Taxation Under The Train Law: 1 - Page

1|Page TAXATION UNDER THE TRAIN LAW
INCOME TAXATION
1. Tax Reform for Acceleration and Inclusion (TRAIN Law) is known as
a. RA 10693
b. RA 19369
c. RA 10963
d. RA 10639
2. Statement 1. Individual taxpayers receiving purely compensation income from only one employer
whose income tax has been correctly been withheld by their employer shall not be required to file
an income tax return.
Statement 2. Exempts individual taxpayers whose taxable income does not exceed P250,000
from the requirement to file income tax return.
a. Both statement are true
b. Both statement are false
c. Statement 1, true; Statement 2, false
d. Statement 1, false; Statement 2, true
3. The date of filing the first quarter tax return for individual taxpayers engaged in business or
practice of profession
a. April 15
b. May 15
c. June 15
d. July 15
4. The deductibility of premium payments on health and/or hospitalization insurance is

a. P2,400 per family
b. P200 a month from gross income of individual taxpayers.
c. Both (a) and (b)
d. Not applicable
5. TRAIN Law eliminates the personal and additional exemption allowances which means that
a. Fixed income earners or compensation income earners will be uniformly taxed on net
basis, without regard to their circumstances
b. Fixed income earners or compensation income earners will be uniformly taxed on gross
basis, without regard to their circumstances
c. Income earners or compensation income earners will be uniformly taxed on net basis,
without regard to their circumstances
d. Income earners will be uniformly taxed on gross basis, without regard to their
circumstances
6. Statement 1. Income of purely self-employed individuals and/or professionals - Self-employed

individuals and/or professionals may, at their option, be subject to either 8% on gross income in
excess of P250,000 or regular individual income tax rates.
Statement 2. The 8% tax shall be in lieu of graduated income tax rates and percentage tax.
7. Statement 1. Under TRAIN Law, PCSO and Lotto winnings are Tax-exempt.
Statement 2. Interest income on foreign currency bank deposits increases the tax rate on
interest income (whether received by an individual taxpayer or corporation) from foreign currency
bank deposits from 7.5% to 10%.
8. Statement 1. Under TRAIN Law, capital gains tax on sale of shares of stock are the two-tiered
rate of 5% and 10% tax on the sale, transfer or exchange of shares of stock.
Statement 2. Thee fringe benefit tax (FBT) rate increases from 32% to 33%.
9. Tax-exempt threshold for 13th month pay and other bonuses under TRAIN Law is
a. P82,000
b. P85,000
c. P92,000
d. P90,000
10. Statement 1. Under TRAIN Law, the income tax rates for individual taxpayers and corporations
restructures by replacing the existing 5%-32% graduated tax rates with 0%- 35% progressive tax
rates with the number of tax brackets reduced from seven to six, and thresholds for each tax
bands adjusted.
Statement 2. Under the TRAIN, individual taxpayers and corporations who have less than
P250,000 taxable income will fall into the lowest tax bracket, and their income will be subject to
0% income tax rate while the tax rate applicable on the taxable income of those earning above
P8M will be raised from 32% to 35%.
11. How many of the following statements are correct?
Statement 1. Compensation income shall be subject to graduated income tax rates for
compensation income.
Statement 2. Those whose gross sales or gross receipts and other non-operating income
exceed the VAT threshold, shall have the option to be subject to 8% tax based on gross sales
or receipts and other non-operating income from business or practice of profession or
graduated income tax rates.
Statement 3.Those whose gross sales or gross receipts and other non-operating income do
not exceed the VAT threshold has no available option. They shall be automatically subject to
the graduated income tax rates.
a. One b. Two c. Three d. Zero
12. Fringe benefit tax (FBT) rate increase by:

a. a. 0% b. 3% d. 32% d. 35%
13. Statement 1. Under the TRAIN Law, General Professional Partnerships (GPPs) and the partners
comprising the partnership are not allowed to avail of the optional standard deduction (OSD).
Statement 2. Under the TRAIN Law, premium payments on health and/or hospitalization
insurance in the amount of P2,400 per family or P200 a month from gross income of individual
taxpayers is not deductible.

14. Which of the following is tax-exempt?

a. Lotto winnings amounting to P8,000.
b. Royalties on books and other literary works
c. PCSO winnings amounting to P11,000
d. Winnings on Sweepstakes amounting to more than P10,000.
15. Statement 1. The list of Tax-exempt corporations includes GSIS but not PCSO.
Statement 2. Interest income on foreign currency bank deposits increased by 15%

16. TRAIN Law mandates that the individual income tax return shall consist only of four (4) pages
and contain:
I. The personal profile;

II. Net sales or income from compensation or trade or business, or exercise of
profession
III. Allowable deductions
IV. Gross income
V. Tax due and payable of individual taxpayers.
a. I, II and III only

b. II, III and IV only
c. I, III, and V only
d. All are included
17. TRAIN law mandates that the corporate income tax return shall consist a maximum of four (4)
pages and shall contain:
I. The personal profile;

II. Gross sales or income gross sales or income from services or conduct of trade or
business
III. Allowable deductions
IV. Taxable income
V. Tax due and payable of individual taxpayers.
a. I, II and III only

b. II, III and IV only
c. I, III, and V only
d. All are included
18. In case of individual taxpayers with tax due in excess of P2,000 and availing of the option to pay
their tax due in two equal installments, TRAIN Law moves the due date for paying the second
installment from July 15 to:
a. August 15
b. September 15
c. October 15
d. December 15
19. Under the TRAIN Law, individual taxpayers receiving purely compensation income from only one
employer whose income tax has been correctly been withheld by their employer
a. Shall be required to file an income tax return, always

b. Shall not be required to file an income tax return
c. Shall be required to file an income tax return, in some cases
d. Has the option to file an income tax return or not
20. Statement 1. TRAIN Law provides the privilege to avail of the 15% preferential tax rate on gross
income of employees of ROHQs/RHQs, OBUs and Petroleum Contractors and Subcontractors
which shall be established starting January 1, 2018.
Statement2. Existing RHQs, ROHQs, OBUs and Petroleum Service Contractors and
Subcontractors presently availing of the 15% preferential tax rate for their qualified employees
shall continue to be entitled to avail of the preferential tax rate for their present and future
qualified employees.

21. Atom, a native of Naga City, supporting his brother, 18 years old, unmarried, not gainfully
employed, studying Bachelor of Science in Accountancy at the University of Santo Thomas, is
entitled to a total personal exemption of –
a. P25,000 c. P75,000
b. P50,000 d. -0-
22. Clarice, single, supporting his 58-year old mother, is a business income earner. During the year,
his net income was P150,000. She also paid a total premium of P3,000 to an insurance company
for her health insurance. How much is her taxable income?
a. P97,600 c. P100,000
b. P150,000 d. P122,600
Items 23-25 are based on the following information:

Carlo received the following income in 2018:
Business income, Philippines P 300,000
Business income, United States 250,000
Expenses, Philippines 200,000
Expenses, United States 125,000
Interest on deposit with Metrobank 3,000
Interest on deposit in U.D. ($1=P40) $ 500
Cash prize won in a local contest P 6,000
Cash prize won in a contest in U.S. 10,000
Winnings in lotto 20,000
Winnings in lotto in U.S. 50,000
Dividends from SMC, a domestic company 25,000
23. The taxable income if Carlo is a resident citizen, single is –
a. P311,000 c. P291,000
b. P334,000 d. P306,000
24. The taxable income if Carlo is a nonresident alien ETB, married with five (5) dependent minor
children—
a. P243,000 c. P74,000
b. P106,000 d. None
25. The income tax due on Carlo assuming he is a nonresident alien NETB, single, is –
a. P88,500 c. P18,500
b. P63,500 d. P334,000
26. Celina sold 1,000 shares of not listed and traded shares lf stocks. The date of which are as
follows.
Selling price P 600,000
Fair market value 620,000
Expenses on sale 10,000
Purchase price 440,000
Expenses upon acquisition 3,000
The capital gains tax due is –
a. P 22,050 c. P9,700
b. P14,000 d. P12,850
27. TP Corporation had the following journal entry of fringe benefits:

Fringe benefit expense P 186,000
Fringe benefit tax expense 64,000
Cash P 186,000
Fringe benefit tax payable 64,000
Based on the above accounting entry, the amount of fringe benefit given to rank and file
employees—
a. P67,143 c. P186,000
b. P50,000 d. P250,000
28. Mrs. Santos, married with a 2 year old child, has the following transactions for the current year:
Salaries received as employee P 200,000

