Cpar 96 Tax Preweek First Final Pb 2024

CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA
TAXATION
Pre-Week Lecture B96 – Part 1
1. Ms. A, the cost accountant of ABC Corporation, earned annual compensation income of Php 1,500,000,
inclusive of 13" month pay and other benefits in the amount of Php 120,000, but net of mandatory
contributions to SSS, PhilHealth and Pag-ibig of Php 25,000. Aside from employment income, she
owns a convenience store, with gross sales of Php 2,400,000. Her cost of sales and operating expenses
are Php 1,100,000 and Php 500,000, respectively and with non-operating income of Php 100,000. If.
Ms. A opted to be taxed at 8% income tax rate of his gross sales for his income from business, her tax
due is
a. Php 292,800 b. Php 513,000 c. Php 455,000 d. Php 312,800
2. A bought a parcel of land in Manila in 1980 at a price of Php 2M. In 2023, the land which remained
idle had a fair market value of Php 12M. B offered to buy the land for Php 12M. The Assessor of
Manila had reassessed the property at Php 10M in 2023. If A sold the land to B subject to the condition
as stated in the Deed of Sale that the buyer shall assume the capital gains tax thereon, which of the
following statements is correct?
a. The capital gain tax due on the transaction is computed at 6% of the selling price of Php 12M
b. The capital gains tax return should be filed within 30 days from the date of the sale and shall pay
the tax due as he files the return
c. The capital gains tax due on the transaction is computed at 6% of the re-assessed value of Php
10M
d. A is liable to pay real property tax on the land based on the re-assessed value in 2023.
3. Which of the following is not correct?

a. Any excess of the minimum corporate income tax over the normal income tax shall be carried
forward and credited against the normal income tax for the three (3) immediately succeeding
taxable year.
b. The Secretary of Finance is authorized to suspend the imposition of the minimum corporate
income tax on corporations which suffers losses on account of prolonged labor dispute or because
of force majeure, or because of legitimate business losses.
c. A minimum corporate income tax of 2% of the gross income is imposed on taxable corporations
beginning on the 4th taxable year immediately following the year in which such corporation was
incorporated.
d. The Secretary of Finance is authorized to promulgate, upon recommendation of the CIR the
necessary rules and regulations that shall define the terms and conditions under which he may
suspend the imposition of the minimum corporate income tax in a meritorious case.
4. Bank A deposited money with Bank B which earns interest that is subjected to the 20% final
withholding tax. At the same time, Bank A is subjected to the 5% gross receipts tax on its interest
income on loan transactions. Which statement below incorrectly describes the transactions?
a. There is double taxation because two taxes - income tax and gross receipts tax are imposed on the
interest incomes described above, and double taxation is prohibited under the 1987 Constitution
b. There is no double taxation because the first is income tax while the second is business tax
c. There is no double taxation because the income tax is on the interest income of Bank A on its
deposits with Bank B (passive income) while the gross receipts tax is on the interest income received
by Bank A from loans to its debtor - customers (active income)
d. Income tax on interest income of deposits of Bank A is a direct tax while GRT on interest income
on loan transaction is an indirect tax.
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5. Statement 1 - There shall be levied, assessed and collected on every sale, barter, exchange or other
disposition of shares of stock listed and traded through the local stock exchange by a dealer in
securities, a tax at a rate of 6/10 of 1% of the gross selling price or gross value in money of the shares
of stock sold, bartered, exchanged or otherwise disposed.
Statement 2 - The percentage tax on the sale, barter or exchange of shares of stock listed and traded
through the local stock exchange has been increased by 1/10 of 1% of the gross selling price or gross
value in money of the shares of stock sold, bartered, exchanged or otherwise disposed.
a. Both statements are correct
b. Both statements are not correct
c. Only Statement 1 is correct
d. Only Statement 2 is correct
6. In 2024, A, a minimum wage earner received from her employer a total amount of Php 195,000
inclusive of the 13 month pay of Php 15,000. She also received overtime pay of Php 48,000 and night
shift differential of Php 22,000. She also received commission income from her employer amounting
to Php 25,000, thus the total income received from her employer amounted to Php 290,000. The taxable
income of A is
a. Php 0 b. Php 25,000 c. Php 290,000 d. Php 275,000
7. Which of the following petroleum products are subject to zero excise taxes?
a. Lubricating oils
b. Leaded Gasoline
c. Kerosene
d. Liquefied Petroleum Gas
8. A is a radio-tv broadcasting franchise grantee. During the preceding year, its gross receipts did
not exceed P10,000,000. During the first quarter of the current year, it has the following data:
Gross receipts, sale of airtime P 2,000,000
Gross receipts, use of radio station’s
communication facilities for overseas comm. 500,000
Business expenses 700,000
Rental income from office spaces. 3,500,000
The franchise tax due for the first quarter is

