Tax 3

Final Period Quizzes

Quiz 1
True or False (20 pts)
True
1. Foreign and domestic banks may have an EFCDU.
2. All cooperatives are subject to income tax on their income from unrelated
activities.
3. The 48-hour rule maybe extended by fortuitous events.
4. Exempt and special corporations are not allowed to used optional standard
deductions.
5. Goods with unpaid excise taxes shall expose the owner of the same to the excise
taxes.
6. Just like other taxes, ad valorem taxes are not indexed to inflation.
7. The excise tax return may be filed in any authorized agent banks, revenue
collection officer or duly authorized city or municipal treasurers.
8. Gross Philippine billings includes gross receipts from transient passengers
whose connecting flight is catered by another carrier and who departed in the
Philippine ports within 48-hour from the time of arrival.

False
1. If the gross income from related activities is greater than 50% of the total gross
income, the educational institution is subject to 30% tax rates. – unrelated or
10%
2. Exempt corporations are never subject to corporate income tax. – still
3. The 48-hour rule applies to all transient passengers. – not to all
4. PEZA-registered companies are tax exempt on its income from related activities.
– 5% tax rate on gross income
5. The unrelated income of non-profit corporations is exempt from income tax if the
same is diverted to its non-profit purpose. – main purpose
6. All corporation created under Philippine Law shall be subject to the current
corporate tax rate of 30%. – not all, because there are tax-exempt corporations
7. Since it is merely an additional tax, excise tax is normally lower in tax rates.
8. Specific excise taxes are normally indexed to inflation at 4% per year – for sin
products only
9. Excise tax and the VAT on importation are levied upon landed costs.
10. The excise tax imposed on cigars and cigarettes are specific taxes.
11. Exemption from excise tax mean exemption from other business taxes.
12. The excise tax on the sale of imported goods is collectible from the first buyer of
the goods.
Multiple Choice Theories and Problems (15 items for 20pts) – 20 mins
Theories (10 pts)
1. Which of the following tax rates is not correct?
4 ½% on gross rentals of resident owner or lessor of vessels chartered by
foreign nationals.

2. A resident foreign corporation is

Not subject to 30% tax on foreign income

3. Which statement is not correct?

All BOI-registered companies naturally enjoy tax holiday for 4 or 6 years and
can be extended up to 10 years.

4. A carrier organized in the Philippines is subject to tax on

World taxable income

5. Which of the following statement is correct?

Tax-exemption of cooperatives doing business with members are not totally
tax exempt.

6. Excise tax on locally produced excisable goods shall be paid

Before the removal of the goods

7. Filing of excise tax on bond is required on

Excise tax on metallic mineral and mineral products

8. Which statement is correct?

Excise tax normally don’t have the deadline of payment.

9. Statement 1: Excise tax rates are relatively more burdensome compared to other
business taxes.
Statement 2: Excise tax rates covers a small range products or services.
Both statements are true

10. Statement 1: The regulatory aspect of specific taxes on certain sin products will
be best preserved when their tax rates adjust for inflation.
Statement 2: There is a need to adjust ad valorem taxes since they don’t ride
with inflation.
Only statement 1 is correct
Problems (5 items, 10 pts)
1. Lougue Inc., a PEZA-registered corporation, recorded the following transactions
for last year’s transactions: Gross receipts, P5,000,000; Dividends received from
a domestic corporation, P300,000; Interest income from time deposit, P380,000;
Cost of services, P1,500,000; Administrative expenses, P2,000,000. How much
is the income tax liability?
5,000,000 – 1500,000 = 3,500,000 x 5% = 175,000

2. Maayo National Highschool, a non-profit, non-stock school has the gross income
of P7,000,000, only 40% of which was contributed by related activities and total
expenses of P4,000,000, 60% of which was incurred in connection with non-
related activities. Compute the income tax if the income from non-related
activities is not used exclusively for educational purposes.