Sales 1,440,000
Cost of goods sold 660,000
Deductions:
Operating Expenses 440,000
Loss due to fire (properly reported) 60,000
Contributions:
To a government priority project in education 12,000
To Quiapo church 42,000
Other Income:
Rent 36,000
Capital gain from sale of CAR Family held for 3 years 96,000
The taxpayer will report a taxable net income of:

a. P435,000 c. P445,400
b. P510,000 d. P520,400
29. Ms. Espiritu an official of ABC Corporation asked for an earlier retirement because she was
migrating to Canada, she was paid P2,000,000 separation pay in recognition of his valuable
services to the corporation plus P300,000 13th month pay, Mr. Manabat another official was
separated due to his falling eyesight. He was give P1,000,000 separation pay. Mr. Rodriguez was
separated for violating company rules but was given P300,000 separation pay. Ms. Abling opted
to retire at 55 years old after working for 10 years in the company. She received P1,000,000. The
total income subject to withholding tax in the above payment is:
a. P2,518,000 c. P2,510,000
b. P2,270,000 d. P2,570,000
30. Mr. Enriquez provided the following data:
Salaries P 450,000
Fringe Benefits as Vice President 75,000
Rice Subsidy for 1 year (P2,000 x 12 mos.) 24,000
13th month pay & other bonuses 100,000
Representation and travel allowance (RATA) 20,000
Interest Income from BPI (30% Long-term) 200,000
Royalty Income (10% books) 100,000
The salaries are net of P50,000 withholding tax but gross of P10,000 SSS, union dues &
Pag-ibig contributions. Mr. Enriquez is married with 5 minor children.
The Taxable Net Income is:

a. P364,000 c. P664,000
b. P506,000 d. P382,000
31. The total Final Tax on Passive Income

a. P47,000 c. P50,000
b. P60,000 d. P48,000
Items 32 and 33 are based on the following data.
32. Malabs Corporation assigned Ms. Joan one of its employees in the head office in Manila to
manage their branch in Dagupan. The company provided for the residential house of the
manager paying monthly rental of P34,000.
The monthly fringe benefit tax thereon is –

a. P 16,000 c. P25,000
b. P 9,154 d. P8,000
33. Based on the same data in No. 32 above, the deductible expense from the gross income of
Malabs Corporation is –
a. P 43,154 c. P 42,000
b. P 25,000 d. P 34,000
Numbers 34 to 37 are based on the following information:
Lawrence, a resident citizen, had the following transactions of not listed and traded shares of stocks:
Date of Sale Date of Acquisition Cost Selling Price
Feb. 13, 2018 Jan. 18, 2016 P 80,000 P135,000
Apr. 5, 2018 Nov. 30, 2017 256,000 360,000
July 20, 2018 Sept. 3, 2016 175,000 115,000
Oct. 30, 2018 Aug. 7, 2018 114,500 150,000
34. The capital gains tax on the February 13, 2018 sale –
a. P 2,750 c. P 675
b. P 4,125 d. P 55,000
35. The capital gains tax on the April 5, 2018 is –

a. P 10,400 c. P 5,200
b. P 15,600 d. None
36. The capital gains tax/refund on the July 20, 2018 sale is –
a. P 3,000 c. P1,500
b. P (3,000) d. None
37. The final capital gains tax/refund at the end of the year is –
a. Tax payable of P 18,900 c. Tax payable of P 18,900
b. Tax refund of P 18,900 d. Tax refund of P18,900
38. Jhay Corp. assigned its own residential property as residence of its manager with a fair market
value of P7,800,000 and a zonal value of P6,000,000. How much is the fringe benefit tax
payable?
a. P91,765
b. P96,045
c. P100,455
d. P105,000
Mr. A reports the following income and expenses for the taxable year 2018. (use 1$ = P50)
Philippines Abroad
Business Income P900,000 $20,000
Business Expenses P400,000 $10,000
Dividend Income P50,000 $1,600
Interest Income P20,000 $2,000
Prizes P10,000 $600
Royalty, books P60,000 $1,000
Interest on foreign currency deposits P100,000 $1,700
39. How much is his income tax payable, assuming he is a resident citizen?
a. P296,500
b. P398,600
c. P382,600
d. P295,900
40. Assuming Mr. A is a non-resident alien engaged in business in Philippines, how much is his
taxable net income?
a. P510,000
b. P1,355,000
c. P900,000
d. P740,000
BUSINESS TAX
41. Under the TRAIN Law, which statements are treated as VAT Zero-rated transactions?
Statement 1: Registered Enterprises within a separate customs territory as provided

under special laws.
Statement 2: Services by agricultural contract growers and milling for others of palay into
rice, corn into grits and sugar cane into raw sugar.
Statement 3: Registered enterprises within Tourism Enterprise Zones as declared by the
Tourism Infrastructure and Enterprise Zone Authority (TIEZA)
Statement 4: Importation of professional instruments and implements, wearing apparel,
domestic animals, and personal household effects belonging to persons coming to settle
in the Philippines, for their own use and not for sale barter or exchange.
a. Statement 1 and 2 b. Statement 1 and 3

c. Statement 3 and 4 d. Statement 2 and 4
42. Which of the following is the best answer?

Statement 1: The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations is a VAT Zero-Rated transaction
whether or not the goods, supplies, equipment and fuel are used for international shipping or air
transport operations.
Statement 2: The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operation provided, that the goods, supplies,
equipment and fuel are limited to those used for international shipping or air transport operations.
a. Statement 1 and 2 are true. c. Statement 1 is true; Statement 2 is false

b. Statement 1 and 2 are false d. Statement 1 is false; Statement 2 is true
43. Which of the following is VAT-Exempt?

a. The sale or lease of goods and services to senior citizens and persons with disabilities.
b. Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed seventy percent (70%) of total annual production;
c. The sale and actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement
d. Those considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws
44. TRUE or FALSE: The TRAIN Law mandates the automatic appropriation of 2% of total VAT
collections of the Bureau of Internal Revenue and Bureau of Customs from the immediately
preceding year to fund claims for VAT refund.
a. True b. False
45. Which of the following is the best answer?

Statement 1: Enhanced VAT Refund System Grants refunds of creditable input tax within 80
days after filing of the VAT Refund Application.
days before filing of the VAT Refund Application.
days after filing of the VAT Refund Application.
days before filing of the VAT Refund Application.
a. Statement 1 b. Statement 2 c. Statement 3 d. Statement 4
46. Filing and payment of VAT returns of a VAT-registered persons beginning January 1, 2023 shall
be made:
a. Within 25 days from the close of the taxable quarter
b. Within 25 days from the close of the taxable year
c. Within 20 days from the close of the taxable quarter
d. Within 20 days from the close of the taxable year
47. Which of the following is correct?

a. Failure of an official, agent, or employee fails to act on the application for tax is not
punishable always.
b. Failure of an official, agent, or employee fails to act on the application for tax refund is
punishable always.
c. Failure of an official, agent, or employee fails to act on the application for tax within 60-
day period is punishable
d. Failure of an official, agent, or employee fails to act on the application for tax within 90-
day period is punishable
48. A claim for refund of excess unutilized input VAT should be made by the BIR from:
a. 120 days from the date of submission of the official receipts or invoices and other
documents.
b. 90 days from the date of submission of the official receipts or invoices and other
documents.
c. 60 days from the date of submission of the official receipts or invoices and other
documents.
d. 30 days from the date of submission of the official receipts or invoices and other
documents.
49. Transport of passengers and cargo by “domestic” air or sea vessels from the Philippines to a
foreign country is a
a. VAT zero rated transaction c. Percentage Tax Transaction

b. VAT-exempt transaction d. VAT and Percentage tax Transaction
50. One of the following is a VAT Zero-rated transaction

a. Medical, dental, hospital and veterinary services except those rendered by professionals
b. Services rendered by individuals pursuant to an employer-employee relationship
c. Sale of services to persons engaged in international shipping or international airport
operations exclusively for international shipping or air transport operations.
d. Importation of fuel, goods and supplies by persons engaged in international shipping or
air transport operations
51. Under the TRAIN Law, The sale of gold to BSP shall be treated as _______ under Section 109.
a. VAT – Zero Rating c. VAT – Exempt Transaction
b. Other Percentage Tax d. Excise Tax
52. Under the TRAIN Law, When would be the mandated date for payment in cash of all pending
VAT refund claims as of December 31, 2017
a. December 31, 2018 c. December 31, 2019
b. January 01, 2018 d. January 01, 2019
53. Under the TRAIN Law, Which Bureau/s shall handle the processing of application for VAT
refund/VAT refund center?
a. Bureau of Internal Revenue (BIR) c. Neither of A nor B
b. Bureau of Customs (BOC) d. Both A and B
54. Under the TRAIN Law, Beginning 01 January 2021, the coverage of VAT exemption on sale of
real properties shall be limited to which of the following?
a. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business.
b. Sale of real property for socialised housing as defined under Republic Act No. 7279.
c. Sale of House and lot and other residential dwellings with selling price of not more than
P2 Million.
d. A and B only
e. All of the above
55. Under the TRAIN Law, the threshold VAT – exempt lease of residential unit of P 10,000 is
changed into _____ per month.
a. P 12, 000 c. P 20,000 b. P 15,000 d. P 25,000
56. Under the TRAIN Law, The sale of prescribed drugs to final consumers of the following starting
January 01, 2019 shall be exempt from VAT.
a. Diabetes, High Cholesterol and

b. Asthma, Diabetes and Tuberculosis
c. Pneumonia, Hypertension and Cancer
d. Dengue, Skin Asthma and Rabies
57. Under the TRAIN Law, the threshold on VAT – Exempt of sale or lease of goods or properties or
the performance of services from P 1.5M gross annual sales and/receipts to ______.
a. P 2 Million b. P 2.5 Million c. P 3 Million d. P 3.5 Million
58. Under the TRAIN Law, The gross selling price or gross value in money of the shares of stock
sold, altered, exchanged or otherwise disposed shall be subject to stock transaction tax of ____.
a. ½ of 1% b. 1% c. 2% d. 6/10 of 1%
59. Under the TRAIN Law, Which of the following is subject to VAT – Exempt which are collected by
homeowners associations and condominium corporations.
a. Association Dues d. A, B and C

b. Membership Fees e. A and B Only
c. Other assessments and charges
60. Under the TRAIN Law, Self-employed individuals and/or professionals, together with
cooperatives, are exempt from 3% gross receipts tax on their first _______ annual gross sales or
gross receipts beginning January 01, 2019.
a. P 100,000 b. P 300,000 c. P 500,000 d. P 1,000,000
61. Which of the following is a not a VAT Zero-Rated Transaction(s)?