a. P60,000 c. P75,000
b. P20,000 d. P50,000
9. How much was the overseas communication tax?

a. 250,000
b. 200,000
c. 75,000
d. 50,000
10. How much is the output VAT, if any?

a. 720,000
b. 660,000
c. 420,000
d. None
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11. Which of the following will not reduce the inheritance of heirs?
a. Unpaid medical expenses
b. Vanishing deduction
c. Transfer for public purpose
d. Casualty loss
12. Billy signed a 60 days debt instrument amounting to Php700,000. How much documentary stamp tax
will Billy pays?
a. 3,500
b. 5,250
c. 875
d. None
13. LouLou an importer of goods from China seeks your professional advice regarding which value will
be the basis of tax assessment for customs duties and value added tax?
a. Product price and gross selling price, respectively.
b. Landed cost and transactional value, respectively.
c. Dutiable value and landed cost, respectively.
d. Computed value and import value, respectively.
14. What is excise tax imposed on distilled spirit?

a. Ad valorem
b. Specific
c. Both Ad valorem and Specific
d. None
15. Philippine Tobacco Institute sold cigarettes per pack of 5’s; 10’s and 20’s. The Bureau of Internal
Revenue impose excise tax per net retail price. The Philippine Tobacco Institute argued the basis of
excise tax must be specific taxation per pack of 20 and not based on ad valorem or net retail price.
Should excise tax on cigarettes packed by hand or machine be taxed at specific or ad valorem?
a. Ad valorem
b. Specific
c. Both Ad valorem and Specific
d. None
16. When pre-assessment notice not required, except?

a. When the finding for any deficiency tax is the result of mathematical error in the computation
of the tax as appearing on the face of the return;
b. When a discrepancy has been determined between the tax withheld and the amount actually remitted
by the withholding agent;
c. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable
period was determined to have carried over and automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or
d. When imported articles value added tax has not been paid and where release in the customs warehouse;
17. Luka Doncic, a professional basketball player from Slovenia came to the Philippines to participate in
the World Cup from August 25 to September 10, 2023. Luka’s income from the Philippines may
be?
a. Taxable in the Philippines
b. Taxable in Slovenia
c. Taxable both in the Philippines and Slovenia
d. Exempt from any tax since he is an athlete sanctioned by Slovenian Government.
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18. Using the preceding number, may Luka claim tax exemption under double taxation agreement?
a. No, tax treaty relief application is granted to non-resident who stay more than 183 days.
b. No, tax treaty relief are given to teachers, researchers, artist, students, trainees and directors only.
c. Yes, provided Luka applies for tax relief with the BIR.
d. Yes, provided Luka is sanctioned by Slovenia Sports Commission.
19. First distinction: The rates for donor’s tax are lower than those for estate tax, in all cases.
Second distinction: In donor’s tax, the exemption is P 250,000 while in estate tax there is none.
a. Both distinctions are correct.
b. Both distinctions are wrong.
c. First distinction is correct, the second is wrong.
d. First distinction is wrong, the second is correct.
20. Donor’s tax as distinguished from estate tax.

