Assessment Task

I. True or False

1. MCIT is computed as 2% of the gross income from operations. FALSE (ON TOTAL GROSS
INCOME)
2. If an entity started operations on June 2011, MCIT shall commence on June 2015. FALSE
(START BY 1/1/2015)
3. The gross income tax applies only to corporation subject to regular income tax. FALSE
(DOMESTIC ONLY)
4. Non-resident foreign corporation are subject to minimum corporate income tax. FALSE
5. The gross income tax cannot apply if the gross profit rate falls below 45%. TRUE
6. Both the regular corporate income tax and the gross income tax are subject to the
minimum corporate income tax. FALSE
7. The MCIT applies only when income is zero or when there is an operating loss. FALSE (ALSO
WHEN RCIT<MCIT)
8. Domestic corporation under the gross income tax, including REITs, are exempt from
MCIT.TRUE
9. Special domestic corporation and special resident foreign corporation are exempt
from MCIT. TRUE
10. Exempt corporation are subject to MCIT with respect to their income subject to regular
corporate income tax. TRUE
11. MCIT does not apply to foreign corporation. FALSE (IT APPLY TO RESIDENT FOREIGN
CORPORATION)
12. As a rule, corporations always pay tax even if there is a loss effective from the fourth year
of their operations. TRUE
13. Resident foreign corporation are subject to either gross income tax or regular corporate
income tax. FALSE
14. A partnership organized under Philippine law is a domestic corporation for purposes
of taxation. TRUE
15. Domestic corporation are subject to either gross income tax or regular corporate
income tax. TRUE
16. MCIT is applied on a quarterly, but not on an annual basis. FALSE
17. MCIT excess can be deducted only against the excess of RCIT over the MCIT in any of the
succeeding three years. TRUE
18. Investment companies and insurance companies are prima facie presumed
improperly accumulating profits. FALSE
19. The improperly accumulate earnings tax does not cover holding companies publicly
listed companies and banks. FALSE (NOT HOLDING COMPANIES)
20. MCIT can be suspended for a taxpayer suffering from prolonged labor dispute,
force majeure, or legitimate business reverses. TRUE
21. Whenever MCIT is payable, there is a Net operating Loss Carry-Over. FALSE
22. An unused excess MCIT will expire on the fourth year of operation. FALSE (THIRD YEAR)
23. The excess MCIT of previous years can be deducted against the RCIT of any quarter of the
year if RCIT is greater than MCIT. FALSE (COMPARISON SI MADE WITH CUMULATIVE
BALANCES)
24. An appropriation involves setting aside of earnings for immediate needs of the business.
TRUE
25. The branch profit remittance tax covers remittance of special resident foreign
corporation except PEZA-registered entities. TRUE
II. Multiple Choice
1. Resident foreign corporation
a. shall elect either RCIT or MCIT.
b. shall elect either GIT or RCIT.
c. are limited to RCIT subject to the MCIT.
d. are subject to IAET and branch profit remittance tax.
2. Which is exempt from the corporate income tax?
a. Non-profit corporations
b. Joint venture
c. Partnership
d. Retail stores
3. Which is not a requisite of the gross income tax?
a. 20% tax effort ration on GNP
b. 40% income tax collection on total tax revenue
c. 4% VAT tax effort ratio on GNP
d. 10% government debt-to-asset ratio
4. The regular corporate income tax is
a. 30% of gross income
b. 2% of taxable income
c. 30% of taxable income
d. 2% of gross income
5. The minimum tax for corporate taxpayer is
a. 15% of gross income
b. 2% of taxable income
c. 2% of gross income
d. 15% of taxable income
6. The MCIT applies to
a. domestic and resident corporation
b. domestic corporation only
c. special corporation
d. non-resident foreign corporation
7. The optional gross income tax is
a. 2% of gross income
b. 15% of gross income
c. 30% of gross income
d. 10% of gross income
