Rex Banggawan

(2016 Ed., pp. 219 & 223)
19. In 2017, Didi sold to Pac two of his adjacent lots valued at
₱1,800,000 and ₱2,050,000. The two lots are to be utilized by
Pac as one residential area. The adjacent lots are covered by
separate titles and/or separate tax declarations covered by
separate Deeds of Conveyance when sold to Pac. Determine
the VAT due on the transaction.
A. ₱ 216,000
B. ₱ 246,000
C. ₱ 462,000
D. ₱ 0
Source(s): RR No. 13-2012
20. The following capital goods acquisitions happened during the

first month of the first quarter of the current year (exclusive of
VAT):
Office Computer (Estimated life of 3 years) ₱ 100,000

Office Furniture (Estimated life of 5 years) 200,000
Vehicle for land transport (Estimated life of 700,000
5 years)
How much input tax can your client credit against its output tax
for the month?
A. ₱ 120,000
B. ₱ 36,000
C. ₱ 3,733.33

21. Sugarco Company buys sugar cane from farmers, processes

them on its refinery and sells the output to wholesalers. The
following relates to its processing and refining activities during
a month:
Purchase of cane sugar from cane ₱ 2,000,000

farmers
Refining expenses, including ₱24,000 324,000
VAT
Total Production of 50 kg-bag refined 4,000 bags
sugar
What is the net VAT payable assuming that Sugarco was able
to sell 3,800 bags at ₱1,800/bag during the month and that
advanced VAT had been paid on the 4,000 bags produced?
(Base price of advanced VAT is ₱1,400 per 50 kg bag)
A. ₱ 716,800
B. ₱ 148,000
C. ₱ 68,000
D. ₱ 44,800

(2016 Ed., pp. 311-312)
22. Prince Corporation, a VAT-registered business that engaged in

the production and sales of school and office supplies, reported
the following business transactions during the year:
Regular VAT sales (per VAT Invoice) ₱ 2,240,000

Sales to ECOZONE Enterprise 1,500,000
Sales of textbooks (VAT-Exempt) 1,200,000
Sales to City of Baguio (per VAT Invoice) 336,000
Common Input VAT 200,000
Cost of Sales 2,000,000
Itemized deductions allowed 1,461,000
What is the net VAT payable?

A. ₱ 100,000
B. ₱ 136,000
C. ₱ 121,000
D. ₱ 280,000

Roxas (7th Ed., pp. 531-532)
23. Northern Electric is a generation company with the following

receipts during a month:
Sale of electricity generated from hydro ₱ 12,000,000

plant
Sale of electricity generated from solar 10,000,000
plant
Sale of electricity from coal-powered plant 30,000,000
Sale of electricity from natural gas-power 15,000,000
plant
What is the output VAT for the month?

A. ₱ 1,800,000
B. ₱ 6,600,000
C. ₱ 5,400,000
D. ₱ 3,600,000

24. Akinto, a VAT-registered sole proprietorship business, is formed

into a corporation named WE Corporation. On the date of
incorporation, the records of Akinto reveal the following:
Particulars Cost or Market Value

Book Value
Merchandise Inventory ₱ 50,000 ₱ 40,000
Equipment 200,000 150,000
Furniture & Fixtures 60,000 80,000

How much is the output VAT arising as a result of the

incorporation?
A. ₱ 37,200
B. ₱ 32,400
C. ₱ 30,000
D. ₱0. Since the control of the corporation and sole
proprietorship are essentially vested on the same
person, it is not a transaction deemed sale.

25. The following figures were taken from the Income Statement as
part of the audited financial statements (FS) as attachment to
the annual Income Tax Return (ITR) submitted to the Bureau of
Internal Revenue (BIR) by your client. (assume figures in ITR
and FS are the same)
External sales -
Valued added tax -
Intercompany sales ₱114,780,217.00
Sales ₱114,780,217.00
Cost of merchandise sales
Beginning inventory ₱31,974,289.00

Unrealized profit -
Inventory, beg ₱31,974,289.00
Import purchases 111,198,133.00