First distinction: For donor’s tax there maybe relatives or/and stranger donee’s unlike Estate tax
there’s no relative or stranger heirs.
Second distinction: In donor’s tax, transfer for public purpose is strictly construed against the
donor, unlike in Estate tax transfer for public purpose shall be liberally
construed.
a. Both distinctions are correct.
b. Both distinctions are wrong.
c. First distinction is correct, the second is wrong.
d. First distinction is wrong, the second is correct.
21. Kawhi, a VAT registered taxpayer-importer of goods made the following purchase as follows:
Cost of purchase 900,000
Insurance 125,000
Freight 135,000
Customs duties 600,000
Wharfage 20,000
Arrastre 30,000
Internal processing fee 40,000
Customs Broker fee 80,000
Documentary Stamp tax 60,000
Interest and other bank charges 90,000
Warehouse and storage cost 100,000
Excise Tax 120,000
Facilitation fees 50,000
Compute the landed cost?

a. 2,350,000
b. 1,760,000
c. 2,300,000
d. 1,880,000
22. Below are characteristics of a sound taxation system, EXCEPT:

a. Administrative feasibility and compliance
b. Fiscal adequacy
c. Theoretical justice
d. Uniformity of taxation
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23. The following powers of the Commissioner may not be delegated, except:
a. The power to recommend the promulgation of rules and regulations by the secretary of finance.
b. The power to issue ruling of first impression or to reverse, revoke or modify any existing ruling of
the bureau.
c. The power to compromise or abate internal revenue taxes save for a few.
d. The power of the commissioner to make assessments.
24. What law repealed Improper Accumulated Earnings Tax?

a. Train Law
b. Create Law
c. Ease of Paying Taxes Act
d. None of the Above
25. Philippine Mining Corporation, operates in Benquet province was assessed by the Local government
for year 2023:
Owner’s Declaration showed the following valuation:
Land - P 9,000,000
Building - P 4,000,000
Assessor’s Value per assessment rolls:

Land – P7,000,000
Building – P6,000,000
Land use Assessment Levels

Residential 20%
Agricultural 40%
Commercial, Industrial and Mineral 50%
Timberland 20%
Special classes: cultural, scientific 15%
Hospital, and water districts 10%
Commercial/Industrial Building
FMV Over But Not Over Assessment Level
300,000.00 30%
300,000.00 500,000.00 35%
500,000.00 750,000.00 40%
750,000.00 1,000,000.00 50%
1,000,000.00 2,000,000.00 60%
2,000,000.00 5,000,000.00 70%
5,000,000.00 10,000,000.00 75%
10,000,000.00 80%
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How much is the basic real property tax?
a. P180,000
b. P65,000
c. P90,000
d. P130,000
26. Mr. Jose Marie Fabella signified his intention to be taxed at 8% income tax. In the given year he
earned the following:
Rentals for first 9 months - P250,000/month
Rentals for last 3 months - P1,000,000/month
Proper withholding of tax was made.
How much is the tax due on the 3rd quarter?
a. P160,000
b. P180,000
c. P22,500
d. P25,000
27. How much is the gross receipts/percentage tax due on the 4th quarter?
a. 0
b. P67,500
c. P420,000
d. P525,000
28. How much is the tax due on his final return in case Mr. Fabella opted for OSD?
a. P398,000
b. P548,000
c. P745,500
d. P437,500
29. When is he required to update his registration from non-VAT to VAT?

a. At the end of 3rd quarter
b. 30 days after he became vatable
c. At the end of the year
d. Beginning of the following year
Bong & Billy are partners in a GPP which realized a Sales of P8,000,000 with corresponding cost of
sales P5,000,000 and Operating Expenses P2,000,000 in year 2018. Bong, single, benefactor of
senior citizen has his own income of P400,000 and cost of sales and expenses P30,000 and P230,000,
respectively. While, Billy, with one qualified dependent generated P450,000 income and incurred
cost of sales and expenses P200,000 and P50,000, respectively. They share 70:30 in the profits.
Bong and Billy incurred unliquidated expenses of P100,000 & P50,000, respectively, for the
partnership.
30. Taxable income of Bong if he claims itemized deductions:

a. P850,000
b. P840,000
c. P740,000
d. P665,000
31. Taxable income of Billy if he opted for OSD:

a. P500,000
b. P570,000
c. P475,000
d. P495,000
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32. A Co. and B Co., domestic corporation, both in the construction business, formed a joint venture to
build houses, a government project duly licensed with PCAB, had the ff:
Joint venture A Co. B Co.

