CHAPTER 8
True or False 1
False 1. To be zero-rated, all forms of export sales must be paid for in acceptable foreign
currencies.
False 2. Vat exemption results in total tax relief while zero-rating results in partial tax relief.
False 3. Input taxes on zero-rated sales are deductible as part of costs or expenses.
True 4. Input taxes on zero-rated sales are claimable as tax credit or tax refund.
True 5. As a rule, effectively zero-rated sales require prior application with the BIR for zero-
rating.
False 6. Sales to tax-exempt persons will be subject to 12% VAT in default of an approved
application for zero-rating.
Note: Zero-rated if with approved application, exempt if otherwise.
True 7. The foreign currencies must be inwardly remitted and accounted for under the rules of
the BSP to be zero-rating.
False 8. The 60-day rule on deemed sales of consignment applied to export sales.
False 9. The sale of good to the BSP must be paid for in acceptable foreign currencies to be
subject to zero-rating.
False 10. The sale to a local export oriented enterprise is subject to zero-rating only if paid for in
acceptable foreign currencies.
False 11. Legal title over exported goods must pass abroad to be subject to zero-rating.
False 12. Export sales that are not paid for in acceptable foreign currencies are subject to the
12% VAT.
Note: Treated as exempt.
False 13. The export sales by non-VAT registered person are exempt from VAT but are subject
to the 3% percentage tax.
Note: Exempt from % tax.
True 14. When the remittance of the foreign currency-denominated sale is not accounted for
under BSP rules, the same shall be considered VAT-exempt.
False 15. An export-oriented enterprise is an entity that exports at least 70% of its total annual
production.
Note: More than 70%
True or False 2
False 1. The direct export by an export trader shall be considered an export sale subject to
12% VAT.
Note: 0% VAT.
True 2. The sale of an export trader to a fellow export trader is subject to zero-rated VAT.
False 3. The commission income from export sales by export traders is exempt from VAT.
Note: Subject to 0% VAT.
True 4. The sale to a bonded manufacturing warehouse of an export-oriented enterprise is
subject to effective zero-rating.
True 5. The sales of goods or services to export-processing zones are subject to an automatic
zero-rating without the need for a BIR application for effective zero-rating.
False 6. The sales to diplomatic missions are exempt from VAT.
True 7. The sales to a BOI-registered manufacturer are subject to zero-rated VAT as long as
100% of its annual production is actually exported.
True 8. The sale of goods or services to a domestic carrier for its international operations is
subject to zero-rated VAT.
False 9. The sale of goods or services to a domestic carrier for its domestic operations is
exempt from VAT.
True 10. The transport of domestic carriers of passengers, baggage and mails from the
Philippines to a foreign country is subject to zero-rated VAT.
True 11. The transport of passengers by an international carrier from the Philippines to a
foreign country is exempt.
Note: Exempt from % tax and VAT.
False 12. The transport of cargoes, baggage or mails by an effective zero-rated if paid for in
acceptable foreign currencies.
True 13. The sale of locally manufactured goods to overseas Filipinos is subject to an effective
zero-rating if paid for in acceptable foreign currencies.
True 14. Sales to the Asian Development Bank are subject to zero-rated VAT.
False 15. The sale to embassies with VEC and embassy personnel with VEIC is not subject to the
zero-rated VAT.
Multiple Choice – Theory: Part 1
1. Which statement is correct?
a. Zero-rated sales are taxable, but will not result in an output VAT.
b. Zero-rated sales are non-taxable; hence, these will not result in an output VAT.
c. VAT zero-rating ang VAT exemption are synonymous concepts.
d. All of these
2. Which is correct regarding the treatment of input VAT?
a. Input VAT on zero-rated sales is deductible from gross income.
b. Input VAT on zero-rated sales is creditable against output VAT or refundable.
c. Input VAT on zero-rated sales is both deductible from gross income and creditable against
output VAT.
d. Input VAT on exempt sales is refundable or creditable.
3. Which of the following requires prior BIR application for effective zero-rating?
D. Sales to export-oriented enterprises
4. What sale is not subject to zero-rating?
A. Sale to a senior citizen
5. Which is not a constructive export?
A. Direct export to a foreign country
6. Which is non-vatable?
D. Sales to senior citizens
7. Statement 1: The export of VAT-exempt goods is subject to zero-rated VAT.
Statement 2: The domestic sale of VAT-exempt goods is subject 12% VAT.
Which is incorrect?