Local purchases -
Intercompany purchases -

Purchases ₱111,198,133.00
Ending inventory 35,465,884.00

Unrealized profit -
Inventory, end ₱35,465,884.00
Total ₱107,706,538.00
Total cost of sales 107,706,538.00
Gross profit ₱7,073,679.00
Operating expenses:
Salaries and wages 3,923,277.00
Rentals 840,000.00
Office supplies 34,766.00
Taxes, licenses and registration 596,768.00
Professional fees 35,000.00
Depreciation and amortization -
Total Operating Expenses ₱5,429,811.00
Interest income -
Listing fee -
Rebates -
Interest expense -
Other income -
Operating income ₱1,643,868.00
Income taxes
Net income ₱1,643,868.00

Per FS note disclosures, you read that the operating expenses

reported in the ITR were shouldered first by another company
(sister company). With this, you asked your client and confirmed
that the same is really shouldered by another corporation.
Upon further examination, you found out that your client doesn’t
really have any accounting system and doesn’t maintain any
books. You also learned that it engaged another firm to
reconstruct its FS for company’s own purposes. Right after, you
decided to get a copy of the said reconstructed FS only to find
out that the operating expenses reported under that
reconstructed FS amounted to ₱21,902,224.34 (reported
depreciation is nil).
Assuming the Value-Added Tax (VAT) liability reported in the

Balance Sheet (BS) submitted by your client to the BIR is
correct, compute for the possible additional VAT liability that the
BIR may assess based on the foregoing. (exclude the effects of
increments and round of the answer to 2 decimal places)
A. ₱ 197,264.16
B. ₱ 651,577.32
C. None since there is an excess input tax credit of
₱13,995,353.28 because Intercompany sales are not
subject to VAT
D. None since there is an excess input tax credit of
₱150,115.08 because it is the purchases and not the
cost of goods sold that is used to compute the net VAT
payable
Source(s): NMYC Tax Cup 2015
26. Bata, a VAT registered person had the following data on

importation of goods from Canada:
Purchase price of goods from Canada ₱ 1,000,000

Freight and Insurance Premiums 200,000

Customs Duties (40% of dutiable -

value)
Other import charges and expenses 120% of
before the release of the goods from Customs
customs duty Duties
What is the VAT due on the importation?

A. ₱ 270,720
B. ₱ 201,600
C. ₱ 270,720
D. ₱ 241,920

27. Lola Immaculada, a 63-year-old grandmother, was treated by

her grandchildren Conrado, Crispin and Pedro to Max’s
restaurant during grandparents’ day and their total bill is
₱2,240 before considering the fact that Lola Immaculada is a
Senior Citizen. How much is the VAT on the bill of Lola
Immaculada?
A. ₱ 240
B. ₱ 180
C. ₱ 100
D. ₱ 60

by Jack De Vera
28. Using the same information as number 27 except that the seller
is now a non-VAT enterprise and that the ₱2,240 is the amount
due to the non-VAT enterprise before considering the discount
allowable to Lola Immaculada, how much is the discount of Lola
Immaculada?
A. ₱ 100
B. ₱ 112
C. ₱ 160

D. ₱ 180

by Jack De Vera
29. Jebby is a VAT-registered real estate dealer. Details of

property sold in 2017 were as follows:
Selling price (net of VAT) ₱ 6,000,000

Zonal Value 6,300,000
FMV in the assessment rolls 5,800,000
Payments made by its customer as of March 15, 2016 were

summarized as follows:
March 15, 2017 ₱ 750,000

October 15, 2017 750,000
March 15, 2018 2,250,000
How much is the output VAT to be recorded in March 15, 2017

collection?
A. ₱ 0
B. ₱ 90,000
C. ₱ 94,500
D. ₱ 600,000
30. Using the same information as number 29, except that the FMV
in the assessment rolls is ₱6,500,000, how much is the output
VAT to be recorded in the March 2018 collection?
A. ₱ 0
B. ₱ 292,500
C. ₱ 270,000
D. ₱ 600,000


entity engaged in manufacturing of medicines.
Here are the results of the Company’s operations as of March

31, 2017:
Decrease in input VAT on goods (February ₱ 550,000

to March)
Decrease in input VAT on Services 640,000
(February to March)
Decrease in deferred input VAT on capital 70,000
goods (February to March)
Details of VAT payment for February 2017 are as follows:
Output VAT ₱ 30,000,000