a. Sale to a non-resident of goods assembled or manufactured in the Philippines for delivery
to a resident in the Philippines, paid for in acceptable foreign currency and accounted
with the Bangko Sentral ng Pilipinas (BSP) rules and regulations
b. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business
c. Sale and delivery of goods to registered enterprises within separate customs territories
as provided under special law
d. A and B

I. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business is a VAT-Exempt Transaction.
II. Sale of real properties primarily held for sale to customers or held for lease in the
ordinary course of trade or business is a VAT-Exempt Transaction.
III. Sale of house and lot and other residential dwellings with selling price of more than P2
Million.
IV. Sale of real property for socialized housing as defined under Republic Act No. 7279.
a. One b. Two c. Three d. Four
I. Self-employed and professionals whose net sales or net receipts do not exceed the VAT
threshold and who opt to pay the 8% tax is Exempt from VAT.
II. Self-employed and professionals whose gross sales or gross receipts exceed the VAT
threshold and who opt to pay the 8% tax is Exempt from VAT.
III. Self-employed individuals and/or professionals, together with cooperatives, are exempt
from 2% gross receipts tax on their first P500,000 annual gross sales or gross receipts
beginning 01 January 2019.
IV. Self-employed individuals and/or professionals, together with cooperatives, are exempt
from 3% gross receipts tax on their first P500,000 annual gross sales or gross receipts
beginning 01 January 2019.
a. Zero b. One c. Two d. Four
64. The threshold VAT-exempt lease of residential unit from increases by:
a. P5,000 b. 10,000 c. 15,000 d. 0
65. The VAT-exempt threshold on sale or lease of goods or properties or the performance of services
increases by:
a. 0 b. P500,000 c. P1,000,000 d. P1,500,000
66. How many of the following statements are not correct?

I. Sale of gold to BSP shall be treated as VAT-exempt transaction.
II. Paintings sold by art gallery is not subject to VAT.
III. Sale to a non-resident of goods assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid for in any
acceptable foreign currency and accounted with the Bangko Sentral ng
Pilipinas (BSP) rules and regulations is subject to VAT Zero-rating.
a. Zero b. One c. Two d. Three
67. “Sale or exchange of services” means the performance of all kinds of services in the Philippines
including:
I. Customs and immigration brokers
II. Common carriers by air and sea relative to their transport of passengers
III. Sales of electricity, transmission and distribution by electric cooperatives
IV. Processing, manufacturing or repacking goods for others
a. None of the above b. III only c. I and II only d. I, II, III and IV
68. Pasaben Leasing Co. leases 20 units of residential apartments to various clients for 14,000 a
month per apartment unit. How much is the VAT payable for the year?
a. P403,200
b. P100,800
c. P168,000
d. 0
69. EDG leases 10 residential units to ABC Co. for 18,000 a month per unit. How much is the VAT
payable for this transaction?
a. P259,200
b. P64,800
c. P194,400
d. 0
10 | P a g e TAXATION UNDER THE TRAIN LAW
70. Ms. B, engage in trading stocks through stocks exchange sold 20,000 shares of ABC Co. for
P150/share. How much is the percentage tax due?
a. P15,000
b. P12,000
c. P18,000
d. P16,500
71. Boa sold the following shares of stock during the year:
Listed and traded Not listed and traded
Selling Price P2,500,000 P830,000
Cost P1,730,000 P470,000
The total tax payable is

a. P54,000
b. P69,000
c. P15,000
d. P36,030
72. AB Co reported total sales for the taxable year P2,500,000 and purchased from VAT-registered
suppliers for P900,000 plus P108,000 input VAT.
How much is the OPT payable?
a. P192,000
b. P75,000
c. P48,000
d. 0
73. How much is the VAT payable?

a. P192,000
b. P75,000
c. P48,000
d. 0
74. AB Co reported total sales for the taxable year P3,250,000 and purchased from VAT-registered
suppliers for P900,000 plus P108,000 input VAT.
How much is the OPT payable?
a. P97,500
b. P70,500
c. P282,000
d. 0
75. How much is the VAT payable?

a. P97,500
b. P70,500
c. P282,000
d. 0
76. Mr. X sold a residential house in Manila for P3,500,000 and a residential lot in Valenzuela for
P1,750,000. All transactions were incurred during Jan 2,2021.
How much is the VAT payable on the sale of house located in Manila?
a. P420,000
b. P105,000
c. P1,050,000
d. P42,000
77. How much is the VAT payable on the sale of house located in Valenzuela?
a. P210,000
b. P52,500
c. P42,000
d. 0
78. Puso Realty sold the following residential lots and houses:
Selling Price
Residential lot P2,500,000
Commercial lot 1,800,000
Residential lot 3,250,000
Residential house and lot 3,000,000
Residential house and lot 3,500,000
.
How much is the VAT payable on the sale of residential houses and lots?
a. P240,000
b. P420,000
c. P180,000
d. P810,000
79. How much is the VAT payable on the sale of commercial lot?
a. P216,000
b. P54,000
c. P162,000
d. 0
80. Manalo invested P500,000 in the shares of stock of Coyote Company. Coyote’s shares of stock
are listed and traded in the local stock exchange. Manalo sold the share for P600,000 through the
local stock exchange. How much is the amount of percentage tax?
a. None, because the sale was traded in the local stock exchange.
b. 6/10 of 1% multiplied by the selling price of 600,000.
c. 6/10 of 1% multiplied by the gain of P100,000.
d. 5% multiplied by the gain P100,000
DONOR’S TAX
81. In lieu of the graduated donor’s tax rates and 30% donor’s tax on donations made to strangers,
the new law imposes a new rate of –
a. 15%
b. 6%
c. 20%
d. 30%
82. The new donor’s tax rate shall be based on total gifts in excess of _____ exempt gifts.
a. P250,000
b. P300,000
c. P200,000
d. P150,000
83. Statement 1. The tax rates in the tax table for donor’s tax are relatively lower than the tax rates
in the tax table for estate tax.
Statement 2. The tax rates in the tax table for donor’s tax are relatively higher than the tax rates
in the tax table for estate tax.
84. Statement 1. A donor who claimed an exemption of P10,000 on a donation given on account of
marriage, but the marriage did not later on take place, is required to amend his computation of
the tax table in an amended tax return.
Statement 2. A man who donates a house and lot to his fiancée is taxable at 30% of net gift.
85. One of the following donees will not entitle the donor-parent to a P10,000 dowry exemption.
a. Recognize naturalized child
b. Adopted child
c. Step child
d. None of the above
86. When the done is a stranger the tax payable is:

a. 6% of gross gifts
b. 30% of net gifts
c. 6% of net gifts
d. Based on the graduated tax rates or 6% of net gifts whichever is higher.
87. Statement 1. Dowries, regardless of the amount, shall be subject to donor’s tax.
Statement 2. The new law removes the first P10,000 exemption from gifts made on account of
marriage
a. Statement 1, true; Statement 2, false
b. Statement 1, false; Statement 2, true
c. Both statement are true
d. Both statement are false
88. In transfers for insufficient consideration, the excess of fair market value over the selling price
shall be subject to—
a. Income tax
b. Transfer tax
c. Donor’s tax
d. Not subject to donor’s tax
89. Statement 1. Under the NIRC, the sale, exchange or other transfer of property made in the
ordinary course of business shall be considered made for adequate and full consideration in
money and money’s worth, hence, not subject to tax.
Statement 2. Under the TRAIN Law, the sale, exchange or other transfer of property made in the
ordinary course of business is transferred for less than adequate and full consideration in money
and money’s worth, then the amount by which the fair market value of the property exceeded
the value of the consideration shall be subject to donor’s tax.
c. Both statement are true
d. Both statement are false
90. Clarice, who is single, gave an outright gift of P150,000 to friend, Atoy, who needed money to
pay medical expenses –
a. The donation is not taxable because the gift is outright.
b. The donor’s tax payable is P1,000
c. The donor’s tax is P9,000
d. The donation is deductible from the gross income of Clarice
91. Which of the following is subject to donor’s tax?

a. Donation inter-vivos to Iglesia ni Cristo
b. Donation inter-vivos to International Rice Research Institute
c. Cash contribution to a political candidate, duly reported to the Commission on Elections.
d. Gifts made on account of marriage.
Jane, a Filipina princess made the following donations.

a. To Mariella, a land worth P450,000 in Cubao.
b. To Aunice, jewelry worth P100,000 in Hongkong.
c. To Rica, PLDT shares amounting to P150,000.
d. To Jomelle, a building in Italy P1,600,000 mortgaged for P50,000 assumed by the donee.
e. To Charl, the land in Pampanga worth P300,000.
f. P300,000 cash, PNB New York to Airon
g. P200,000 receivables, 50% condoned by Jane.
She has also transferred the following properties:

