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TRAIN Law

Multiple Choice

1. Effective January 1, 2018, the following income payments to self-employed individuals or


professionals shall be subject to 5% or 10% expanded withholding tax (EWT) except?

a. Professional fees, talent fees or commissions etc., for services rendered by individuals
b. Income distribution to partners of general professional partnership (GPP)
c. Income payment to brokers and agents
d. Payment of commission to independent and/or exclusive sales representatives, and
marketing agents of companies
e. None of the above

2. Beginning January 1, 2018, coal produced under Coal Operating Contracts entered in by the
Philippine government pursuant to Presidential Decree (PD) 972 as well as those exempted
from excise tax on mineral products under other tax laws shall be subject to the following
excise rates, except?

a. P50 per metric ton effective January 1, 2018


b. P100 per metric ton effective January 1, 2020
c. P150 per metric ton effective January 1, 2020
d. P150 per metric ton on January 1, 2021
e. P100 per metric ton effective January 1, 2019

3. Starting January 1, 2018, locally extracted or produced non-metallic minerals and quarry
resources shall be subject to excise tax at what rate?

a. Exempt
b. Four percent (4%) based on the actual market value of the gross output thereof at the time
of removal
c. Four percent (4%) based on the fair market value of the gross sales thereof at the time of
removal
d. Four percent (4%) based on the value used by the Bureau of Customs (BoC) in determining
tariff and customs duties, net of excise tax and value added tax (VAT)
e. Six percent (6%) of the fair international market price

4. Under the TRAIN Law, imported copper, gold, chromite and other metallic minerals shall be
subject to excise tax at what rate?

a. Exempt
b. Four percent (4%) based on the actual market value of the gross output thereof at the time
of removal
c. Four percent (4%) based on the fair market value of the gross sales thereof at the time of
removal
d. Four percent (4%) based on the value used by the Bureau of Customs (BoC) in determining
tariff and customs duties, net of excise tax and value added tax (VAT)
e. Ten percent (10%)

5. Which of the following shall be subject to excise tax of 6% of the fair international market price
on the first taxable sale, barter, exchange or such similar transaction, such tax to be paid by
the buyer or the purchaser before removal from the place of production?

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a. Locally extracted gold
b. Locally extracted chromite
c. Indigenous petroleum
d. Metallic and non-metallic minerals
e. None of the above

6. There are petroleum products which became subject to excise tax rate of P8.00 per liter
effective January 1, 2018. These are:

a. Lubricating oils and greases, locally produced or imported oils, waxes and petrolatum
b. Denatured alcohol to be used for motive power, processed gas, kerosene
c. Process gas, asphalts, naptha
d. Unleaded premium gasoline, regular gasoline, lubricating oils
e. Kerosene, gasoline, naptha

7. Statement 1 - Diesel fuel oil, and on similar fuel oils having more or less the same generating
power shall be subject to excise tax of P2.50 per liter of volume capacity under the TRAIN Law.

Statement 2 – Liquefied petroleum gas used for motive power shall be subject to excise tax of
P2.50 per kilogram under the TRAIN Law.

Statement 3 – Petroleum coke shall be subject to excise tax of P2.50 per metric ton under the
TRAIN Law.

a. Statement 1 is True; Statement 2 is True


b. Statement 1 is True; Statement 2 is False
c. Statement 1 is False; Statement 2 is True
d. Statement 1 is False; Statement 2 is False
e. 2 statements are true and 1 statement is false

8. Statement 1 – Lubricating oils and greases produced from basestocks and additives on which
excise tax has already been paid shall no longer be subject to excise tax.

Statement 2 – Any excess of excise tax paid on raw materials resulting from manufacturing,
blending, processing, storage and handling losses shall not give rise to a tax refund or credit.