Input VAT on goods 18,000,000
Input VAT on services 3,500,000
Input VAT on capital goods 70,000
 Julengjeng, the Company’s Accounts Payable

Associate, recorded the purchase of packaging
materials (total invoice amount = ₱1,600,000) as
purchase of services instead of purchase of goods.
 The Company has unrecorded input VAT on employee
reimbursement for meals and hotel accommodation for
business use amounting to ₱52,000
 The Company has no purchase of capital goods for the
month of March 2016.
 The Company made income payments for services
rendered by non-residents subjected to withholding VAT
amounting to ₱140,000.
 Amortization of input VAT on purchases of capital goods
greater than ₱1,000,000 is ₱70,000.

In addition, the Company’s records of importations for March

2017 are summarized as follows:
Input VAT on importations recorded ₱ 17,000,000

per books
Landed cost per Import Entry 142,000,000
Document
Dutiable value per import entry 137,000,000
document
Furthermore, the Company recorded the following adjustments

to correct the input VAT in February 2017 but only recorded in
the books during March 2017:
Decrease in input VAT on importation – ₱ 100

February 2017
Unrecorded employee reimbursements – 10,000
February 2017
Withholding VAT on services of non- 390,000
resident – February 2017
How much is the adjustment to correct the input VAT on

importations for March 2017?
A. ₱ 40,000 increase
B. ₱ 560,000 decrease
C. ₱ 31,440,000 increase
D. None of the choices are correct
32. Using the same information as number 31, how much is the
correct input VAT on goods to be claimed for March 2017?
A. ₱ 17,450,000
B. ₱ 17,621,428.57
C. ₱ 17,661,428.57
D. ₱ 17,661,528.57

correct input VAT on services to be claimed for March 2017?
A. ₱ 2,860,000
B. ₱ 2,688,571.43
C. ₱ 2,480,571.43
D. ₱ 2,318,071.43
correct input VAT on capital goods to be claimed for March
2017?
A. ₱ 0
B. ₱ 70,000
C. ₱ 35,000
D. ₱ 140,000
35. Using the same information as number 31, how much is the total
amount of input VAT that the company can claim for March
2017?
A. ₱ 20,420,000
B. ₱ 20,212,000
C. ₱ 20,212,100
--END--

Reviewer in Taxation Part III Other Percentage Tax
OTHER PERCENTAGE TAX

1. Which of the following is subject to common carrier’s tax?
(Assume that none are businesses for mere subsistence or are
marginal income earners)
A. Mr. Horse, operator of an autocalesa
B. Strong Co., carrier which transports its own cargo
C. Mr. Boat, operator of a banca
D. Mr. Engine, operator of a tricycle

(2015 Ed., p. 461)
2. Which of the following business activities is (are) vatable

franchises?
A. Electricity
B. Telecommunications
C. Transportation
D. All of the above
Source(s): Self-made with reference to Business and Transfer

Taxation by Rex Banggawan (2016 Ed., p. 143)
3. A hotel operator that is a VAT-registered person and who leases

luxury vehicles to its hotel customers is
A. Subject to 3% common carriers’ tax and 12% VAT
B. Subject to 3% common carriers’ tax only
C. Subject to 12% VAT only
D. Exempt from business taxes

(2015 Ed., p. 477)
4. An offering of shares to the investing public subsequent to an

initial public offering
A. Secondary offering
B. Primary offering

C. Follow-on/Follow-through offering
D. Follow-up offering

(2015 Ed., p. 481)
5. Which of the following are the requisites in order for the gross
receipts from professional basketball to be exempt from
percentage tax?
A. World or Oriental Championship
B. At least two of the contenders are Filipino citizens
C. The promoter is a Filipino citizen or a corporation, more
than 50% of which is owned by Filipino citizens

6. A resident citizen makes overseas calls to his parents who live

in the United Sates of America. There are times when it is his
parent’s turn to call him from the USA. The calls are personal in
nature and are paid for by his parents in USA. He asked you
whether or not he is subject to the 10% overseas
communications tax. What will you tell him?
A. He is subject to the 10% overseas communications tax
on his calls to his parents.
B. He is subject to the 10% overseas communications tax
on his calls to his parents and the calls of his parents
origination from USA.
C. He is not subject to the 10% overseas communications
tax because the calls are personal in nature.
D. He is not subject to the 10% overseas communications
tax because the calls are paid for by his parents who are
in USA.