Selling Price FMV
Car, Makati P200,000 P300,000
Car, USA 300,000 200,000
Res. Land, Manila 1,000,000 2,000,000
92. If she is Resident Alien her gross gift is:
a. P 2,100,000
b. P 1,950,000
c. P 3,000,000
d. P 3,100,000
93. If she is a NRA non-resident Egyptian, and there is reciprocity law, her gross gift is:
a. P 750,000
b. P 950,000
c. P 1,050,000
d. P 700,000
Questions 94 and 95 are based on the following data:

Mr. Enriquez, made the following donations for the year 2018:
April 15 - To Maryel, legally adopted child on acct. of marriage last week, car worth P710,000 in the
Philippines.
- To Abraham, his daughter, car in USA worth P300,000. They paid $200 donor’s tax in the US
($1-P45).
July 20 - To Celina niece in Manila, P200,000 worth of personal property.
- To Joan, legitimate daughter on acct. of marriage in Cebu, July 18, 2014 car, worth P400,000
but mortgaged for P200,000, ½ of which was assumed by the donee.
94. The gift tax due after credit on April 15, 2018
a. P 30,800
b. P 51,600
c. P 44,000
d. P 33,000
95. The gift tax due on July 20, 2018 is:

a. P 30,000
b. P 36,000
c. P 84,000
d. P 80,000
96. On July 18, 2018, Mr. Carlo gave a property with a fair market value of P550,000 to Marlon, a
legitimate son, and Mikee, Marlon’s bride, on account of their marriage celebrated on January 3,
2018. The donor’s tax payable is:
a. P 33,000
b. P 38,000
c. P 84,100
d. P 15,800
97. Besh donated P500,000 to TP Corporation. The donor owns 80% of the outstanding capital stock
of the donee-corporation. The donor’s tax due or the donation is-
a. P 14,000
b. P 30,000
c. P 40,000
d. None
98. Ardiente whose free portion of the property amounts to P500,000 as of January 2018, donated
P300,000 to his nephew Ian on January 5, 2018 and another P300,000 to Kelly, a friend on
January 6, 2018, as reflected in the deed of donation.
a. P 6,000
b. P 90,000
c. P 12,000
d. P 14,000
99. Abra sold his car to his friend, Beng for P100,000 when its value was P250,000. The property
was acquired by Abra for P450,000 in 2018. Six months after the sale, Abra died. On that date,
the property was valued at P190,000. The donor’s tax due is-
a. P 1,000
b. P 1,200
c. P 45,000
d. None
100. Andrea made it appear that he sold his properties to his son at the following prices:
Residential House P100,000
Personal Properties 50,000
The correct fair market value on the date of sale was P1,000,000 for the house, and P500,000
for the personal properties.
Assuming that you know the facts as a BIR officer, the total tax payable on the transaction is
a. P 12,000
b. P 72,000
c. P 38,000
d. P 60,000
ESTATE TAX
101. The TRAIN Law extends the period to file Estate tax return from six months to____.
a. One year
b. Two years
c. Three years
d. Four years
102. Statement 1: Payment by installment shall be allowed within one (1) year from the statutory
date for its payment without civil penalty and interest in case the available cash of the estate is
insufficient to pay the total estate tax due.
Statement 2: The new law increases the fair market value of family home which is exempt from
estate tax from one (1) million to ten (10) million.
c. Both statements are true
d. Both statements are false
103. Statement 1: Estate tax returns showing a gross value exceeding five (5) million pesos shall be
supported with a statement duly certified to by a Certified Public Accountant.
Statement 2: The Estate tax return shall be filed within one (1) year from the decedent’s death.
104. The TRAIN Law provides for the new estate tax rate of:
a. 4% based on the value of such net estate
b. 5% based on the value of such net estate
c. 6% based on the value of such net estate
d. 7% based on the value of such net estate
105. Statement 1: In case of non-resident alien, a standard deduction of five hundred thousand
pesos (P500, 000) is allowed against his gross estate.
Statement 2: It is no longer required to file an estate tax return for gross estate exceeding P200,
000 which are exempt from estate tax.

106. Statement 1: Under the TRAIN Law, if a bank has knowledge of the death of a person, who
maintained a bank deposit account alone, or jointly with another, it shall allow any withdrawal
from the said deposit account, subject to a final withholding tax of six percent (6%).
Statement 2: Under the TRAIN Law, the administrator of the estate of any one of the heirs of the
decedent may, upon the authorization of the Commissioner, withdraw an amount not exceeding
Twenty thousand pesos (P20, 000) without the said certification.
107. Daniel John Ford, resident citizen died leaving the following properties:
Real Properties P 2,500,000

Personal Properties 2,000,000
Necklace 50,000
Which of the following statements is correct?
a. The estate of Becca shall be exempt from estate tax.

b. The estate of Becca shall be subject to estate tax in accordance with the estate tax table.
c. The estate of Becca shall be subject to fixed estate tax rate of six percent (6%).
108. In the case of a citizen or resident of the Philippines, which of the following is/are allowed as
deduction/s from the value of the gross estate?
a. Funeral and Judicial Expenses
b. Judicial and Medical Expenses
c. Both A and B
109. In case, Ramwel is a non resident not a citizen of the Philippines. How much standard deduction
allow against his gross estate?
a. 200,000
b. 300,000
c. 400,000
d. 500,000
110. Sean, a resident citizen died who maintained a bank deposit account alone leaving his son,
Daniel. Since Daniel is the only heir, he can withdraw the deposits in the account of his father.
Which of the following statements is correct?
a. Daniel shall not allow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon have been paid. Provided,
Daniel, upon authorization by the Commissioner withdraw an amount not exceeding
twenty thousand pesos (P20,000) without the said certification.
b. Daniel shall allow withdrawal any amount he wants.
c. Daniel shall allow withdrawal not exceeding twenty thousand pesos (P20,000)
d. Daniel shall allow any withdrawal from the said deposit account, subject to a final
withholding tax of six percent (6%).
111. The gross estate of non-resident alien is P2,000,000, 75% of which is from abroad. The actual
funeral expenses totaled to P80,000, one fourth of which was paid by his employer. The
deductible funeral expenses is:
a. P25,000 c. P80,000
b. P60,000 d. 0
From the following:

Funeral Expenses P 150,000
Judicial Expenses 500,000
Medical Expenses 400,000
Claims against the Estate 200,000
Claims against insolvent persons 40,000
Taxes 25,000
Losses 60,000
Mortgage or indebtedness on property 120,000
Transfer for public use (e.g. legacy to the
Government national and local) 100,000
Vanishing Deduction 28,000
Family Home 700,000
Standard Deduction 1,000,000
Net Share of the surviving spouse
in the conjugal/community estate 950,000
Amounts receivable under Republic Act 4917 20,000
112. How much are the ordinary deductions from the gross estate?
a. P637,000
b. P573,000
c. P773,000
d. P837,000
113. How much are the special deductions from the gross estate?
a. P5,000,000
b. P5,010,000
c. P5,020,000
d. P5,030,000
114. Malia, a non-resident alien, single, died leaving the following properties and deductions:
Shares, Domestic Corporation P500,000
Shares, Foreign Corporation 500,000
Tangible Personal Property 1,500,000
Deductible Expenses 500,000
Assuming there is no reciprocity, the estate tax payable is –

a. P105,000
b. P115,000
c. P125,000
d. P96,000
115. The decedent, married, died leaving a family home valued at P1,500,000, composed of the
house (conjugal property) and the lot (exclusive property).
Seventy percent (70%) of the value of the family home pertains to the house, while thirty
percent (30%) pertains to the lot.
a. P500,000 c. P450,000
b. P350,000 d. P650,000
116. Kiko, single and a resident citizen, died with properties constituting his gross estate of
P9,000,000. Actual funeral expenses amounted to P150,000 and other charges against the
estate amounted to P210,000. The net taxable estate is –
a. P2,700,000 c. P3,790,000
b. P3,833,500 d. P4,027,500
117. The estate tax payable is –

a. P227,500 c. P367,000
b. P433,500 d. P427,500
118. The following expenses and obligations were left by Dos upon his death:
Notes Payable, not notarized P 30,000
Loans Payable, PNB 300,000
Accounts Receivable, debtor not insolvent 40,000
Accounts Receivable, debtor is insolvent 60,000
Death benefits from employer 200,000
Mortgage paid 50,000
Income Taxes on income of decedent’s estate 7,500
The total amount deductible from gross estate is –
a. P5,560,000 c. P5,430,000
b. P6,120,000 d. P5,800,000
119. Ely, non-resident Japanese, died leaving the following:
Exclusive properties, Philippines P 4,000,000

Conjugal properties, Philippines 3,000,000
Conjugal properties, Abroad 2,000,000
Deductions claimed:
Funeral Expenses 100,000
Judicial Expenses 100,500
Unpaid Expenses 150,500
Losses: occurring 3 mos. After death due to fire 120,000
Donation mortis causa to Makati City Hall 180,000
Family Home (inc. above), located abroad 1,000,000
The taxable net estate is:
a. P1,970,500 c. P1,678,750
b. P1,184,750 d. P1,750,900
120. The estate tax payable is:

a. P80,000 c. P71,085
b. P78,490 d. P79,852
SUGGESTED ANSWERS
Income Taxation
1. C 11. A 21. D 31. A