B. Statement 2
8. Which is subject to zero-rated VAT?
A. Sale of fruits and vegetable to an embassy personnel with VEIC
9. What is the requirement for zero-rating of sales to BOI-registered enterprises?
C. 100% of production must be exported
10. What is the requirement for zero-rating of sales to a PEZA-registered enterprise?
D. None
11. What is the requirement for zero-rating of sales to an export-oriented enterprise?
B. Export sales must exceed 70% of annual production
12. Which is not subject to zero-rating?
B. Export of automobiles to a local export-oriented enterprise
13. Which is correct with constructive export?
D. None of these
14. Which of the following is not subject to zero-rated VAT?
C. Export sales paid for in the local currency
15. Prior BIR application for effective zero-rating is not required for
A. direct export to a foreign country.
16. Which of the following may not qualify as export sale?
C. Sale to an export trader
17. Which is not a constructive report?
D. Sale to a foreign customer abroad
18. A non-large taxpayer shall file the application for effective zero-rating with the
C. Audit Information, Tax Exemption and Incentive Division.
19. An approved application for effective zero-rating is given
B. a prospective effect.
20. An approved application for zero-rating is valid for
A. one quarter only.
Multiple Choice – Theory: Part 2
1. The sale of services to the following cannot qualify for zero-rating
A. Sale to a resident person doing business in the Philippines
2. Statement 1: Services to non-residents are always subject to zero-rated VAT if rendered abroad.
Statement 2: Services to residents may be subject to zero-rating if paid for in acceptable foreign
currencies.
Which is incorrect?
C. Both statements
3. Which is correct?
D. Service rendered abroad is exempt from any business tax.
4. Which is subject to zero-rating?
B. Non-resident foreign corp.; Philippines; $10,000
5. Which is not required in the zero-rating of services rendered to a non-resident?
B. The non-resident alien must be a resident in the Philippines at the time the services were
rendered
6. Sales of services to this entity is subject to the 12% VAT.
A. Development Bank of the Philippines
7. Which is not subject to zero-rating?
B. Sale of services to a BOI-registered enterprise
8. To which of the following is a sale not subject to zero-rated VAT?
D. Government agencies
9. Which is not subject to zero-rating?
B. Sale to a domestic sea carrier on its domestic operations
10. Which is incorrect with effectively zero-rated sales?
D. The sale must be made by a VAT-exempt person
11. Which is incorrect with foreign currency-denominated sales?
B. Title to the goods must pass to the buyer outside Philippine territory
12. Which is subject to zero-rating?
C. Outgoing transport of passengers, cargoes, excess baggage or mails by a domestic carrier
13. Which of these services is subject to zero-rating?
D. None of these
14. Which of these entities is subject to zero-rating on the sale of renewable sources of energy?
A. Generation companies
15. Which of the following power generation plants is not qualified to a zero-rating treatment on the
sale of electricity?
D. Coal power plant
Multiple Choice – Problems 1
1. A business payer reported the following sale during a period:
B. P300,000; P0
2. A VAT-registered export trader purchased and sold an equipment. The details of the purchase and
sale are as follows:
Compute the gross income for taxation purposes.
B. 200,000
3. For a taxpayer subject to a 30% tax rate, compute respectively the tax benefits of a P60,000 input
VAT deduction and a P40,000 input VAT credit.
B. P18,000; P40,000
4. A Philippine company exported goods for $140,000 to a non-resident customer. The payment;
however, was not inwardly remitted. The same was remitted to its home office abroad.
Which is correct?
B. The sale is an exempt sale
5. A VAT-registered taxpayer made the following sales:
Compute the total zero-rated sales.
B. P820,000
6. Compute the output VAT.
B. P0
7. An exporter entered into the following transaction during the month:
Compute the zero-rated sales.
E. No answer
8. Export Co. made the following export and foreign consignments:
A. P2,494,000
9. A PEZA locator sold scraps to a domestic business for $12,000. Which is correct?
D. The sale is subject to the VAT on importation to the domestic business.
10. Which is an export-oriented enterprise in 2018?
C. CDE Co. P150M, P108M, P180M, P126M
Multiple Choice – Problems 2
1. Johnny Company, a maintenance contractor, had the following receipts from the following clients in
June 2019:
C. P2,000,000
2. A BSP assay report on a sale of gold nuggets discloses the following:
B. P1,539,500; P1,140
3. A non-VAT taxpayer had the following sales during the month:
Assuming the exchange rate is P43,20: $1, compute the zero-rated sales.
A. P0
4. Carefree, a security service provider, had the following receipts during the month:
C. P5,200,000
5. A VAT-registered service provider had the following receipts from services rendered in the
Philippines in February 2018:
B. P500,000
6. Legazpi Corporation had the following sales in March 2020:
D. P5,000,000
7. A domestic enterprise made the following sales:
Compute the zero-rated sales.
D. P4,100,000
8. DrimPhil Enterprises, a VAT taxpayer, sold the following to various exporters in July 2018:
C. P4,000,000
9. A PEZA locator made the following sales to entities within the custom territories:
A. P0
10. An electric cooperative sold the following during the month:
What is the zero-rated sale of the electric cooperative?
A. P0