7. Makikiraan Po Transportation Company is a holder of a

franchise which operates 12 units of buses in the Ilocos Region.
It also owns a gas station, which is used exclusively to load its
own buses although in very rare instances it is accepting repair
jobs from outsiders. During the month of December 2017, it had
the following gross receipts:
From the buses ₱ 280,000

From the gas station 300,000
From the garage 12,000
The common carrier’s tax is payable by the company without

any penalty on or before what date?
A. January 15, 2018
B. January 20, 2018
C. January 25, 2018
Source(s): Level 2 Quizbowl Training 2017
8. This refers to “a bet to predict the first and second finisher in a

particular race”
A. Double
B. Forecast
C. Trifecta

9. The formula for net winnings is:

A. Winnings less cost of ticket
B. Winnings less appropriate tax
C. Winnings less cost of ticket and less appropriate tax
D. Winnings is equivalent to net winnings


10. Which of the following is false?

A. OPT is imposed on business transactions
B. OPT follows the consumption/destination principle
C. OPT is an indirect, ad valorem and privilege tax
D. None of the choices are false

Roxas (7th Ed., pp. 660-661)
11. The following are entities whose frequency of reporting are

monthly, except:
A. Life insurance companies
B. Operators of international air and shipping carriers
C. Franchise grantees of gas and water
D. Franchise grantees of telephone or telegraph
messages transmitted outside the Philippines

12. Other Percentage Tax subject transactions
I- Are not subject to VAT.

II - Are not exempt from Business Tax.

D. Both statements are false
Source(s): NIRC

13. Which of the following statements (is) are false?
Statement I – Calls made from one place in the Philippines

to another place in the Philippines is subject
to VAT or OPT, as the case may be.
Statement II – Calls made from abroad to a place in the

Philippines is subject to
Zero-rated VAT subject to zero-rating
requirements. Otherwise, this is exempt from
VAT.
Statement III – Calls made from a place in the Philippines

to abroad are subject to 10% overseas
communication tax in all cases.
A. Only one statement is false

B. Only two statements are false
C. All of the statements are false
D. None of the statements are false

Taxation by Rex Banggawan (2016 Ed., p. 141)
14. Which of the following statements is (are) false?
Statement I – Under section 116 of the NIRC, cooperatives

shall be exempt from 3% percentage tax.
Statement II – The exemption of cooperatives from 3%

percentage tax is absolute.
A. Only statement one is false

B. Only statement two is false
C. Both statements are false
D. Neither statements are false


15. Which of the following statements is (are) false?
Statement I – Tax on winnings shall be remitted to the BIR

within 20 days from the date the same is
withheld.
Statement II – IPO tax shall be filed and paid within 5

banking days from the date of collection.
Statement III – Overseas communications tax shall be paid

within 20 days after the end of each quarter.
Statement IV – Stock transactions tax shall be filed and

paid within 30 days from the date of listing
in the stock exchange.

C. Only three statements are false
D. All of the statements are false

Statement I – The additional gross receipt tax as a result of

pre-termination shall be reflected as a
separate line item in the Gross Receipt Tax
return covering all transactions for the month
in which the pre-termination took place.
Statement II – BSP shall withhold the OPT of bank & non-

bank financial institutions to special deposit
accounts and reserve liquidity accounts.


D. Neither statement one nor statement two are true
Source(s): RR 4-2009; BSP Memorandum No. M-2014-029
17. Pilipinas Company is a domestic sea/air carrier operating in the

Philippines. Which of the following statements is (are) true?
Statement I – Transport of passengers and cargo from an

area in the Philippines to another area in the
Philippines is subject to VAT or OPT, as the
case may be.
Statement II – Transport of passengers and cargo from the

Philippines to a Foreign country is exempt
from VAT.
Statement III – Transport of passengers and cargo from a

Foreign country to the Philippines is subject
to Zero rated VAT.
A. Only one statement is true

B. Only two statements are true
C. All of the statements are true
D. None of the statements are true

Taxation by Rex Banggawan (2016 Ed., pp. 139-141) and
Transfer and Business Taxation by Valencia & Roxas (7th Ed.,
pp. 667-669)
18. Intsik Company is an international air and shipping carrier doing

business in the Philippines. Which of the following statements
are false?