2. A 12. B 22. B 32. B
3. B 13. D 23. A 33. A
4. D 14. A 24. B 34. B
5. B 15. C 25. A 35. B
6. A 16. C 26. A 36. D
7. B 17. B 27. A 37. B
8. B 18. C 28. D 38. D
9. D 19. B 29. C 39. A
10. B 20. D 30. B 40. A
Business Taxation
41. B 51. C 61. D 71. B

42. D 52. C 62. B 72. B
43. A 53. D 63. B 73. D
44. B 54. E 64. A 74. D
45. C 55. B 65. D 75. C
46. A 56. A 66. C 76. A
47. D 57. C 67. D 77. D
48. B 58. D 68. D 78. D
49. A 59. D 69. D 79. A
50. C 60. C 70. C 80. B
Donor’s Tax
81. B 86. C 91. D 96. A

82. A 87. C 92. C 97. B
83. B 88. D 93. A 98. C
84. B 89. D 94. B 99. D
85. D 90. C 95. A 100. D
Estate Tax
101. A 106. A 111. D 116. C

102. B 107. C 112. B 117. A
103. C 108. D 113. C 118. A
104. C 109. D 114. D 119. B
105. C 110. D 115. C 120. C
Income Taxation
1. Answer is (C).
On 19 December 2017, the President signed into law package 1 of the Tax Reform for Acceleration
and Inclusion (“TRAIN”) bill or Republic Act (RA) No. 10963. The law contains amendments to
several provisions of the National Internal Revenue Code of 1997 on individual income taxation,
passive income for both individuals and corporations, estate tax, donor’s tax, value-added tax, excise
tax, and documentary stamp tax, among others
2. Answer is (A).
Statement 1 is true. Inserts a new provision which provides that individual taxpayers receiving purely
compensation income from only one employer whose income tax has been correctly been withheld by
their employer shall not be required to file an income tax return.
Statement 2 is true
3. Answer is (B). Under RA 10963, the date of filing moves the first quarter tax return for individual
taxpayers engaged in business or practice of profession from 15 April to 15 May of each year.
4. Answer is (D). RA 10963 removes the deductibility of premium payments on health and/or
hospitalization insurance in the amount of P2,400 per family or P200 a month from gross income of
individual taxpayers.
5. Answer is (B). RA 10963 eliminates the personal and additional exemption allowances which means
that fixed income earners or compensation income earners will be uniformly taxed on gross basis,
without regard to their circumstances.
6. Answer is (A).
Statement 1 is true. Income of purely self-employed individuals and/or professionals - Self-employed

individuals and/or professionals may, at their option, be subject to either 8% on gross sales or gross
receipts and other non-operating income in excess of P250,000 or regular individual income tax rates.
Statement is 2 true. The 8% tax shall be in lieu of graduated income tax rates and percentage tax.
7. Answer is (B)
Statement 1 is false. PCSO and Lotto Winnings – Subjects to 20% final withholding tax PCSO and
Lotto winnings amounting to more than P10,000. PCSO and Lotto winnings amounting to P10,000 or
less are tax exempt.
Statement 2 is false. Interest income on foreign currency bank deposits – Increases the tax rate on
interest income (whether received by an individual taxpayer or corporation) from foreign currency bank
deposits from 7.5% to 15%.
8. Answer is (B).
Statement 1 is false. Capital gains tax on sale of shares of stock – Replaces the two-tiered rate of 5%
and 10% tax on the sale, transfer or exchange of shares of stock with a fixed rate of 15%.
Statement 2 is false. Increases the fringe benefit tax (FBT) rate from 32% to 35%.
9. Answer is (D). Increases the amount of tax-exempt 13th month pay and other benefits from P82,000
to P90,000.
10. Answer is (B).
Statement 1 is false. Restructures the income tax rates for individual taxpayers by replacing the
existing 5%-32% graduated tax rates with 0%- 35% progressive tax rates with the number of tax
brackets reduced from seven to six, and thresholds for each tax bands adjusted.
Statement 2 is false. Under the TRAIN, individual taxpayers who have less than P250,000 taxable
income will fall into the lowest tax bracket, and their income will be subject to 0% income tax rate while
the tax rate applicable on the taxable income of those earning above P8M will be raised from 32% to
35%.
11. Answer is (A).
Income of mixed income earners –

a. On compensation income - They shall be subject to graduated income tax rates for compensation
income.
b. On income from business and/or practice of profession -
1. Those whose gross sales or gross receipts and other non-operating income do not exceed the VAT
threshold – They shall have the option to be subject to 8% tax based on gross sales or receipts and
other non-operating income from business or practice of profession or graduated income tax rates.
2. Those whose gross sales or gross receipts and other non-operating income exceed the VAT
threshold – No option available. They shall be subject to the graduated income tax rates.
Thus, only statement 1 is correct.
12. Answer is (B).

TRAIN Law increases the fringe benefit tax (FBT) rate from 32% to 35%. Thus, 35% less 32% =
3%.
13. Answer is (D).
Statement 1 is false. A new provision in TRAIN Law allows general professional partnerships
(GPPs) and the partners comprising the partnership to avail of the optional standard deduction
(OSD) only once, which option shall either be exercised either by the GPP or the partners
comprising the partnership.
Statement2 is true. TRAIN Law removes the deductibility of premium payments on health and/or
hospitalization insurance in the amount of P2,400 per family or P200 a month from gross income
of individual taxpayers.
14. Answer is (A).
PCSO and Lotto Winnings are subject to 20% final withholding tax PCSO and Lotto winnings
amounting to more than P10,000. PCSO and Lotto winnings amounting to P10,000 or less are tax
exempt.
15. Answer is (C).

Statement is true. TRAIN Law excludes Philippine Charity Sweepstakes Office (PCSO) from the
list of tax-exempt government-owned or – controlled corporations, agencies or instrumentalities.
GSIS is still a Tax-exempt corporation.
Statement 2 is false. Interest income on foreign currency bank deposits increased by 7.5%. From
7.5% increased to 15%. Thus, 15% less 7.5% = 7.5%.
16. Answer is (C).
TRAIN Law mandates that the individual income tax return shall consist only of four (4) pages and
contain the (1) personal profile; (2) gross sales or income from compensation or trade or
business, or exercise of profession;(3) allowable deductions; (4) taxable income; and (5) tax due
and payable of individual taxpayers.
17. Answer is (B).
TRAIN law mandates that the corporate income tax return shall consist a maximum of four (4)
pages and shall contain the (1) corporate profile; (2) gross sales or income from services or
conduct of trade or business; (3) allowable deductions; (4) taxable income; and (5) income tax
due and payable of corporations.
18. Answer is (C).
TRAIN Law moves the due date for paying the second installment from July 15 to October 15 in
case of individual taxpayers with tax due in excess of P2,000 and availing of the option to pay
their tax due in two equal installments.
19. Answer is (B).

The TRAIN Law provides that individual taxpayers receiving purely compensation income from
only one employer whose income tax has been correctly been withheld by their employer shall
not be required to file an income tax return.
20. Answer is (D).
Statement 1 is false. TRAIN Law removes the privilege to avail of the 15% preferential tax rate on
gross income of employees of ROHQs/RHQs, OBUs and Petroleum Contractors and
Subcontractors which shall be established starting January 1, 2018.
Statement 2 is true. Existing RHQs, ROHQs, OBUs and Petroleum Service Contractors and
Subcontractors presently availing of the 15% preferential tax rate for their qualified employees
shall continue to be entitled to avail of the preferential tax rate for their present and future
qualified employees.
21. Answer is (D).
Under the new law, an individual is no longer entitled to a basic and additional personal exemption
regardless of his personal status as single, married or head of the family.
22. Answer is (B).
Gross compensation income P150,000 only.

The deduction of health insurance and basic personal exemption is already repealed under the new
law.
23. Answer is (A).
Business Income, Phil P 300,000

Less: Expenses, Phil 200,00 P 100,000
Business Income, U.S. P 250,000
Less: Expenses, U.S. 125,000 125,000
Interest on deposit in U.S. ($500 x 40) 20,000
Cash prize, U.S. 10,000
Cash prize, local contest 6,000
Lotto winnings in U.S. 50,000
Taxable Income P 311,000
24. Answer is (B).
Business Income, Phil P 300,000

Less: Expenses, Phil 200,00 P 100,000
Cash prize, local contest 6,000
Taxable Income P 106,000
25. Answer is (A).

Business Income, Phil P300,000

Interest, deposit with Metrobank 3,000
Cash Prize, local contest 6,000
Winnings in Lotto 20,000
Dividend from domestic company 25,000
Gross Income 354,000
Rate of tax 25%
Income Tax (Final Tax) P88,500
26. Answer is (A).