Income Php80,000,000 2,000,000 3,000,000
Expenses 60,000,000 1,200,000 2,000,000
What is the income tax of the Joint venture?

a. 6,000,000
b. 20,000,000
c. 1,800,000
d. 0
33. What is the taxable income of the joint venture?

a. 1,800,000
b. 20,800,000
c. 10,800,000
d. 3,240,000
34. If the joint venture is not approved by PCAB, what is the taxable income of the venture?
a. 6,000,000
b. 3,000,000
c. 20,000,000
d. 0
35. Andrea Campasso, purely engaged in business had the following for the given year:
Revenue Php800,000
Cost of Sales 200,000
Business expenses 150,000
Other (non-operating) business income:
Interest from bank deposit Php20,000

Gain from Capital asset (holding period of 15 months) 50,000
How much is Taxable Income if Andrea chooses Optional Standard Deduction?
a. 450,000
b. 475,000
c. 505,000
d. 530,000
36. Income tax due if he availed the 8% GRT?

a. 64,000
b. 68,000
c. 66,000
d. 46,000
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37. Azure corporation a domestic corporation duly registered under Philippines laws, made the following
donation for the year as follows:
March 31, Shares of stock of Azure Corporation to its shareholders.
June 30, Land to a subsidiary Domestic Corporation.
September 30, Membership stock in Wack Wack Golf and Country Club to corporate manager and
officers.
December 31, Php100,000 donation to a private Roman Catholic school.
What type of tax is imposed on March 31 donation?

a. Final Tax
b. Net Income Tax
c. Donor Tax
d. Exempt from tax
38. What type of tax is imposed on June 30 donation?

a. Final Tax
b. Fringe Benefit Tax
c. Donor Tax
d. Exempt from tax
39. What type of tax is imposed on September 30 donation?

a. Final Tax
b. Net Income Tax
c. Fringe Benefit Tax
d. Donor Tax
40. What type of tax is imposed on December 31 donation?

a. Final Tax
b. Net Income Tax
c. Fringe Benefit Tax
d. Donor Tax
41. A PEZA registered enterprise operating in the Philippines beginning year 2020 was given income tax
holiday for 4 years, however, this year 2024 it opted the Gross Income Tax. Presented below are the
following financial data:
Sales to registered activities P5,000,000

Sales to non-registered activities P1,000,000
Cost of sales P3,000,000
Administrative expenses P1,200,000
How much is due to National Government?

a. P125,000
b. P157,500
c. P165,000
d. P150,000
42. How much is due to Local Government?

a. P125,000
b. P110,000
c. P50,000
d. P42,000
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43. How much discount is granted to a senior citizen on his purchase of basic and prime commodities,
subject to limitation?
a. 20%
b. 15%
c. 10%
d. 5%
44. Applicants availing the 20% discount of senior citizens must present which of following documents.
I. Company ID
II. LGU Senior Citizen ID
III. Passport
a. True, false, true
b. False, False, true
c. True, true, False
d. False, true, true
Buenas Corporation, a real estate dealer and lessor, on its first year of operation, has received a Letter
of Authority from the BIR. As a revenue officer, you were assigned to audit the Corporation’s income
tax for taxable year 2024. The audited financial statements show the Corporation’s income statement
as follow:
Revenues:
Rental income 2,800,000
Interest from bank 24,000
Gain on sale of land 500,000
Total 3,324,000
Expenses:
Depreciation 800,000
Salaries and wages 200,000
Taxes and licenses 180,000
Entertainment and representation 40,000
Interest expense 60,000
Office supplies 20,000
Total 1,300,000
Income tax due for the year is computed as follows:
Net income before income tax 2,024,000