Statement I – Transport of passengers, regardless of

whether from the Philippines to a Foreign
country or vice versa, is exempt from VAT &
OPT.
Statement II – Transport of cargo from the Philippines to a

Foreign country is subject to OPT.
Statement III – Transport of cargo from a Foreign country to

the Philippines is exempt from VAT and
OPT.

C. All of the statements are false
D. None of the statements are false

Taxation by Rex Banggawan (2016 Ed., pp. 139-141) and
Transfer and Business Taxation by Valencia & Roxas (7th Ed.,
pp. 667-669)
19. Makikiraan Po Transportation Company is a holder of a

franchise which operates 12 units of buses in the Ilocos Region.
It also owns a gas station, which is used exclusively to load its
own buses although in very rare instances it is accepting repair
jobs from outsiders. During the month of December 2017, it had
the following gross receipts:
From the buses ₱ 280,000

From the gas station 300,000
From the garage 12,000
What is the common carrier’s tax payable?

A. ₱ 8,400
B. ₱ 8,760
C. ₱ 17,760
D. ₱ 0


(2015 Ed., p. 464)
20. Mr. Operator had the following gross receipts from operating
the following events during the month of March:
Billiards ₱ 150,000
Amateur Basketball Game 180,000
Professional Basketball Game 120,000
Concert by Jake Zyrus 320,000
What is the amusement tax due?

A. ₱ 4,500
B. ₱ 27,000
C. ₱ 18,000
D. ₱ 9,600
Source(s): 2017 CF JPIA Level II Annual Accounting Quizbowl

Sponsored by RG Manabat & Co.
21. Sunset Insurance Company, a domestic corporation, had the

following receipts related to its insurance premiums:
Health & Accident Insurance ₱ 2,340,000

Motor Vehicle Insurance 1,250,000
Life & Disability Insurance 1,850,000
Property Insurance 2,840,000
The percentage tax is:

A. ₱ 83,800
B. ₱ 92,500
C. ₱ 272,000
D. ₱ 414,000
Source(s): NMBE 2015; Answer modified to become updated

to the provisions of Sec. 1, R.A. 10001 amending Sec. 123 &

183 of the NIRC; See also Business and Transfer Taxation by

Rex Banggawan (2016 Ed., p. 151)
22. On December 1, 2017, Pinoy bank loaned to a client

₱1,000,000 payable within 10 years. The loan pays 10%
interest every December 1 with the first interest payment due
on December 1, 2018. On December 1, 2022, the client pre-
terminated the loan by repaying the principal in full. How much
is the gross receipt tax due as a result of the pre-termination?
A. ₱ 5,000
B. ₱ 9,000
C. ₱ 16,000
D. ₱ 25,000

(2016 Ed., p. 150)
23. Tela-Pono Company a franchise grantee of telephone services

reported the following receipts for the quarter:
Receipts from overseas calls ₱ 3,000,000

Receipts from domestic calls 2,000,000
What is the total business tax payable?

A. ₱ 240,000
B. ₱ 90,000
C. ₱ 540,000
D. ₱ 150,000

24. Mang Benton is an operator of a taxi and a car for hire in Cebu
City. The taxi reported gross receipts of ₱26,000 in the month.
The car for hire was indefinitely garaged for repair when its
chauffeur bumped it to a bus. The car registered only ₱600

receipts in the same month. How much is the percentage tax

due for the month?
A. ₱ 798
B. ₱ 66
C. ₱ 54
D. ₱ 810

25. May Sabit is a grantee of several franchises. Her gross receipts

for the year ended included the following:
From water distribution ₱ 1,500,000

From electric distribution 2,000,000
Total receipts ₱ 3,500,000
How much is the total business tax payable from the