Related Unrelated Total

Gross income 2,800,000 4,200,000 7,000,000
Expenses 1,600,000 2,400,000 4,000,000
Net income 1,200,000 1,800,000 3,000,000

Income tax due = 1,800,000 x 30% = 540,000

3. XYL Company is a VAT-registered car manufacturer. It had the following data on

the manufacture of a car model during a period or recession: Production costs,
P1,000,000; Transport and other expenses of sale, P200,000; Final selling price
to customer, P1,100,000. What is the basis of the ad valorem tax?

(P1,000,000 + P200,000) x 110%; note higher than final selling price

4. High-Low company produced the following vehicle models during the month:
Cuttie electric car, P5,000,000; Walden bus, P4,000,000; Hybrid SUV,
P3,000,000; Juan Jeepney, P1,500,000; Durro motorbikes, P1,000,000.
Compute for the total excise tax due.

(P3M x 20% x 50%); Electric car is exempt; Bus and jeep is an exempt utility
vehicle; motorbike is not expressly taxed)

5. Ms. Male-muten, a VAT-registered physician and beautician, conducted an

internal abs enhancement procedure a well-known and handsome practicing
accountant, Lou Mina. The two contracted for a P2,000,000 payments before
taxes. What is the excise tax?

P2M x 5% = 100,000
Straight Problems (10 items for 20 pts) – 20 mins
Round-up decimal numbers to the nearest ones.
A domestic bank reported the following summary of income and expense:

Residents Non-
OBU/FCDU Others residents Total
Regular banking unit gross income P - P3,000,000 P 850,000 P3,850,000
FCDU interest income 900,000 900,000 700,000 2,500,000
FCDU rent fees 200,000 220,000 50,000 470,000
Total gross income P1,100,000 P4,120,000 P1,600,000 P6,820,000
Direct expenses:
Regular banking expenses P - P1,000,000 P 600,000 P1,600,000
FCDU Expenses:
Interest income 650,000 400,000 250,000 1,300,000
Rent fees 30,000 20,000 10,000 60,000
Total direct expenses P2,960,000
Common expenses 300,000
Total expenses P3,260,000

1. Is there an income from FCDU subject to regular income tax? Yes

2. Is an FCDU a division of both domestic and resident foreign banks? No
3. How much is the gross income from FCDU that is subject to regular income tax?
4. How much is the taxable net income subject to regular tax from regular banking
unit?
5. How much is the corporate income tax due from regular banking unit?
6. How much is the total income tax liability?

FCDU RBU
RBU total gross income P - P3,850,000
FCDU rent fees 470,000 -
Gross income P 470,000 P3,850,000
Less: Deductions
Directly traceable expense 60,000 1,600,000
Common expenses 20,674 169,355
Taxable net income P 389,326 P 2,080,645
Multiply by 30% 30%
Regular corporate income tax P 116,798 P 624,194 = 740,992

Common expenses:
FCDU = 470/6820 x 300,000 = 20,674
RBU = 3,850/6820 x 300,000 = 169,355
Quolorram Company sells sports car with the selling prices ranging P2M to P20M.
During the month, it completes production of 2 units of the Tigris model with aggregate
cost and wholesale price of P2M and P6M.
1. What is the ad valorem tax?
2. What is the ad valorem tax if the vehicles are hybrid models utilizing alternative
power sources?

(SRP/unit = P6,000,000 / 2 = P3,000,000 each, taxable at 20%; P6,000,000 x 20% =

P1,200,000
(P6M x 20% x 50%) = P600,000

Dr. Becky Co, a VAT-registered surgeon, conducted a cosmetic surgery on Ms.

Everyone for P1,200,000. The fee is agreed to be inclusive of VAT but exclusive of
excise tax.
1. What is the excise tax?
2. What is the excise tax assuming that the fee is inclusive of both excise tax and
VAT?