Statement 3 – For the period covering 2018 to 2020, the scheduled increase in the excise tax
on fuel shall be suspended when the average Dubai crude oil based on Mean of Platts Singapore
(MOPS) for three (3) months prior to the schedule increase of the month reaches or exceed
eighty dollars (US$80) per barrel.

a. Statement 1 is True; Statement 2 is True


b. Statement 1 is True; Statement 2 is False
c. Statement 1 is False; Statement 2 is True
d. Statement 1 is False; Statement 2 is False
e. 2 statements are true and 1 statement is false

9. Statement 1 – Cigarettes packed by hand shall be subject to excise tax rate of P32.50 per pack
effective January 1, 2018 until June 30, 2018 under the TRAIN Law.

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Statement 2 – Cigarettes packed by hand shall be subject to excise tax rate of P35.00 per pack
effective July 1, 2018 until December 31, 2019 under the TRAIN Law.

Statement 3 – Cigarettes packed by machine shall be subject to excise tax rate of P35.00 per
pack effective July 1, 2018 until December 31, 2019 under the TRAIN Law.

a. Statement 1 is True; Statement 2 is True


b. Statement 1 is True; Statement 2 is False
c. Statement 1 is False; Statement 2 is True
d. Statement 1 is False; Statement 2 is False
e. 2 statements are true and 1 statement is false

10. The following transactions were subjected to higher Documentary Stamp Tax (DST) under the
TRAIN Law, except:

a. Sales, agreements to sell, memoranda of sales, deliveries or transfer of shares or


certificate of stocks
b. Certificates of profits or Interest in Property or Accumulations of any association, company
or corporation, and on all transfers of such certificates or memoranda
c. Powers of Attorney
d. Deeds of Sales, Conveyances and donations of real property
e. None of the above

11. FJR Corporation, as a result of the investment made by a non-resident foreign corporation, RT
Inc. to his company in February 14, 2018, issued original shares of stock with a total value of
P500 million. Among others, this issuance will be subject to DST at what rate?

a. Seventy-five centavos (P0.75) on each one hundred fifty pesos (P150), or fractional part
thereof, of the par value of such stock
b. One peso and fifty centavos (P1.50) on each two hundred pesos(P200), or fractional part
thereof, of the par value of such stock
c. Two pesos (P2.00) on each one hundred fifty pesos (P150), or fractional part thereof, of
the par value of such stock
d. Two pesos (P2.00) on each two hundred pesos (P200), or fractional part thereof, of the
par value of such stock
e. Two pesos (P2.00) on each two hundred fifty pesos (P250), or fractional part thereof, of
the par value of such stock

12. This shall refer to a motor vehicle powered by electric energy, with or without provision for off-
vehicle charging, in combination with gasoline, diesel or any motive power and must be able to
propel itself from a stationary condition using solely electric motor

a. Electric motor vehicle


b. Hybrid electric vehicle
c. Electronically-charged hybrid vehicle
d. Purely Electric vehicle
e. Renewable energy vehicle

13. Malcolm celebrated his 18th birthday on September 26, 2018. His generous and rich father
bought him a vehicle as a gift. According to his father, he was able to purchase the vehicle at a
cheap price because it was not subject to excise tax. Which of the following vehicles was
purchased by Malcolm’s dad?

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a. Toyota Prius, a hybrid electric vehicle
b. Tesla, a purely electric vehicle
c. Mitsubishi Mirage, a compact car with a net manufacturer’s price of below Six hundred
thousand pesos (P600,000)
d. Ford Explorer, a sports utility vehicle (SUV) which functions like a pick up truck
e. Aston Martin V8, a British sports car which was imported to the Philippines as a display unit
and not for sale

14. Ruth is a Certified Public Accountant (CPA) who works as a team leader in the Philippine office
of one of the world’s biggest oil refineries, Zevron. Aside from her compensation as an
employee, she receives, from time to time, commission from the sale of oil lubricants and die-
cast car models. The commission is paid in cash to her, separate from her regular salary, by the
Zevron’s cashier. For income tax purposes, Ruth is –

a. Mixed income earner


b. Compensation income earner
c. Professional
d. Entrepreneur
e. May opt to be subjected to 8% tax on gross revenues if her sales or revenues will not
exceed Three Million pesos (P3,000,000) and she will not be VAT-registered

