TAXATION

EASY

1. Which of the following is/are false?

I. Under the old rules, the administrator of the estate or any one of the heirs may, when authorized
by the Commissioner, withdraw an amount not exceeding P20,000 even without the certification
from the Commissioner that the estate taxes have been paid.
II. Under the TRAIN law, banks, which has knowledge of the death of the person, shall allow
withdrawals from a decedent’s deposit account subject to a 5% FWT.
III. The donor’s and estate tax rate is the same.
IV. Donor’s tax rate is 6% regardless if stranger or not.

ANSWER: II only

2. Under the TRAIN law, the following shall be subject to the 12% VAT subject to the following conditions
(1) Successful establishment of an enhanced VAT refund system that grants refunds of creditable input tax
within 90 days from the filing of the VAT refund with the BIR effective January 1, 2018; and (2) All pending
VAT refund as of December 31, 2017 shall be fully paid in cash by December 31, 2019.
I. Sale of raw or packaging materials to export-oriented enterprise
II. Sale of raw or packaging materials to nonresident buyer for delivery to a resident local export-
oriented enterprise
III. Export sales under E.O. No. 226
IV. Processing, manufacturing or repacking of goods for nonresident buyer which goods are
subsequently exported
V. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales > 70% of annual production

ANSWER: II only

3. Beginning January 1, 2019, self-employed and professional with total annual gross sales and/or gross
receipts not exceeding P500,000 shall be:
I. covered by VAT-exemption up to P3M
II. Exempt from Percentage Tax

ANSWER: I only

4. The following procedures shall be done if payment is made to GRAB/UBER and GRAB/UBER pays its Partners.
Select the exception.
a. If the Partner is not a holder of a valid and current Certificate of Public Convenience (CPC), the partner
is considered as a land transportation service contractor and it shall issue a VAT OR.
b. If GRAB/UBER is a holder of a valid and current CPC, it shall issue a non-VAT OR to the
passenger/customer upon receipt since the same is liable for the 3% common carriers tax based on
gross receipts.
c. If GRAB/UBER is not a holder of a valid and CPC, the same will be considered as a land transportation
service contractors, subject to the 12% VAT and shall issue VAT OR.
d. If the Partner is a holder of a valid and current CPC, it is a common carrier and it shall issue a non-VAT
OR upon receipt of payment from GRAB/UBER and shall be liable for the 3% common carrier tax based
on gross receipts.

ANSWER: A
5. ABC Bank shifted the 5% GRT due on the interest collectible from XYZ Co. for loans extended by ABC Bank
to XYZ Co.

Details Amount

Interest collectible from XYZ Co. P1,000,000,000

Add: Passed-on GRT ?

Total amount collected ?

Determine the total GRT due on the above information.

ANSWER: P53.50M

AVERAGE

1. One of the highlights of the draft proposal of the Department of Finance (DOF) covering the 2nd package
of the Duterte Administration’s comprehensive tax reform program is lowering of Optional Standard
Deduction from 40% to _____

ANSWER: 20%

2. On January 15, 2018, Olivia Company has an FCDU account with Banco de Plata obtained a loan from Pope
Financing Corporation in connection with the operation of its business. Olivia Company’s taxable net income
for the year 2018 before the deduction of the interest expense amounted to P1,000,000. For the year 2018,
the interest income it derived from the said deposit with Banco de Plata amounted to P297,500 as credited
per bank statement. Its interest expense on the loan obtained from Pope Financing Corporation during the
same year amounted to P160,000. How much is the tax due for taxable year 2018?

ANSWER: P286,650

3. Assume the following information related to an employee (with 4 qualified dependents) during 2018:

Basic monthly salary P100,000

13th month pay 60,000
Monthly mandatory deductions 1,231.30

Determine the taxable income assuming the employee is receiving up to 15 th month pay of P60,000.