Less : Interest from bank 24,000
Gain on sale of land 500,000 524,000
Net taxable income 1,500,000
Multiply by: corporate income tax rate 25%
Income tax expense 375,000
After a detailed examination of the Corporation’s books, you have noted the following:
• Balance sheet as of December 31, 2024 showed an outstanding balance of deferred rent income
amounting to P200,000, representing advance rent payments by tenants.
• Interest from bank is net of 20% final withholding tax
• Gain on sale of land, represents gain on sale of residential lot with selling price, amounting to
P2,000,000
• Taxes and licenses in the Notes to Financial Statements
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Showed the following breakdown
• Withholding tax on sale of land, P120,000
• Documentary stamp tax on sale of land, P30,000
• Surcharge and penalties on late payment of tax, P10,000
• Permits and licenses, P20,000
Interest expense includes interest on late payment of tax, amounting to P5,000.
45. How much should be reflected as net sales and revenue in the annual income tax return of the
Corporation?
a. P3,000,000
b. P5,000,000
c. P4,800,000
d. P3,300,000
46. How much should be the deductible taxes and licenses?

a. P20,000
b. P180,000
c. P30,000
d. P50,000
47. How is the deductible entertainment and representation expense?

a. P40,000
b. P33,333
c. P38,000
d. P34,000
48. How much is the basic deficiency income tax due?

a. P250,770
b. P252,200
c. P253,770
d. P210,500
BTS CORPORATION, is a registered enterprise with the Board of Investments and was granted an
Income Tax Holiday (ITH) Incentives for the first 4 years of operations as a non-pioneer firm. The
Corporation has not applied for an extension of its ITH incentives on its 5th year. On its 5th year of
operations, it reported the following:
Export Sales P120,000,000

Cost of goods manufactured and sold 70,000,000
Operating expenses 20,000,000
Additional information were made available as follows:
➢ Cost of goods manufactured and sold include, imported raw materials with dutiable value of
P1,400,000. Pre-computed customs duties and other charges are as follows:
(a) Customs duties – P200,000

(b) Insurance – P10,000
(c) Arrastre charges – P5,000
(d) Wharfage dues – P7,000.
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➢ Included under operating expenses are expenses incurred on the importation of the said
equipment as follows:
(a) Facilitation fee – P100,000

(b) Delivery expense to warehouse after release from Customs P11,200.
➢ Cost of goods manufactured and sold include direct labor skilled and unskilled workers
amounting to P10,000,000 and P20,000,000, respectively. The project meets the prescribed
ration of capital equipment to number of workers set by the BOI.
➢ The Company incurred an accumulated net operating loss on the first 4 years of operations as
follows:
(a) 1st year – P2,000,000
(b) 2nd year – P1,600,000
(c) 3rd year – P800,000
(d) 4th year – P400,000.
49. How much is the deductible direct labor cost?

a. P35,000,000
b. P45,000,000
c. P40,000,000
d. P30,000,000
50. How much is the deductible net operating loss carry over?
a. None
b. P2,800,000
c. P400,000
d. P4,800,000
51. How much is the income tax due of the Company for the year?
a. P4,500,000
b. P3,775,000
c. P4,530,000
d. P1,869,000
ATTY. PAPA, is a practicing lawyer, is also a licensed real estate broker. Both businesses were
registered with the BIR and had the following data made available for year 2023 (months are gross of
withholding tax):
Revenues from his profession 3,000,000