15. Statement 1 – Gross receipts, for income tax purposes, refer to the total amount of money or
its equivalent representing the contract price, compensation, service fee, rental or royalty,
including the amount charged for materials supplied with the services and deposits and
advance payments actually or constructively received during the taxable period for the services
performed or to be performed for another person, except returnable security deposits.

Statement 2 – Gross sales subject to the 8% income tax rate option shall refer to the total sales
transactions, net of VAT, if applicable, reported during the period, without any other
deduction.

Statement 3 – Discounts determined, granted and properly documented, the amount thereof
forming part of the gross sales duly recorded in the books of accounts may be excluded from
the gross sales for purposes of applying the 8% income tax option.

a. Statement 1 is True; Statement 2 is True


b. Statement 1 is True; Statement 2 is False
c. Statement 1 is False; Statement 2 is True
d. Statement 1 is False; Statement 2 is False
e. 2 statements are true and 1 statement is false

16. Igiboy, an employee of Fiji Camera Corporation of Japan, opened a self-service laundry shop on
February 1, 2018. Based on the projected revenue prepared by his accountant, the laundry
shop will achieve sales amounting to P3.5 million before November 30, 2018. Which of the
following is true regarding Igiboy’s tax position in 2018?

a. Igiboy’s taxable income for income tax purposes is composed of compensation income from
Fiji and business income from laundry shop if he will not register for VAT purposes.
b. Igiboy can apply the 8% income tax rate option tax on his taxable income if he will not reach
the projected P3.5 million revenues in 2018.
c. Igiboy is required to file two (2) tax returns, one for the compensation income and another
one for the business income.

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d. Igiboy is required to register as a VAT-taxpayer even if he is an employee of Fiji Camera
Corporation of Japan.
e. Igiboy is required to consolidate the compensation income and business income when he
files the annual income tax return. He is also required to pay percentage tax on business
income.

17. Which of the following statements is true regarding the application of income tax rules under
the TRAIN law?

a. The election of 8% income tax rate shall be revocable and no amendment of option shall be
made for the said taxable year.
b. The taxpayer can signify the intention to elect the 8% income tax rate in the 1 st Quarter
Percentage and/or Income Tax Return, or on the initial quarter return of the taxable year
after the commencement of a new business/practice of profession.
c. Minimum wage earners shall be exempt from the payment of income tax based on their
statutory minimum wage rates. The holiday pay, overtime pay, night shift differential, and
home leave pay received by such earner are likewise exempt.
d. Taxable income for compensation earners is the gross compensation income less non-
taxable income/benefits such as but not limited to 13th month pay and other benefits, de
minimis benefits, and the employer’s share in the SSS, GSIS, PHIC, Pag-ibig contributions
and union dues.
e. Taxable income for individuals earning income from self-employment/practice of
profession shall be gross income, if the taxpayer opted to be taxed at graduated rates or
has failed to signify the chosen option.

18. Which of the following statements is false regarding the application of 8% income tax rate?

a. The option to be taxes at 8% income tax rate is not available to a VAT-registered taxpayer,
regardless of the amount of gross sales/receipts.
b. Partners of a GPP by virtue of their distributive share from GPP which is already net of cost
and expenses cannot avail of the 8% income tax rate option.
c. A taxpayer who signifies the intention to avail of the 8% income tax rate option, and is
conclusively qualified for said option shall compute the final annual income tax due based
on actual annual gross sales/receipts and other non-operating income.
d. A taxpayer who availed of the 8% income tax rate option is not required to attach financial
statement in filing the final income tax return. However, existing rules and regulations on
bookkeeping shall still apply.
e. A taxpayer may be subject to the graduated income tax rates even if the flat 8% income tax
rate option is initially selected, when the taxpayer’s gross sales/receipts and other non-
operating income exceeded the VAT threshold during the taxable year.