(P1,200,000/112%) x 5% = P53,571
(P1,200,000/112% x 5%/105% = P51,020

Let’s Drink Manufacturing Company is about to transfer the 1500 liters of Royal Cola
using purely caloric sweetener and 2000 liters of RC Pop using stevia non-caloric
sweetener.
1. How much is the total excise tax? 1500 x 6 = P9,000
Quiz 2 –
True or False (20 pts) – 20 mins
True
1. If one party is exempt in a transaction subject to documentary stamp tax, the
other non-exempt party is taxable.
2. Documents pertaining to the same taxable transactions are taxable as one
transaction.
3. Government assessment is prima facie presumed correct and done in good faith.
4. An assessment is a notice of tax deficiency or delinquency coupled with a
demand for its payment.
5. The pre-audit of tax returns may lead to an additional tax liability of the taxpayer.
6. The taxpayer can object to an investigation if he is given a manual LA.
7. A taxpayer who is issued a letter notice may also be issued a letter of authority.
8. The failure to file a protest shall make the assessment final and executory and
unappealable to the CTA.
9. If the BIR finds merits in the taxpayer’s responses to the preliminary assessment
letter, the impending assessment may be cancelled.

False
1. Documentary stamp tax does not apply when the transaction is void or voidable.
– still apply
2. The documentary stamp tax return shall be filled within 15 days from the close of
the month the transaction is executed. – 10 days
3. A single transaction may result in payment of several documentary stamp taxes.
– one transaction, one tax
4. To determine the correct tax, the Commissioner of Internal Revenue can inquire
into the balances of bank accounts of the taxpayers.
5. Unpaid taxes must be collected by the government within five years from the
filing of the tax return or the deadline for such filing whichever is late. –
assessment
6. The BIR must restrict its examination to those taxpayer groups listed in the BIR
Annual Audit Program. Any assessment issued in violation of this rule is void.
7. A revenue officer can issue his own letter of authority to any taxpayer he
suspects of fraudulent tax reporting.
8. Taxpayers may be subject to audit examination more than once in a year. –
General rule: only once
9. A pre-assessment notice is always required to be given to a taxpayer who will be
assessed.
10. An assessment is always necessary for the collection of unpaid taxes. - criminal
action does not need assessment
11. The remedies of distraint or levy may be availed of by the government even in
default of an assessment. – only if the assessment is final, executory and
demandable
Multiple Choice Theories and Problems (19 items for 28pts) – 28 mins
Theories
1. Which of the following statement is correct?
If the required documentary stamp is not affixed on a document, the
document will not be registered in the proper registry even if the
document is valid.

2. Statement 1: Loans not exceeding P250,000 made by individuals during a month

for business purposes is exempt from documentary stamp tax.
Statement 2: Loans not exceeding P250,000 made by a corporation during a
month is subject to documentary stamp tax.
Only statement 2 is true

3. Which is not subject to documentary stamp tax on bills of lading?

Import shipment of goods from abroad

4. Which documentary stamp tax is a specific tax?

Stamp tax on warehouse receipts

5. Statement 1: Leases not exceeding 1 year in duration is exempt from

documentary stamp tax.
Statement 2: Loans not exceeded 1 year in duration is exempt from documentary
stamp tax.
Both statements are false

6. The 3-year prescriptive period will be extended by any of the following instances
except
Fortuitous events

7. Which of the following is correct regarding the pre-audit of a tax return?

Pre-audit is done to check mathematical computations or ascertain correctness
and validity of deductions claimed by the taxpayer

8. Statement 1: A revised assessment can no longer be disputed.

Statement 2: A cancelled assessment can no longer be enforced.
Statement 1

9. Which is not required in an assessment notice?

A statement to the effect that the taxpayer must dispute the findings of the
examiner

10. A taxpayer who concedes to a BIR assessment must

Pay the tax
Problems
1. Mr. Bato sold a piece of land with a zonal value of P4,000,000 to a buyer for
P4,500,000. How much is the documentary stamp tax liability?