Less: Selling expenses 10,000
Balance P 590,000
Less: Cost:
Purchase price P 440,000
Expenses upon acquisition 3,000 443,000
Net capital gain P 147,000
Multiply by (new rate): 15%
Capital gains tax P 22,050
27. Answer is (A).
Fringe benefit expense P186,000

Less: Monetary value of fringe benefit subject to tax 118,857
Fringe benefit given to rank and file 67,143
Computation of monetary value:

Fringe benefit tax expense P 64,000
Divide by fringe benefit tax rate 35%
Grossed-up monetary value P 182,857
Multiply by 65%
Monetary value of benefit P 118,857
28. Answer is (D).
Sales P 1,440,000
Less: Cost of goods sold 660,000
Gross profit P 780,000
Less: Operating expense 440,000
Operating income P 340,000
Less: Loss due to fire 60,000
Add: Other income – Rent 36,000
Net Income before Charitable Contribution P 316,000
Less: Charitable Contribution:
Government P 12,000
Quiapo church (see note 1) 31,600 19,600
Capital asset transaction:
Capital gain ( P96,000 x 50%) 48,000
Taxable Net Income P 520,400
Note 1:
Charitable contribution to Quiapo church:
Actual contribution 42,000
Limit: NI before CC P 316,000
Multiply by 10% 31,600
The deductible charitable contribution to contribution would be lower between the

actual and the limit; hence, the deduction should be P 31,600.
29. Answer is (C).

Ms. Espiritu: Separation pay P 2,000,000
13th month pay (P300,000 – 90,000) 210,000
Mr. Rodriguez: Separation pay 300,000
Total income subject to withholding tax P 2,510,000
30. Answer is (B).

Salaries P 490,000
Fringe benefits -----
Rice subsidy: 1,500 exempt
500 x 12mos. 6,000
13th month pay (P100,000 – 90,000) 10,000
Taxable Net Income P 506,000
31. Answer is (A).

Interest income:
(P200,000x30%) Exempt
(P200,000x70% = P140,000 x 20%) P 28,000
Royalty income:
(P100,000x10% = P10,000 x 10%) 1,000
(P100,000x90% = P90,000 x 20%) 18,000
Total Passive income P 47,000
32. Answer is (B).

Grossed-up monetary value (34,000/65%) x 50% P 26,154
x Tax rate 35%
Fringe benefit tax P 9,154
33. Answer is (A).
Fringe benefit tax expense P 9,154

Fringe benefit expense 34,000
Deductible expense P 43,154
34. Answer is (B).

Less: Cost 80,000
Net capital gain 55,000
Holding period (long-term) 50%
Base 27,500
Rate of tax 15%
35. Answer is (B).
Gross selling price P 360,000

Less: Cost 256,000
Net capital gain (short term) 104,000
Rate of tax 15%
36. Answer is (D).

Less: Cost 175,000
Net capital loss P (60,000)
If the sale is shares of stock (not traded) results to a loss, no capital gains tax shall be paid by
the seller.
37. Answer is (B).
Date Sold Selling Price Cost Capital Gain Tax Paid
02-13-18 P 135,000 P 80,000 P 27,500 P 4,125

04-05-18 360,000 256,000 104,000 15,600
07-20-18 115,000 175,000 (30,000) ---
10-13-18 150,000 144,500 5,500 825
760,000 655,500 107,000 20,550
Capital gains tax paid P 20,550

Less: Capital gains tax
On P107,000 x 15% 16,050
Amount refundable P 4,500
38. Answer is (D)

Use the FMV of the property as basis for computation (FMV or ZV whichever is higher)
𝑀𝑜𝑛𝑒𝑡𝑎𝑟𝑦 𝑉𝑎𝑙𝑢𝑒 (𝑀𝑉) = (50% 𝑜𝑓 𝐹𝑀𝑉 𝑜𝑟 𝑍𝑉, 𝑤ℎ𝑖𝑐ℎ𝑒𝑣𝑒𝑟 𝑖𝑠 ℎ𝑖𝑔ℎ𝑒𝑟) × 5%
𝑀𝑉 = (50% × 𝑃7,800,000) × 5% = 𝑃195,000
𝑀𝑉 𝑃195,000
𝐺𝑟𝑜𝑠𝑠 − 𝑢𝑝 𝑀𝑜𝑛𝑒𝑡𝑎𝑟𝑦 𝑉𝑎𝑙𝑢𝑒(𝐺𝑀𝑉) = = = 𝑃300,000
65% 65%
𝐹𝐵𝑇 = 𝐺𝑀𝑉 × 35% = 𝑃300,000 × 35% = 𝑃105,000
39. Answer is (A)

Since Mr. A is a resident citizen, his income from all sources are taxable. All passive incomes
(except prizes, since the amount is 10,000 and below) are subject to final taxes.
Within Without
Business Income P900,000 P1,000,000
Business Expenses (400,000) (500,000)
Prizes 10,000 30,000
Dividend Income 80,000
Interest Income 100,000
Royalty, books 50,000
Interest on foreign currency deposits ______ __ 85,000
Totals P510,000 P845,000
Add Income from Within 510,000
Taxable Net Income P1,355,000
Tax on P800,000 P130,000

Tax on excess (P1,355,000 – P800,000) x 30% 166,500
Income tax due and payable P296,500
40. Answer is (A)

Under the assumption that Mr. A is a NRAETB, only those income within are subject to income
tax within are taxable. Only, the net business income of P500,000 and the prizes of P10,000 are
subject to income tax. Other incomes are subject to final taxes. Thus, the taxable net income of Mr. A
is P510,000.
Business Taxation
41. Answer is (B).

Statement I and III are correct because under the TRAIN Law, a new provision which categorically
treats as VAT zero-rated the sale and delivery of goods to registered enterprises within separate
customs territories as provided under special law, and registered enterprises within tourism enterprises
zones as declared by the Tourism Infrastructure and Enterprise
Zone Authority (TIEZA) inserted.
Statement II and IV are VAT-Exempt Transactions.
42. Answer is (D).

VAT zero rating of sale of goods, supplies and equipment and fuel to persons engaged in international
shipping or international airport operations shall be limited to those used for international shipping or
air transport operations.
43. Answer is (A).

Under the TRAIN Law, the provision of Expanded Senior Citizen’s Act (RA 9954) and Persons with
Disability Act (RA 10754) exempts from VAT the sale or lease of goods and services to senior citizens
and persons with disabilities.
Choices B, C, and D are example of VAT Zero-Rated Transactions.
44. Answer is (B).

The TRAIN Law mandates the automatic appropriation of 5% of total VAT collections of the Bureau of
Internal Revenue and Bureau of Customs from the immediately preceding year to fund claims for VAT
refund.
45. Answer is (C).

The enhanced VAT Refund System Grants refunds of creditable input tax within 90 days after filing of
the VAT Refund Application.
46. Answer is (A).

VAT-registered persons shall pay the value-added tax on a monthly basis: provided, that beginning
January 1, 2023, the filing and payment required shall be done within 25 days following the close of
each taxable quarter.
47. Answer is (D).

TRAIN Law imposes penalty on the official, agent or employee of the BIR who fails to act on the
application for tax refund within 90 days.
48. Answer is (B).

TRAIN Law, reduces the period within which a claim for refund of excess unutilized input VAT should
be made by the BIR from 120 days to 90 days from the date of submission of the official receipts or
invoices and other documents.
49. Answer is (A).

Transport of passengers and cargo by “domestic” air or sea vessels from the Philippines to a foreign
country is a VAT zero rated transaction.
50. Answer is (C).

Services rendered to persons engaged in international shipping or international air transport
operations, including leases of property for use thereof: Provided, that these services shall be
exclusively for international shipping or air transport operations.
51. Answer is (C).

Under the TRAIN Law, the sale of gold to BSP treats as VAT exempt instead of VAT zero-rated
52. Answer is (C).

The TRAIN Law mandates the payment in cash by December 31, 2019 of all pending VAT refund
claims as of 31 December 2017.
53. Answer is (D).

The TRAIN Law establishes a VAT refund center in the Bureau of Internal Revenue and Bureau of
Customs that will handle the processing of application for VAT refund.
54. Answer is (E).

Beginning 01 January 2021, the coverage of VAT exemption on sale of real properties shall be limited
to the following:
a. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
course of trade or business;
b. Sale of real property for socialized housing as defined under Republic Act No. 7279; and
c. Sale of house and lot and other residential dwellings with selling price of not more than P2
Million.
55. Answer is (B).

The TRAIN Law increases the threshold VAT-exempt lease of residential unit from P10,000 to P15,000
per month.
56. Answer is (A).

The TRAIN Law exempts from VAT the sale to final consumers of drugs and medicines prescribed for
diabetes, high cholesterol and hypertension starting January 1, 2019.
57. Answer is (C).

The TRAIN Law increases the VAT-exempt threshold on sale or lease of goods or properties or the
performance of services from P1.5M gross annual sales and/or receipts to P3M.
58. Answer is (D).

The TRAIN Law increases the stock transaction tax from 1/2 of 1% to 6/10 of 1% of the gross selling
price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed
59. Answer is (D).

The TRAIN Law exempts from VAT the association dues, membership fees, and other assessments
and charges collected by homeowners associations and condominium corporations.
60. Answer is (C).

Self-employed individuals and/or professionals, together with cooperatives, are exempt from 3% gross
receipts tax on their first P500,000 annual gross sales or gross receipts beginning January 1, 2019.
61. Answer is (D).