19. The following are the income tax rates on passive income received by Marga, a Filipino citizen
after the effectivity of TRAIN law, except:

a. Winnings (except Philippine Charity sweepstakes and lotto winnings amounting to P10,000
or less) – 20%
b. Cash and property dividends from a domestic corporation – 10%
c. Prizes – 20%
d. Royalties (except royalties on books, other literary works and musical compositions – 20%
e. Royalties on books and other literary works and musical compositions – 10%

20. Which of the following situations represent the proper application of income tax rules after the
effectivity of TRAIN law?

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a. Personal expenses of Kathryn, Chief Financial Officer of FJR Corporation, recorded as
entertainment, amusement and recreation expenses, subjected to 35% fringe benefit tax
(FBT)
b. Business income of Kristianne, a US-trained banker and engaged in pawnshop business with
gross receipts of less than P3,000,000, subjected to 8% income tax rate.
c. Anna, an MWE receiving statutory minimum wage of P150,000, holiday pay of P50,000,
commissions of P500,000 and de minimis benefits of P300,000 during the year, reported
the commission as taxable income subject to either the graduated income tax rate or the
8% income tax rate, at her option.
d. Service revenues (combination of advance payment and deposit) amounting to P2,500,000
of Roshane, a VAT-registered CPA, paid by a client for the tax services she will perform in
the next two years subjected to graduated income tax rates
e. Mark, a freelance performance artist receiving talent fees from clients, reported as taxable
income an amount equivalent to P2,900,000 representing total collections from clients
during the year less the expenses he spent for costumes, fees of make-up artists and glam
team, depreciation of vehicles used in the profession. This taxable income was subjected to
8% income tax rate as this is the option Mark chosen when he filed the 1st quarter income
tax return.

21. Which of the following statements is correct regarding optional standard deduction (OSD) after
the effectivity of TRAIN law:

a. James, a professional broker, can avail of the OSD on his professional income subjected to
the 10% EWT by his clients.
b. The OSD allowed for individuals is equivalent to 40% of the gross income from business or
practice of profession.
c. OSD is allowed for individuals who opted to pay the 8% income tax rate but exceeded the
P3 million VAT threshold on gross revenues/gross receipts.
d. If an individual opted to compute his taxable income using the rules of OSD, he is no longer
subject to examination of the BIR since financial statements are not required to be
maintained.
e. Availment of the OSD is discouraged by the government since only 60% of the gross
revenues is subjected to income tax.

22. Delinquency interest may be imposed on the following situations, except:

a. Failure to pay the amount of the tax due on any return to be filed
b. Failure to pay the amount of the tax due for which no return is required
c. Failure to pay a deficiency tax on the due date appearing in the notice and demand of the
Commissioner
d. Failure to pay any surcharge or interest on deficiency tax on the due date appearing in the
notice and demand of the Commissioner
e. Failure to pay compromise penalties on the due date appearing in the notice and demand of
the Commissioner

23. Statement 1 – There shall be assessed and collected on any unpaid amount of tax, interest at
the rate of double the effective legal interest rate for loans or forbearance of any money in the
absence of an express stipulation as set by the Bangko Sentral ng Pilipinas (BSP) from the date
prescribed for payment until the amount is fully paid.

Statement 2 – Interest imposed on any deficiency tax due, which interest shall be assessed and
collected from the date prescribed for its payment until the full payment thereof, or upon

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issuance of a notice and demand by the Commissioner or its authorized representative,
whichever comes first.