8. The maximum cost ratio for corporations to avail of the gross income tax is
a. 60% c. 55%
b. 40% d. 45%
9. What is the minimum tax as percentage of gross income under the corporate gross
income tax?
a. 15% c. 7.5%
b. 10% d. 6.75%
10. The minimum lock-in period under the corporate gross income tax is
a. five years. c. three years.
b. four years. d. two years.
11. The MCIT is not due when
a. MCIT is greater the RCIT.
b. taxable income is zero.
c. Taxable income is negative.
d. RCIT is greater than MCIT.
12. Exempt corporations are subject to MCIT on their income from
a. related activities.
b. unrelated activities
c. both related and unrelated activities if they pass the dominance test.
d. both related and unrelated activities if they fail the dominance test.
13. MCIT shall commence on the
a. 5th year of operations.
b. 3rd year of operations.
c. 4th taxable year following the year of start of operation.
d. 3rd taxable year following the year of start of operation.
14. Excess MCIT is a tax credit that can be carried over to the next
a. 3 consecutive years.
b. 4 consecutive years.
c. 3 years including the year it arises.
d. 3 consecutive years when there is income
15. Which is deductible in the computation of the MCIT?
a. Marketing expenses
b. Office utilities
c. Loss on sale of assets
d. Salaries of employees directly engaged in rendering the service
16. Which of these may grant relief from the MCIT?
a. Secretary of finance
b. Office of the Commissioner of Internal Revenue
c. Office of the Revenue District Officer having jurisdiction
d. National office of the BIR
17. For taxpayers involved in the sale of goods, gross income means
a. gross sales less sales returns, discounts and cost of goods sold.
b. Gross receipts less returns, allowances, discounts and cost of goods sold.
c. Gross sales less sales returns, discounts and cost of services.
d. Gross receipts less returns, allowances, discounts and cost of services.
18. For taxpayers involved in the sale of services, gross income means
a. gross sales less sales returns, discounts and cost of goods sold.
b. gross receipts less returns, allowances, discounts and cost of goods sold.
c. gross sales less sales returns, discounts and cost of services.
d. gross receipts less returns, allowances, discounts and cost of services.
19. Gross receipts, as compared with gross sales, include
a. cash collections only.
b. transactions on account sales only.
c. both cash and on account transactions.
d. cash collections on completed contracts only.
20. The quarterly income tax return is due on or before
a. 60 days following the end of the quarter.
b. 30 days following the end of the quarter.
c. 15th day of the fourth month following the end of the quarter.
d. 45 days following the end of the quarter.
21. Which of the following is not a deduction in the computation of the income tax
payable or refundable.
a. Estimated quarterly income tax payment
b. Final withholding tax on passive income
c. Excess MCIT prior year
d. Creditable withholding tax on gross income
22. Which of the following tax credit is not always creditable in the current accounting
period?
a. MCIT Excess prior year
b. Excess creditable withholding tax in prior years
c. Creditable withholding tax in the current year
d. Estimated quarterly income tax payment
23. In the quarterly income tax return, Excess MCIT prior year is deductible only when
a. the MCIT exceeds the RCIT for that quarter.
b. the RCIT exceeds the MCIT for that quarter.
c. the cumulative MCIT exceeds the cumulative RCIT as of the end of that quarter.
d. the cumulative RCIT exceeds the cumulative MCIT as of the end of that quarter.
24. Excess MCIT is valid as a tax credit over
a. five years c. three years
b. Four years d. two years
25. Which of the following entities is improper accumulation of profits not presumed?
a. Closely-held corporation
b. Investment companies
c. Banks
d. Dealers of securities