The TRAIN Law removes the VAT Zero-Rating of foreign currency denominated sales, i.e., sale to a
non-resident of goods assembled or manufactured in the Philippines for delivery to a resident in the
Philippines, paid for in acceptable foreign currency and accounted with the Bangko Sentral ng Pilipinas
(BSP) rules and regulations.
Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course
of trade or business is a VAT-Exempt Transaction.
Sale and delivery of goods to registered enterprises within separate customs territories as provided
under special law is a VAT Zero-Rated Transaction.
62. Answer is (B).

The coverage of VAT exemption on sale of real properties shall be limited to the following:
a. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
course of trade or business;
b. Sale of real property for socialized housing as defined under Republic Act No. 7279; and
c. Sale of house and lot and other residential dwellings with selling price of not more than P2
Million.
Thus,
I. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
course of trade or business is a VAT-Exempt Transaction. TRUE
II. Sale of real properties primarily held for sale to customers or held for lease in the ordinary
course of trade or business is a VAT-Exempt Transaction. FALSE (not)
III. Sale of house and lot and other residential dwellings with selling price of more than P2 Million.
FALSE (not more than)
IV. Sale of real property for socialized housing as defined under Republic Act No. 7279. TRUE
63. Answer is (B).

I. Self-employed and professionals whose net sales or net receipts do not exceed the VAT
threshold and who opt to pay the 8% tax is Exempt from VAT. FALSE (gross)
II. Self-employed and professionals whose gross sales or gross receipts exceed the VAT
threshold and who opt to pay the 8% tax is Exempt from VAT. FALSE (do not exceed)
III. Self-employed individuals and/or professionals, together with cooperatives, are exempt from
2% gross receipts tax on their first P500,000 annual gross sales or gross receipts beginning
01 January 2019. FALSE (3%)
IV. Self-employed individuals and/or professionals, together with cooperatives, are exempt from
3% gross receipts tax on their first P500,000 annual gross sales or gross receipts beginning
01 January 2019.TRUE
64. Answer is (A).

The TRAIN Law increases the threshold of VAT-exempt lease of residential unit by P5,000. (From
P10,000 to P15,000 per month, thus 15,000-10,000 = 5,000.
65. Answer is (D).

The TRAIN law increases the VAT-exempt threshold on sale or lease of goods or properties or the
performance of services from P1.5M gross annual sales and/or receipts to P3M. Thus, 3M -1.5M =
1.5M.
66. Answer is (C).

Statement 1 is true. TRAIN Law removes the VAT zero-rating on sale of gold to BSP. Sale of gold to
BSP shall be treated as VAT-exempt transaction under Section 109.
Statement 2 is false. Paintings sold by art gallery are vatable.
Statement 3 is false. TRAIN Law removes the VAT zero rating of foreign currency denominated sales,
i.e., sale to a non-resident of goods assembled or manufactured in the Philippines for delivery to a
resident in the Philippines, paid for in acceptable foreign currency and accounted with the Bangko
Sentral ng Pilipinas (BSP) rules and regulations.
67. Answer is (D).
68. Answer is (D).

Under the TRAIN Law, the new threshold for the monthly rent per residential unit is P15,000. Thus, the
lease is VAT-exempt.
69. Answer is (D).

The monthly rent exceeds the monthly threshold of 15,000
But the aggregate annual rent (P18,000 x 10 units x 12 mos) of P2,160,000 does not exceed the new
VAT threshold of P3,000,000. Therefore, the transaction is not subject to VAT.
70. Answer is (C).

Under the TRAIN Law, the new rate for the percentage tax on sale of shares of stocks listed and
traded through Local Stock Exchange is 6/10 of 1% (under NIRC is ½ of 1%)
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 = 20,000 𝑠ℎ𝑎𝑟𝑒𝑠 𝑥 𝑃150/ 𝑠ℎ𝑎𝑟𝑒 = 𝑃3,000,000
6
𝑂𝑃𝑇 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 = 𝑃3,000,000 𝑥 𝑜𝑓 1% = 𝑃18,000
10
71. Answer is (B).

The transactions involving shares of stocks listed and traded are subject to OPT of 6/10 of 1% and not
listed and traded are subject to CGT of 15%.
𝐶𝐺𝑇 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛𝑠 𝑥 15% = (𝑃830,000 − 𝑃470,000)𝑥 15% = 𝑃360,000 𝑥 15% = 𝑃54,000
6
𝑂𝑃𝑇 = 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑥 𝑜𝑓 1% = 𝑃2,500,000 𝑥 0.6 𝑜𝑓 1% = 𝑃15,000
10
𝑇𝑜𝑡𝑎𝑙 𝑡𝑎𝑥 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝑃54,000 + 𝑃15,000 = 𝑃69,000
72. Answer is (B).

The new threshold for business to be a VAT registered business if P3,000,000. Thus, the transaction is
not subject to VAT but subject to OPT.
𝑂𝑃𝑇 = 𝑃2,500,000 𝑥 3% = 𝑃 75,000
73. Answer is (D).

not subject to VAT
74. Answer is (D).

Since the transaction exceeds the VAT threshold, the transaction is subject to VAT regardless
whether the business is VAT-registered or not.
--- not subject to OPT
75. Answer is (C).

𝑂𝑢𝑡𝑝𝑢𝑡 𝑉𝐴𝑇 = 𝑃3,250,000 𝑥 12% = 𝑃390,000
𝑉𝐴𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝑂𝑢𝑡𝑝𝑢𝑡 𝑉𝐴𝑇 − 𝐼𝑛𝑝𝑢𝑡 𝑉𝐴𝑇 = 𝑃390,000 − 𝑃108,000 = 𝑃282,000
76. Answer is (A).

Effective Jan 1, 2021, under the TRAIN Law, the VAT-exempt threshold for sale of real properties not
held for sale or for lease is P2,000,000.
𝑉𝐴𝑇 (𝑀𝑎𝑛𝑖𝑙𝑎) = 𝑃3,500,000 𝑥 12% = 𝑃420,000
77. Answer is (D).

The transaction does not exceed the threshold thus it is VAT-exempt.
78. Answer is (D).

The new threshold for VAT on sale of residential lot is P3,000,000 and P3,199,200 on sale of
residential house and lot. Sale of commercial lot is subject to VAT.
Lot # Description Selling Price VAT
1 Residential lot P2,500,000 none
2 Commercial P1,800,000 P216,000 (12%)
3 Residential Lot P3,250,000 P390,000 (12%)
4 Residential house and lot P3,000,000 none
5 Residential house and lot P3,500,000 P420,000 (12%)
𝑉𝐴𝑇 (𝑟𝑒𝑠𝑖𝑑𝑒𝑛𝑡𝑖𝑎𝑙 ℎ&𝑙) = 𝑃390,000 + 𝑃420,000 = 𝑃810,000
79. Answer is (A).

𝑉𝐴𝑇 (𝑐𝑜𝑚𝑚 𝑙𝑜𝑡) = 𝑃216,000
80. Answer is (B).

Under the TRAIN Law, the new rate for the sale of shares of stocks listed and traded through local
stock exchange is 6/10 of 1% of the selling price. Thus, the percentage tax is 6/10 of 1% of P600,000.
B
Donor’s Tax
81. Answer is (B). The new law imposes a uniform 6% donor’s tax.
82. Answer is (A). The 6% donor’s tax shall be based on total gifts in excess of P250,000 exempt gifts.
83. Answer is (B). Both statements are false because the TRAIN Law imposes a 6% tax rate for donor’s
and estate tax.
84. Answer is (B).

Statement 1 is false because a donation given on account of marriage is already subject to donor’s tax
regardless of the amount. Statement 2 is false because the tax rate for stranger is now 6% under the
new law.
85. Answer is (D). None of the donees will entitle to the P10,000 dowry exemption, because the dowry is
already subject to donor’s tax regardless of the amount.
86. Answer is (C). The stranger’s tax payable is 6% of the net gifts.
87. Answer is (C).

Statement 1, Dowries, regardless of the amount, shall be subject to donor’s tax. Statement 2, The new
law removes the first P10,000 exemption from gifts made on account of marriage.
88. Answer is (D). Under the TRAIN Law, the sale, exchange or other transfer of property made in the
ordinary course of business shall be considered made for adequate and full consideration in money
and money’s worth, hence, not subject to tax.
89. Answer is (D).
Statement 1. Under the TRAIN Law, the sale, exchange or other transfer of property made in the
ordinary course of business shall be considered made for adequate and full consideration in money
and money’s worth, hence, not subject to tax.
Statement 2. Under NIRC, the sale, exchange or other transfer of property made in the ordinary course
of business is transferred for less than adequate and full consideration in money and money’s worth,
then the amount by which the fair market value of the property exceeded the value of the consideration
shall be subject to donor’s tax.
90. Answer is (C).
Gross gift P 150,000

Rate of tax(stranger) 6%
Donor’s tax P 9,000
91. Answer is (D).