Statement 3 – Upon the effectivity of the TRAIN law, in no case shall the deficiency and
delinquency interest be imposed simultaneously.

a. Statement 1 is True; Statement 2 is True


b. Statement 1 is True; Statement 2 is False
c. Statement 1 is False; Statement 2 is True
d. Statement 1 is False; Statement 2 is False
e. 2 statements are true and 1 statement is false

24. Colmi Corporation received a deficiency income tax assessment from the BIR amounting to
P1,000,000, exclusive of surcharge and interest, for Taxable Year 2015. As stated in the
notice and demand signed by the Commissioner of the BIR, the deadline for payment of the
assessed amount is June 30, 2017. Actual payment was made only by Colmi on February 10,
2018. How much is the total amount due on June 30, 2017?

a. P1,000,000.00
b. P 1,491,643.84
c. P 1,241,643.84
d. P 1,450,000.00
e. Zero. The BIR’s right to examine and assess has already prescribed.

25. Colmi Corporation received a deficiency income tax assessment from the BIR amounting to
P1,000,000, exclusive of surcharge and interest, for Taxable Year 2015. As stated in the
notice and demand signed by the Commissioner of the BIR, the deadline for payment of the
assessed amount is June 30, 2017. Actual payment was made only by Colmi on February 10,
2018. How much is the total amount paid on February 10, 2018?

a. P1,450,000.00
b. P 1,491,643.84
c. P 1,762,962.69
d. P 1,750,000.00
e. None of the above

26. Marionne Corporation received a deficiency income tax assessment from the BIR amounting to
P1,000,000, exclusive of surcharge and interest, for Taxable Year 2018. The tax liability has
remained unpaid on June 30, 2020, the deadline for payment stated in the notice and demand
issued by the BIR. Marionne paid the BIR only on February 10, 2021. How much is the total
amount paid on February 10, 2021?

a. P1,500,000.00
b. P 1,395,315.07
c. P 1,250,000.00
d. P 1,498,530.16
e. None of the above

27. Monique Corporation received a deficiency income tax assessment from the BIR amounting to
P1,000,000, exclusive of surcharge and interest, for Taxable Year 2018. The tax liability has
remained unpaid on June 30, 2020, the deadline for payment stated in the notice and demand

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issued by the BIR. Monique paid the BIR only on February 10, 2021. How much is the total
delinquency interest paid on February 10, 2021?

a. P 250,000.00
b. P 145,315.07
c. P 103,215.09
d. P 395,315.07
e. None of the above

28. Refers to a substance that is sweet and includes sucrose, fructose, and glucose that produces
certain sweetness

a. Caloric sweetener
b. Sweetened beverage
c. Non-caloric sweetener
d. High-fructose corn syrup
e. None of the above

29. Which of the following is exempt from the excise tax imposed on sugar sweetened beverage?

a. Nature Spring Grape Flavored water


b. Pocari Sweat health hydration drink
c. RC Cola Neo – stevia sweetened cola drink
d. Nestle Fitnesse Cereal drink
e. None of the above

30. The following shall be liable for the payment of excise tax on sweetened beverages, except:

a. Manufacturers of locally-manufactured sweetened beverages


b. Persons having possession of domestically-manufactured sweetened beverages removed
from the place of production without payment of the tax
c. Owners or importers of sweetened beverages
d. Persons having possession of imported sweetened beverages removed from customs
custody without the payment of the tax
e. None of the above

31. Rutay Mfg. Corp will remove from the place of production 100 cases of Masarap Cola drink
which uses high fructose corn syrup and non-caloric sweetener. Each case contains 6 bottles of
1.5 liters each. How much is the excise tax to be paid by Rutay before removal of the finished
products from the place of production?

a. P10,000
b. P5,400
c. P7,200
d. P10,800
e. None of the above

32. The following are the conditions for the allowance for family home as deduction from the gross
estate, except:

a. The family home must be the actual residential home of the decedent and his family at the
time of his death, as certified by the Barangay Captain of the locality where the family
home is situated