transactions above?
A. ₱ 420,000
B. ₱ 70,000
C. ₱ 270,000
D. ₱ 220,000

Roxas (7th Ed., pp. 669-670)
26. A stockholder of a closely held corporation owns 100,000

shares or 20% of the outstanding capital stock before the IPO.
The cost of the share is ₱1,000,000. During the IPO, the shares
are selling at ₱12 per share. His broker-friend advises him not
to sell his shares during the IPO but instead to wait until after
the IPO. After the IPO, the outstanding shares of the closely
held corporation are 1,000,000 shares and are now selling at
₱14 per share at the local stock exchange. The stockholder of
the closely held corporation approaches you to

seek your advice because he is also planning to sell the shares

directly to his friend and, therefore, will not be traded through
the local stock exchange at ₱15 per share. How much is the net
tax benefit (loss) if he chooses to sell the stock after the IPO
instead of during the IPO?
A. ₱ 48,000
B. ₱ 41,000
C. ₱ 17,000
D. ₱ 7,000
Source(s): ReSA Taxation First Pre-board Examination on

February 05, 2017
27. Using the same information as number 26, how much is the net
tax benefit (loss) if he chooses to sell the stocks to his friend
instead of selling the stocks through the local stock exchange?
A. ₱ 45,000
B. (₱ 45,000)
C. ₱ 38,000
D. (₱ 38,000)
Source(s): ReSA Taxation First Pre-board Examination on

February 05, 2017
28. A bank had the following income in April 2017 and May 2017,
respectively
Particulars April May

Interest income from ₱ 100,000 ₱ 100,000
short-term loans
Rentals 50,000 50,000
Net trading gain (loss) (10,000) 20,000
The gross receipt tax for the month of April is:

A. ₱ 7,800
B. ₱ 8,500
C. ₱ 7,500
D. ₱ 9,800

(2016 Ed., p. 147)
29. Using the same information as number 28, what is the gross
receipt tax for the month of May?
A. ₱ 9,900
B. ₱ 9,200
C. ₱ 11,900
D. ₱ 11,200

(2016 Ed., p. 147)
30. Printers Corporation, closely held, has an authorized capital

stock of 10,000 shares with a par value of ₱1.00 per share as of
January 1, 2017. Of the 10,000 authorized shares, 2,500
thereof is subscribed and fully paid up by the following
stockholders:
Galog 500
Oyang 500
Idong 500
Kulas 500
Manay 500
Total Shares Outstanding 2,500
Printers Corporation finally decides to conduct an initial public

offering and initially offers 2,500 of its unissued shares to the
investing public. After the IPO in March 2017, Printers
Corporation’s total issued shares increased from 2,500 to 5,000
shares. At the IPO, one of the existing stockholder,

Manay, has likewise decided to sell her 500 shares to the public.
If the unissued shares were offered at ₱10 per share, how much
is the tax due on the primary offering?
A. ₱ 250
B. ₱ 500
C. ₱ 1,000

Ampongan (11th Ed., pp. 489-490)
31. Using the same information as number 30 and that that the
shares of Manay were also offered at ₱10 per share, how much
is the total tax due on the IPO?
A. ₱ 250
B. ₱ 450
C. ₱ 500
D. ₱ 1,000

Ampongan (11th Ed., pp. 489-490)
32. HIM Finance Corporation imports machineries from abroad and

sells them under a deferred financing scheme. February 28,
2017, it sold a machine with an acquisition cost of
₱257,710 for ₱300,000 payable in ₱100,000 monthly installments
starting March 31, 2017. The loan earns 8% effective monthly
interest. How much is the gross receipt tax for the month of
March?
A. ₱ 15,000
B. ₱ 5,000
C. ₱ 1,443.18
D. ₱ 1,030.84

(2016 Ed., p. 149)

33. Using the same information as number 32 except that the lease
is classified as an operating lease and ₱100,000 constitutes the
monthly operating lease payments of the lessee, what is the
gross receipt tax for the month of March?
A. ₱ 15,000
B. ₱ 5,000
C. ₱ 1,443.18
D. ₱ 1,030.84