III. Multiple Choice Computation

1. The Paluan Corporation had the following excess MCIT in prior years:
Excess MCIT – 2016 P 80,000
Excess MCIT – 2017 40,000
Excess MCIT – 2018 50,000
Excess MCIT – 2019 10,000

In 2020, the RCIT and MCIT were respectively P230,000 and P210,000. What is the
income tax due and payable?
a. P 30,000 c. P 110,000
b. P 50,000 d. P 130,000

2. The following are the composition of the total gross income of a domestic corporation which is
subject to MCIT:
Sales, net of discounts and allowances P 4,000,000
Less: Cost of sales 2,400,000
Gross income from operations P 1,600,000
Dividend income 100,000
Royalty income 250,000
Gain on sale of building 150,000
Total gross income P 2,100,000

What is the minimum corporate income tax?

a. P 42,000 c. P35,000
b. P40,000 d. P32,000

3. In the immediately preceding problem, what is the regular corporate income tax if
the corporation has a total allowable deduction of P 1,700,000?
a. P 0 c. P 90,000
b. P 15,000 d. P 120,000
4. The Calintaan Corporation had the following historical MCIT and RCIT data:
2017 2018 2019 2020
MCIT P 120,000 P 200,000 P 190,000 P 170,000
RCIT P 110,000 P 220,000 P - 0- P 180,000

Basing solely on the information provided, what is the tax due and payable respectively in
2017 and 2018?
a. P120,000; P220,000 c. P120,000; P210,000
b. P120,000; P100,000 d. P110,000; P220,000

5. In the immediately preceding problem, what is the tax due and payable respectively in
2019 and 2020?
a. P190,000; P 0 c. P 0; P 0
b. P190,000; P180,000 d. P110,00; P220,000

6. A corporation reported its first profits in 2020 since its start-up in 2017. The following
summarizes its results of operations:

Sales, net of discounts and P 5,000,000

allowances
Less: Cost of sales 2,000,000
Gross income P 3,000,000
Regular allowable deductions P 1,200,000
Special allowable deductions 200,000
NOLCO 500,000 1,900,000
Net income P 100,000

What is the income tax due?

a. P 0 c. P 60,000
b. P 30,000 d. P100,000
7. A corporate taxpayer had the following data on its fifth year of operation:
Philippines Abroad Total
Sales P 2,000,000 P 3,000,000 P 5,000,000
Less: Cost of services 1,200,000 1,800,000 3,000,000
Gross income from operation P 800,000 P 1,200,000 P 2,000,000
Interest on deposits 50,000 250,000 300,000
Total income P 850,000 P 1,450,000 P 2,300,000
Less: Business expenses 800,000 1,300,000 2,100,000
Net income P 50,000 P 150,000 P 200,000

What is the tax due assuming the taxpayer is a domestic

corporation? a. P 60,000 c. P 45,000
b. P 46,000 d. P 40,000

8. In the immediately preceding problem, what is the tax due if the corporation is a
resident foreign corporation?
a. P0 c. P 16,000
b. P 15,000 d. P 17,000

9. A domestic corporation reported the following income in its fifth year of operation:
Within Without Total
Gross income P 4,000,000 P 3,000,000 P 7,000,000
Less: Deductions 3,500,000 3,400,000 6,900,000
Gross income P 500,000 (P 400,000) P 100,000

Compute the income tax due.

a. P 30,000 c. P 140,000
b. P 80,000 d. P 150,000

10. In the immediately preceding problem, what is the income tax due assuming the taxpayer
is a resident foreign corporation?
a. P 30,000 c. P 140,000
 b. P 80,000 d. P 150,000
11. A corporation which started operations in 2016 had the following results of operations:

2018 2019 2020

Gross income P 3,500,000 P 5,000,000 P 7,000,000
Less: Business expenses 3,400,000 5,300,000 6,400,000
Net income P 100,000 (P 300,000) P 600,000

What is the income tax due in 2019?

a. P 0 c. P 90,000
b. P 60,000 d. P 100,000

12. In the immediately preceding problem, what is the tax due in

2020? a. P 80,000 c. P 140,000
b. P 90 d. P 180,000
13. A corporation which started operations in 2015 reported the following:
2019 2020
Gross income from operations P 500,000 P 1,000,000
Rent Income 200,000 200,000
Less: Business expenses 820,000 850,000

What is the tax due in 2019?

a. P0 c. P 14,000
b. P 10,000 d. P 60,000

14. In the immediately preceding problem, what is the tax due and payable in 2020?
a. P 105,000 c. P 69,000
b. P 95,000 d. P 55,000
15. Paluan Corporation had the following excess MCIT in prior years:
Excess MCIT – 2016 P 80,000
Excess MCIT – 2017 40,000
 Excess MCIT – 2018 50,000
Excess MCIT – 2019 10,000

In 2020, the RCIT and MCIT were respectively P230,000 and P210,000. What
is the income tax due and payable?
c. P 30,000 c. P 110,000
d. P 50,000 d. P 130,000