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b. The total value of the family home must be included as part of the gross estate of the
decedent
c. Allowable deduction must be in an amount equivalent to the current fair market value of
the family home as declared or included in the gross estate or the extent of the decedent’s
interest (whether conjugal/community or exclusive property), whichever is lower, but not
exceeding P10,000,000
d. The family home must be part of the properties of the absolute community or of the
conjugal partnership, or of the exclusive properties of either spouse depending upon the
classification of the property (family home) and the property relations prevailing on the
properties of the husband and wife.
e. None of the above

33. The value of the net estate of a citizen or resident alien of the Philippines shall be determined
by deducting from the value of the gross estate the following items of deduction, except:

a. Standard deduction
b. Claims of the estate
c. Unpaid mortgages, taxes and casualty losses
d. Properties previously taxed
e. Transfers for public use

34. Which of the following is not considered a VAT exempt transaction?

a. Sale of real properties not primary held for sale to customers or held for lease in the
ordinary course of trade or business
b. Sale of real properties not primary held for sale but used in ordinary course of trade or
business
c. Sale of services of banks, non-bank financial intermediaries performing quasi-banking
functions and other non-bank financial intermediaries
d. Transport of passengers by international carriers
e. None of the above

35. Taipa Nasia, a resident citizen, died in a motorcycle accident in Siargao on February 14, 2018.
After gathering all the information about his properties accumulated from doing business from
2010 to 2017, Kim, his administrator, determined that the gross value of his estate as of his
death amounted to P4,500,000.

Questions:
a. Is a written notice of death required to be filed to the BIR?
b. Is the estate of Mr. Nasia required to file an estate tax return to the BIR?
c. Is the administrator required to obtain a certification from a CPA regarding the value of
the estate?
d. Will Mr. Nasia be affected by the changes in the estate tax rules under the TRAIN law?
e. When is the deadline of filing the estate tax return?

a. Yes, Yes, Yes, Yes, August 14, 2018


b. No, Yes, No, Yes, February, 14, 2019
c. Yes, Yes, No, Yes, August 14, 2018
d. Yes, Yes, Yes, Yes, February 14, 2019
e. None of the above

36. Willie Irene, a resident Filipino doctor, held shares of stock of FJR Corporation, a domestic
corporation engaged in selling real properties, as investment. On March 1, 2018, Ms. Irene sold

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the shares she bought for P143,445 for P 345,989 to her boyfriend, John Jonnix, a Fil-
Nigerian professional basketball player in the Philippines. Mr. Jonnix incurred certain expenses
amounting to P27,632 related to the deal such as fees for the accountant and lawyers.
Compute the capital gains tax (CGT) paid by Ms. Irene on the transaction.

a. P17,491
b. P8,746
c. P26,237
d. P30,381
e. Zero

37. Which of the following is true regarding excise tax rules under the TRAIN law?

a. Excise tax for tobacco products will increase annually by 4% starting January 1, 2022.
b. The excise tax on automobiles is based on the gross selling price of the manufacturer or the
dealer or the fair market value of the vehicle, whichever is higher.
c. Diesel fuel oil, aviation fuel and kerosene for public transportation are exempt from excise
tax prior to TRAIN law.
d. Soymilk and sweetened condensed milk are exempt from excise tax on sweetened
beverages.
e. Dairy and milk products are covered by exemption from excise tax on sweetened
beverages.

38. FJR Corporation, a domestic manufacturer of state-of-the-art LED screens for mobile phones
and television, purchased capital goods which are detailed, as follows:

Month of Amount Input tax Useful Life


Purchase (Philippine Peso) claimed
January 2018 500,00 60,000 6 years
February 2018 8,500,00 1,020,000 4 years
December 2018 10,000,000 1,200,000 5 years
January 2022 10,000,000 1,200,000 5 years

Which of the following is incorrect?

a. For the purchase made in January 2018, the input tax can be claimed on the month of the
purchase.
b. For the purchase made in February 2018, the amortization of input tax shall be for 4 years
only or up to January 2022.
c. For the purchase made in December 2021, the amortization of input tax shall be for 5
years or up to November 2026.
d. For the purchase made in December 2021, the input tax can be claimed on the month of
the purchase.
e. For the purchase made in January 2022, the input tax can be claimed on the month of the
purchase.