ANSWER: P1,395,224.40
4. Complete the table below for the VAT treatment of a PEZA-registered seller of services:
Transaction Details VAT Treatment

Under the Income Tax Under the 5% Gross Income

Holiday (ITH) Regime Tax (5% GIT) Regime

(a) The services are for Export and are part of its (I) (II)
registered activities
(b) The services are for Export and are VAT zero-rated VAT zero-rated
considered part of unregistered activities
(c) Sales to Other PEZA-Registered Enterprise VAT zero-rated VAT exempt
(whether registered or unregistered activity)
(d) Sale to a Buyer from the Customs Territory (III) (IV)
(whether registered or unregistered activity)

Choices are as follows:

I. VAT-exempt
II. VAT-zero rated
III. Subject to 12% VAT
IV. Optional to subject to 12% VAT

ANSWER: B, A, C and C, respectively

5. Which of the following is/are false in relation to estate tax upon effectivity of the TRAIN law?
I. ELIT are deductions from gross estate.
II. A maximum of P10M can be deducted from gross estate for family home for all decedents.
III. The standard deduction that can be claimed is P5M for resident/citizen decedents.
IV. The due date for filing an estate tax return is 6 months after death of decedent.

ANSWER: I, II and IV

DIFFICULT

1. The JD Company is a PEZA-registered manufacturer entitled to the Income Tax Holiday (ITH) incentive for
CY 2018. It is the Company’s fourth year of operations. The following information pertain to the CY 2018
activities of the Company:

Details Registered Activities Unregistered Activities

Gross sales P 121,700,000 P 10,425,000
Cost of sales (103,400,000) (7,297,500)
Gross income P 18,300,000 P 3,127,500
Other Income (net gain on disposal of office PPE) - 550,500
Total Gross Income P 18,300,000 P 3,678,000
Operating expenses* (use 90%-10% allocation P9,890,100
between registered and unregistered activities)
*assume all the requisites for deductibility were met

CWTs from the first 3 quarters amounted to P98,000 (including P10,000 CWTs dated 2019) while CWTs for
the 4th quarter totaled P33,600 (including P5,000 CWTs not in the name of JD Company). Assuming the
Company is entitled to the 5% GIT for CY 2018, determine the income tax still due to the BIR

ANSWER: P1,239,097
2. A stockholder of a closely held corporation owns 100,000 shares before the IPO. The cost of the share is
P1,000,000. During the 2018 IPO, the shares are selling at P12 per share. His broker-friend advises him not
to sell his shares during the IPO but instead wait until after the IPO. After the IPO, the outstanding shares
of the closely held corporation are 1,000,000 shares and are now selling at P14 per share at the local stock
exchange.

The stockholder of the closely held corporation approaches you to seek your advice because he is also
planning to sell the shares directly to his friend and, therefore, not traded through the local stock exchange
at P15 per share.

I. How much is the percentage tax if he sells his shares during the IPO?
II. How much is the percentage tax if he sells the shares after the IPO?
III. How much is the capital gains tax if he sells the shares directly to his friend?

ANSWER: P48,000; P8,400; P75,000

3. A resident rank-and-file private employee has two (2) qualified dependent children at the beginning of 2018.
He also supports his father-in-law who is PWD and his uncle who is a senior citizen.

Salary, net of P73,443 withholding tax and mandatory deductions of P14,776 P 511,781
th
13 month pay 50,000
th
14 month pay 50,000
Rice subsidy (P1,500 x 12 months) 18,000
Uniform and clothing allowance 5,000

Monetized unused vacation leave credits (12 days) 28,800

Actual medical benefits 15,000
Christmas gift 10,000
Laundry allowance (P400 x 12) 4,800
Employee achievement award (amount of cash given) 10,000
Benefits received by virtue of a collective bargaining (CBA) and productivity 11,000
incentive schemes

I. Total tax-exempt de minimis benefits.

II. Taxable net income.

ANSWER: P65,600; P632,224

4. Which of the following is currently not subject to VAT?

I. Sale to senior citizens and PWDs as provided under R.A. No. 9994 and 10754, respectively.
II. Transfer of property pursuant to Section 40(C)(2) of the NIRC, as amended
III. Sale of gold to BSP
IV. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension
V. Association dues, membership fees, and other assessments and charges collected by homeowners
associations and condominium corporations

ANSWER: I, II, III and V only

5. Under the TRAIN law, the interest on deficiency tax is changed to what percentage?

ANSWER: 12%