34. Carrie Rista operates a racetrack. Other than the restaurant that
it operates, it also allows “Burger ka Dyan Burger,” a burger
stand operated by a concessionaire, to sell foods inside its
premises. The gross receipts during the month are as follows:
From operation of racetrack ₱ 1,200,000

From restaurant 600,000
From television coverage 400,000
The gross receipts of “Burger ka Dyan Burger” amounted to

₱450,000. How much is the amusement tax payable by Carrie
Rista?
A. ₱ 795,000
B. ₱ 660,000
C. ₱ 135,000
D. ₱ 0

amusement tax payable by “Burger ka Dyan Burger?”
A. ₱ 795,000

B. ₱ 660,000
C. ₱ 135,000
D. ₱ 0

--END--
GROUP 6 (DEP DEP)

Acruz, Judy Ann
Cartilla, James Mauie C.
Literal, Maureen June M.
Mandiadi, Lois Mari D.
Ochea, Justine Rey V.
Rosales, Jan Stefano B.
Serad, Josia Alaine J.
Taveros, Miguel Albert M.

Business Taxation Problems

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REVIEWER IN TAXATION

TAX RATES: VALUE-ADDED TAX

USC FERVID Page 1 of 40

TAX RATES: OTHER PERCENTAGE TAX

Coverage Basis Tax Rate

USC FERVID Page 2 of 40

Source(s): Bureau of Internal Revenue Website

USC FERVID Page 3 of 40

QUESTIONNAIRE SOURCE BREAKDOWN

QUESTIONNAIRE TOPIC BREAKDOWN

USC FERVID Page 4 of 40

Instructions: Select the best answer for each of the following

Source(s): Section 2 (a) of RR No. 016-2013

2. A VAT-registered taxpayer treated the excess of output VAT

Source(s): NMBE 2017

3. GLD Pharma Corporation is considered a large taxpayer and

USC FERVID Page 5 of 40

entity engaged in manufacturing of medicines. When is the

Source(s): 2016 ANC Tax Cup sponsored by SGV & Co.

4. Under the VAT law, what is “Relief?”

Source(s): CPAR Taxation Reviewer 2017 Preweek Batch 81

5. This principle mandates that no VAT shall be imposed to form

Source(s): BIR Ruling DA-127-06 dated March 16, 2016; See

USC FERVID Page 6 of 40

6. Your VAT-registered client sold locally manufactured,

Source(s): NMBE 2016

7. GLD Pharma Corporation is considered a large taxpayer and

USC FERVID Page 7 of 40

C. April 30, 2017

Source(s): 2016 ANC Tax Cup sponsored by SGV & Co.

8. In “Oplan Kandado,” the BIR temporarily closed the business

Source(s): CPA Reviewer in Taxation by Omar Ampongan

9. Which of the following entities fall under the category of Group

Source(s): Business and Transfer Taxation by Rex

USC FERVID Page 8 of 40

Gross sales, roasted chicken ₱ 1,750,000

He wants to know if he is subject to VAT. He has not

Source(s): NMBE 2016

11. A VAT-registered hotel owner contends that the sale of fresh

Source(s): NMBE 2016

USC FERVID Page 9 of 40

12. Which of the following statements is (are) true?

Statement I - Construction in Progress (CIP) is considered,

Statement II – The exchange of goods or properties including

A. Only statement one is true

Source(s): Sec. 4.110-3 of RR No. 16-2005, as amended by

13. Which of the following is (are) included as part of gross

I. Amount charged for materials supplied with the

Source(s): Section 4.108-4 of RR 16-2005

USC FERVID Page 10 of 40

14. How many statement is (are) true?

Statement I – Input taxes attributable to regular sales can

Statement II – Input taxes attributable to zero-rated sales

Statement III – Input taxes attributable to exempt sales can

Source(s): NMBE 2016

15. Mr. Sio Pao, a manufacturer of dimsum products to its

I- Sold its dimsum products to customers.

Which of the following statements (is) are true?

USC FERVID Page 11 of 40

Source(s): Transfer and Business Taxation by Valencia &

16. Which of the following statements (is) are false?

Statement I – The BIR Certificate of Registration, together

Statement II – Franchise Grantees of Radio and Television