4,500,000 x 1.5% = 67,500

2. Vaquo-na Company issued 1,000,000 shares for P10 par value per share to
various stockholders for a total consideration of P12,000,000. Mr. Astra, one of
the shareholders, subscribed for 120,000 shares on which he subsequently sold
for P140,000. How much is the documentary stamp tax on the sale of shares?
[(120,000 x 10) / 200] x 1.50 = 9,000

3. Peter contracted John to mortgage his lot for P3,272,000. His land has a zonal
value of P5,000,000 and an assessor’s fair value of P4,500,000. How much is
the documentary stamp tax liability?
3,272,000
- 5,000 40
3,267,000 / 5000 = 654 x 20 = 13,080
13,120

4. A French Company issued shares to Mr. Wanchow, a resident Chinese in the

Philippines. The shares had a total par value of P2,000,000 in Philippine Pesos.
How much is the documentary stamp tax?
(2,000,000 / 200) x P2 = P20,000

5. A Canadian Company issued bonds to Mr. Macaramdam. The bonds had a total
issued price of P2,000,000 in Philippine Pesos. How much is the documentary
stamp tax?
(2,000,000 / 200) x 1.5 = P15,000

6. A Filipino Company issued no-par value shares to Mr. Wangdo, a non-resident

American citizen. The shares had a total consideration of P2,000,000. Mr.
Wangdo sold the shares to Mayaman Company in the Philippines for
P3,000,000. How much is the documentary stamp tax on the sale? (2,000,000 /
200) x P2 = P20,000 x 50% = P10,000

7. The BIR found reasonable basis to assess the taxpayer for the delinquent
income taxes for the calendar year 2015. The assessment must be served
On or before April 15, 2019

8. On June 3, 2015, the BIR sent a deficiency assessment on the 2013 income tax
of a taxpayer which had become final and executory. The taxpayer filed the
pertinent income return on April 2, 2014. When is the last day of the BIR to
collect by distraint and / or levy or by judicial action?
July 3, 2020
 9. On March 5, 2015, the BIR discovered a deficiency value added tax for the
quarter ended September 2008. The deficiency did not arise from error or fraud.
Which is correct?
The BIR has no more remedies since the tax prescribed

Straight Problems (6 items for 12 pts) – 12 mins

Don Uno loaned Ms. Lovie P5,000,000 under a written loan agreement. The principal of
the loan will mature in 5 years and pays 10% annual interest. Don Uno required Ms.
Lovie to submit a promissory note to secure the loan. After a year, Ms. Lovie incurred a
delay in interest payment prompting Don Uno to require Ms. Lovie to mortgage his
residence with a total fair value of P4,000,000 as security to loan.
How much is the documentary stamp tax on the loan agreement?
(5,000,000 / 200) x 1.5 = 37,500

How much is the documentary stamp tax on the mortgage?

5,000,000
- 5,000 40
4,995,000 / 5000 = 999 x 20 = 19,980
20,020
Assuming Ms. Lovie was not able to pay for the mortgage principal and executed
a deed of conveyance of his residence as full payment for the loan, what is the
documentary stamp tax?
5,000,000 x 1.5% = 75,000

Antoc-na Enterprises of Pasay City ordered custom-built equipment from Tulog-na

Company in Tacloban City for P500,000. Tulog-na shipped the goods through Sleepy
Logistics to Bed’s warehousing in Pasay City. Antoc-na Enterprises issued a bills of
exchange in favor of Antoc-na Enterprises ordering Tacloban Bank to pay P550,000 on
sight. After Tacloban Bank’s payment, Tulog-na Company oreder the release of the bills
of lading and the warehouse receipt to Antoc-na Enterprises.

How much is the documentary stamp tax on the accounts receivable? 0

How much is the documentary stamp tax on the bills of exchange?

(550,000 / 200) x 0.6 = 1,650

If Antoc-na Enterprises issued checks for the full settlement of its payable, how
much is the documentary stamp tax? P3 per check
A301 Quiz
Mr. Bato sold a piece of land with a zonal value of P4,000,000 and assessed value of
P5,000,000 to a buyer for P4,500,000. How much is the documentary stamp tax
liability?
5,000,000 x 1.5% = 75,000

Vaquo-na Company issued 1,000,000 shares for P10 fair value per share to various
stockholders for a total consideration of P12,000,000. Mr. Astra, one of the
shareholders, subscribed for 120,000 shares on which he subsequently sold for
P140,000. How much is the documentary stamp tax on the sale of shares?

(12,000,000 / 200) x P2 = P120,000 x 50% = P60,000 x 120/1,000 = 7,200