39. Which of the following is true regarding VAT rules under the TRAIN law?

a. An amount equivalent to 5% of the total VAT collections of the BIR and the BOC from the
immediately preceding year shall be automatically appropriated annually and shall be
treated as a special account in the general fund or as trust receipts for the purpose of
funding claims for VAT refund.

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b. After December 31, 2023, the filing and payment of VAT shall be done within 25 days
following the close of the taxable quarter.
c. Beginning January 1, 2022, the VAT withholding system on sales to government shall shift
from final to creditable system.
d. A lessor rents his 5 commercial units and 10 residential units for a monthly rent of
P60,000 and P15, 500 per unit respectively. In 2018, the gross receipts from the
commercial leasing business amounted to P3.6 million while the residential leasing
amounted to P1,860,000. The lessor is required to pay 12% VAT on the commercial leasing
business only since it exceeded the P3M threshold.
e. Self-employed individuals and professionals availing of the 8% tax on gross income and
other non-operating income shall also be exempt from the payment of the 12% VAT or the
3% percentage tax, as applicable.

40. The following are the details of the donations made in 2018 by Don Edgardo Abraham, a CPA
and currently in the Top 2 of the Richest Filipinos recognized by the Forbes Park Magazine:

Donations to Jenny, a beauty titlist, on January 30, 2018 amounting to P2,000,000


Donations to Luwie, a professional artist, on March 30, 2018 amounting to P1,000,000
Donations to Jenika, a special friend, on August 15, 2018 amounting to P500,000

How much is the donor’s tax paid on the donations made in 2018?

a. P195,000
b. P105,000
c. P60,000
d. P30,000
e. P210,000

41. Which of the following is not a requirement to qualify and avail of the 8% income tax rate option
under the TRAIN law?

a. Individuals (single proprietor or professional or mixed income earner) earning from self-
employment and/or practice of profession
b. Taxpayers whose gross income/receipts and other non-operating income did not exceed
the P3,000,000 VAT threshold during the taxable year
c. Taxpayers registered and subject only to percentage tax under Section 111 of the 1997
Tax Code, as amended
d. Taxpayers exempt from VAT or other percentage taxes
e. Taxpayers who have signified their intention to elect the 8% income tax rate upon
registration from the BIR as a new business registrant

42. Mr. Ervin Pogi, a Filipino entrepreneur engaged in selling love potions, signified his intention to
be taxed at 8% income tax rate on gross sales in his 1 st Quarter 2018 income tax return. He has
no other source of income. His total sales for the first three (3) quarters amounted to
P3,000,000 while the 4th quarter sales amounted to P3,500,000. For the first 3 quarters of
the year, he paid 8% income tax. The details of the results of his business operations are as
follows:

1st Quarter (8% 2nd Quarter (8% 3rd Quarter (8% 4th Quarter
income tax rate) income tax rate) income tax
rate)
Sales 500,000 500,000 2,000,000 3,500,000

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Cost of Sales 300,000 300,000 1,200,000 1,200,000
Operating 120,000 120,000 480,000 720,000
Expenses

How much is Mr. Pogi’s annual income tax payable (to be paid in April 15, 2019) in 2018?

a. P280,000
b. P240,000
c. P106,400
d. P289,200
e. P509,200

43. Mr. Mark James, a CPA and the acting CFO of Gaylord Cabida Industries, earned annual
compensation in 2018 of P1,500,000, inclusive of the 13th month and other benefits
amounting to P120,000 but net of his share in the mandatory contributions to SSS and
PhilHealth amounting to P50,000. Aside from his income from employment, he owns a Korean
BBQ restaurant, Samgyupamore, with gross sales of P2,400,000. His cost of sales and
operating expenses during the year amounted to P1,000,000 and P600,000, respectively.
During the year, he also earned commission for Usaka, a multi-level marketing company,
amounting to P100,000.