Under the TRAIN Law, dowries, regardless of the amount, shall be subject to donor’s tax. For (a), (b),
and (c) are items under Special Laws that are exempt from donor’s tax.
92. Answer is (C).
Land – Cubao P 450,000

Jewelry – Hongkong 100,000
PLDT Shares 150,000
Building – Italy 1,600,000
Land – Pampanga 300,000
Cash – New York 100,000
Receivable – 50% 100,000
Total Gross Gift P 3,000,000
93. Answer is (A).
Land – Cubao P 450,000

Land – Pampanga 300,000
Total Gross Gift P 750,000
94. Answer is (B).
April 15 Philippines U.S.A Total

Gross gift P 710,000 P 300,000 P 1,010,000
Deductions --- --- ---
Net gifts P 710,000 P 300,000 P 1,010,000
Tax due on P 1,010,000 (**6%) P 60,600

Less: Foreign credits 9,000
Tax payable P 51,600
Computation of foreign credits:

Limit [60,600 x (300,000/1,010,000)] P 18,000
Tax paid 9,000
LOWER between limit and actual P 9,000
95. Answer is (A).
July 20 Philippines U.S.A Total

Gross gift P 600,000 --- P 600,000
Deductions 100,000 --- 100,000
Net gift 500,000 --- 500,000
Previous 710,000 300,000 1,010,000
Aggregate net gift 1,210,000 300,000 1,510,000
Tax due on P 1,510,000 (**6%) P 90,600

Previous tax 60,600
96. Answer is (A).
Net gift to Marlon (relative) P 275,000

Net gift to Mikee (stranger) 275.000
Total net gifts 550,000
Tax rate 6%
97. Answer is (B).

Whenever the done is a juridical person, it is always considered to be stranger to the donor regardless
of the extent of control by the donor on the capital of the juridical person. However, under the TRAIN
Law, whether the donee is relative or stranger, the tax rate is 6%. Thus, the tax is computed as
follows:
Net gift P 500,000
Rate of tax 6%
Gift tax due P 30,000
98. Answer is (C).
Free portion P 500,000

Less: Amount of donation on January 5 300,000
Available for disposal 200,000
Rate of tax 6%
Donor’s tax due P 12,000
If, there being two or more donations, the disposal portion is not sufficient to cover all of them,
those of the more recent date shall be suppressed or reduced with regard to the excess.
99. Answer is (D). Although the seller died six months after the sale, it cannot be said that the sale was
made in contemplation of death. However, the sale for inadequate consideration is no longer subject to
donor’s tax under the new law.
100. Answer is (D).
Fair market value (residential house P 1,000,000

Rate of tax 6%
Estate Tax
101. Answer is (A).

Under the TRAIN Law, it extends the period to file estate tax return from six months to one year.
102. Answer is (B).

Statement 1 is incorrect because under the TRAIN Law, a new provision which allows payment by
instalment of estate tax due within two years from statutory date for payment of tax in case the cash of
the estate is insufficient to pay the total estate tax due.
Statement 2 is correct because the fair market value of the family home increases which is exempt
from estate tax from 1M to 10M.
103. Answer is (C).

Statement 1 and 2 are correct.
Under the TRAIN Law, it increases the threshold value of estate from P2 million to P5 million where
the estate tax return to be filed should be supported by a statement duly certified by a Certified Public
Accountant (CPA).
The new law extends the period to file estate tax return from six months to one year.
104. Answer is (C).

The TRAIN Law replaces the current graduated estate tax rates with a fixed estate tax rate of six
percent (6%) based on the value of net estate.
105. Answer is (C).

Statement 1 and 2 are correct.
In case of a non-resident not a citizen of the Philippines, the TRAIN Law introduces a standard
deduction of P500,000 against the gross estate of non-residents.
The Train Law eliminates the requirement to file an estate tax return for gross estate exceeding
P200,000 which are exempt from estate tax.
106. Answer is (A).

The TRAIN Law relaxes the rule on the amount which can be withdrawn from the deceased’s bank
deposits. The banks allow withdrawal of deceased’s bank deposits subject to 6% final withholding tax.
107. Answer is (C).

There shall be levied, assessed, collected and paid upon the transfer of the net estate of every
decedent, whether resident or non-resident of the Philippines, a tax at the rate of six percent (6%)
based on the value of such net estate.
108. Answer is (D).

The TRAIN Law removes the deduction for funeral expenses, judicial expenses, family home, and
medical expenses incurred by decedent in arriving at the net estate subject to estate tax.
109. Answer is (D).

Under the new law, introduces a standard deduction of P500,000 against the gross estate of non-
residents.
110. Answer is (D).

The TRAIN Law relaxes the rule on the amount which can be withdrawn from the deceased’s bank
deposits. The banks allow withdrawal of deceased’s bank deposits subject to 6% final withholding tax.
111. Answer is (D).

The TRAIN Law removes the deduction for funeral expenses incurred by decedent in arriving at the
net estate subject to estate tax.
112. Answer is (B).
113. Answer is (C).

Ordinary Special
Claims against the estate P 200,000
Claims against insolvent persons 40,000
Taxes 25,000
Losses 60,000
Mortgage on indebtedness 120,000
Transfer for public use 100,000
Vanishing deduction 28,000
Amounts receivable under R.A.4917 ___________ 20,000
P573,000 P5,020,000
114. Answer is (D).

Shares, domestic corporation P 500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
Less: Deductions (2,000,000/2,500,000) x 500,000 400,000
Net Taxable Estate 1,600,000
Estate tax payable (1,600,000 x 6%) 96,000
115. Answer is (C).

Amount deductible:
Lot (P1,500,000 x 30%) P450,000
116. Answer is (C).
Gross Estate P9,000,000

Deductions:
Other Charges P210,000
Standard deduction 5,000,000 5,210,000
Net Taxable Estate P3,790,000
117. Answer is (A).
Estate tax payable (3,790,000 x 6%) P227,400

118. Answer is (A).
Loans Payable P 300,000

Bad debts 60,000
RA 4917 200,000
Total Deductions P5,560,000
To be deductible, claims against the estate out of debt instrument must be duly notarized.
Claims of the estate against other persons are deductible only if the debtor is declared insolvent.
Mortgages paid are allowed only as deduction from the value of the property in computing vanishing
deduction. In computing for the net estate, the deductible item is unpaid mortgage.
Taxes must have accrued before the death of the decedent. Taxes on income of properties which have
accrued after death are not deductible.
119. Answer is (B).

Exclusive Conjugal Total
Gross Estate P4,000,000 P5,000,000 P9,000,000
Allowable Deductions:
Transfer for Public Use 180,000
Unpaid Expenses 150,500 150,500
Losses 120,000 120,000
Net estate before Share of Surviving Spouse 8,549,500
Less: Share of Surviving Spouse (4,729,000/2) 2,364,750
Net estate before Special Deduction 6,184,750
Less: Standard Deduction 5,000,000
Taxable net estate P1,184,750
120. Answer is (C).
Estate tax payable (1,184,750 x 6%) P71,085

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1|Page TAXATION UNDER THE TRAIN LAW

4. The deductibility of premium payments on health and/or hospitalization insurance is

6. Statement 1. Income of purely self-employed individuals and/or professionals - Self-employed

11. How many of the following statements are correct?

a. One b. Two c. Three d. Zero

12. Fringe benefit tax (FBT) rate increase by:

a. Both statement are true

14. Which of the following is tax-exempt?

Statement 2. Interest income on foreign currency bank deposits increased by 15%

I. The personal profile;

a. I, II and III only

I. The personal profile;

a. I, II and III only

a. Shall be required to file an income tax return, always

a. Both statement are true

Items 23-25 are based on the following information:

27. TP Corporation had the following journal entry of fringe benefits:

Salaries received as employee P 200,000

The taxpayer will report a taxable net income of:

30. Mr. Enriquez provided the following data:

The Taxable Net Income is:

31. The total Final Tax on Passive Income

Items 32 and 33 are based on the following data.

The monthly fringe benefit tax thereon is –

Numbers 34 to 37 are based on the following information:

35. The capital gains tax on the April 5, 2018 is –

Statement 1: Registered Enterprises within a separate customs territory as provided

a. Statement 1 and 2 b. Statement 1 and 3

42. Which of the following is the best answer?

a. Statement 1 and 2 are true. c. Statement 1 is true; Statement 2 is false

43. Which of the following is VAT-Exempt?

45. Which of the following is the best answer?

a. Statement 1 b. Statement 2 c. Statement 3 d. Statement 4

47. Which of the following is correct?

a. VAT zero rated transaction c. Percentage Tax Transaction

50. One of the following is a VAT Zero-rated transaction

a. Diabetes, High Cholesterol and

a. Association Dues d. A, B and C

61. Which of the following is a not a VAT Zero-Rated Transaction(s)?

62. How many of the following statements are correct?

a. One b. Two c. Three d. Four

63. How many of the following statements are correct?

66. How many of the following statements are not correct?

The total tax payable is

73. How much is the VAT payable?

75. How much is the VAT payable?

86. When the done is a stranger the tax payable is:

91. Which of the following is subject to donor’s tax?

Jane, a Filipina princess made the following donations.

She has also transferred the following properties:

Questions 94 and 95 are based on the following data:

95. The gift tax due on July 20, 2018 is:

a. Statement 1, true; Statement 2, false

Real Properties P 2,500,000

a. The estate of Becca shall be exempt from estate tax.

From the following:

Assuming there is no reciprocity, the estate tax payable is –

117. The estate tax payable is –

The total amount deductible from gross estate is –

119. Ely, non-resident Japanese, died leaving the following:

Exclusive properties, Philippines P 4,000,000

120. The estate tax payable is:

1. C 11. A 21. D 31. A