How much is Mr. James’s tax due for 2018 assuming he opted to be taxed at 8% on his income
other than compensation?

a. P540,000
b. P493,000
c. P513,000
d. P313,000
e. P200,000

44. Mr. Mark James, a CPA and the acting CFO of Gaylord Cabida Industries, earned annual
compensation in 2018 of P1,500,000, inclusive of the 13th month and other benefits
amounting to P120,000 but net of his share in the mandatory contributions to SSS and
PhilHealth amounting to P50,000. Aside from his income from employment, he owns a Korean
BBQ restaurant, Samgyupamore, with gross sales of P2,400,000. His cost of sales and
operating expenses during the year amounted to P1,000,000 and P600,000, respectively.
During the year, he also earned commission for Usaka, a multi-level marketing company,
amounting to P100,000.

How much is Mr. James’s tax due for 2018 assuming he did not opt to be taxed at 8% on his
income other than compensation?

a. P600,000
b. P557,200
c. P184,800
d. P490,000
e. P589,200

45. Mr. Mark James, a CPA and the acting CFO of Gaylord Cabida Industries, tendered his
resignation in February 2019 to concentrate on his business. His total compensation during the
year amounted to P150,000, inclusive of benefits of P20,000. Mr. James’ business,
Samgyupamore, Korean BBQ restaurant, had gross sales of P2,500,000. His cost of sales and

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operating expenses during the year amounted to P1,000,000 and P600,000, respectively. He
opted to be taxed at 8% income tax rate.

How much is Mr. James’s tax due for 2019?

a. P180,000
b. P200,000
c. P190,400
d. P192,000
e. P200,000

46. Natalie Mau Corporation (NMC) entered into the following loan arrangements for calendar year
(CY) 2018:

· January 1, 2018 - Loan from BPI amounting to PhP 15,500,000 payable on June 30,
2018. The fund will be used for the working capital of the Company.
· June 1, 2018 – Provided educational loan to Razel, the Company’s accountant, amounting
to PhP 150,050 payable within one (1) year through semi-monthly salary deduction.
· August 1, 2018 – Provided loan to Macoy Gaylord, company’s sales director, amounting to
PhP 255,500 payable on December 31, 2018. The loan will be used for business of the
employee.
Assuming that it is the NMC’s obligation to pay the documentary stamp tax (DST) due on loan
agreements as stated in the contracts, how much will NMC pay for DST during the year?

a. P 66,282.97
b. P 58,312.50
c. P 44,501.25
d. P 66,751.88
e. None of the above

47. FJR Corporation, a domestic corporation engaged in the manufacture of electric vehicles,
granted Ms. Gay Karyl, a Filipino chief financial officer, P5,000 cash per quarter for her
personal membership fee at the Celebrity Sports and Golf Club, in addition to her compensation
package which is composed of P2,000,000 (basic salary) and transportation/representation
allowance of P500,000.

How much is the FBT liability of FJR for the 1st quarter of 2018?

a. P7,692.31
b. P1,750.00
c. P5,000.00
d. P2,692.31
e. None of the above

Withholding Tax Table (2018):

Annual Income Bracket Tax Rate


Not Over P250,000 0%
Over 250,000 – 400,000 20% of the excess over 250,000

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Over 400,000 – 800,000 30,000 + 25% of the excess over 400,000
Over 800,000 – 2,000,000 130,000 + 30% of the excess over 800,000
Over 2,000,000 – 8,000,000 490,000 + 32% of the excess over 2,000,000
Over 8,000,000 2,410,000 + 35% of the excess over 8,000,000

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