Commission received 600,000
Cost of services 700,000
Business related expenses 400,000
Gain on sale of real property held for investment 500,000
Selling price of real property 2,000,000
Wagering gain 150,000
Wagering losses 100,000
Royalties from books published 150,000
Interest Income from banks 30,000
52. Compute Tax due, assuming ATTY. opted to use itemized deduction in computing his income tax.
a. P810,000
b. P698,000
c. P666,000
d. P567,500
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53. Compute OSD. Optional Standard Deductions

a. P2,240,000
b. P2,300,000
c. P1,460,000
d. P1,440,000
54. How much is the final withholding income tax of ATTY., assuming 2/3 of interest income from banks
were realized from time deposits with maturity of 5 years?
a. P47,000
b. P17,000
c. P32,000
d. P137,000
55. Which of the following taxes may be collected by Local Government Units?
a. Wharfage Fees
b. Tonnage dues
c. Registration Fees
d. Marking Duties
56. San Miguel Corporation a domestic corporation declared dividends in favor of a non-resident foreign
corporation, Mc Donald’s USA in the amount of 200M. How much is the tax payable in the
Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt
57. Using the preceding number in case there is no tax sparring, how much is the tax due/payable in
Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt
58. CRP is one of the Philippines registered top 20,000 private corporation. As the company’s
accountant you were tasked to account for all payments made local/resident suppliers. What
percentage of withholding tax rates of income payments made by top 20,000 private corporations
to their local/resident suppliers of goods?
a. 1% of the gross payments.
b. 2% of the gross payments
c. 3% of the gross payments
d. 4% of the gross payments
59. Tan Torres a non-stock and non-profit charitable institution pays for its regular repairs and
maintenance of its facilities to Carmel Manpower Service Incorporated. As the accountant of the
exempt entity, how much withholding tax will you impose to its supplier (Carmel) for the repairs
and maintenance expense?
a. Exempt from withholding tax.
b. 1% withholding tax on its gross payment.
c. 2%withholding tax on its gross payment.
d. 5% withholding tax on its gross payment.
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60. One of the following statement is false:
a. Taxation is lifeblood of the government;
b. The power of taxation must first be expressly granted, either be law or the Constitution, before the
State may validly exercise it;
c. A Government that imposes direct taxes than indirect taxes is said to have managed to evolve a
progressive system of taxation;
d. Taxes are imposed primarily to raise revenues, while fees and charges are imposed primarily for
regulation purposes.
61. Prior to the enactment Local Government Code, consumers cooperative registered under the
Cooperative Development Act enjoyed exemption from all taxes imposed by a local government. With
the Local Government Code’s withdrawal of exemptions, could these cooperative continue to enjoy
such exemption?
a. Yes, because the Local Government Code, a general law, could not amend a special law such as the
Cooperative Development Act.
b. No, Congress has not by the majority vote of all its members granted exemption to consumers’
cooperatives;
c. No, the exemption has been withdrawn to the level the playing field for all taxpayers and preserve
the Local Government units financial position.
d. Yes, their withdrawal is specifically mentioned among those not withdrawn by the Local
Government Code.
62. Josef for the calendar 2020 and 2021 avail the 8% Gross Income Tax, what will be the basis of the 8%
tax?
2020 2021
Compensation 1,000,000
Interest Income from banks 50,000 50,000
Interest Income from receivables 100,000 100,000
Rent Income 1,000,0000
a. 1,150,00 and 1,100,000 respectively;

b. Zero and 1,100,000 respectively;
c. 100,000 and 850,000 respectively;
d. Zero and zero respectively.
63. PAL a senior citizen with his 2 grandchildren went to Davao City to visit Mt. Apo, the total cost of
ticket with Cebu Pacific amounted to P3650, how much will PAL pay?
a. 3,650
b. 3,300
c. 2,600
d. None of the above
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64. (TRAIN) Decedent was married at the time of death and was survived by his wife and their five
legitimate children when he was still alive. He died on November 1, 2021, leaving the following:
Real and personal properties in the Philippines P11,000,000

Proceeds of life insurance:
Receivable by the estate as revocable beneficiary 5,000,000
Receivable by the third party as irrevocable beneficiary 3,900,000
Medical expenses within one year prior to death
Paid by the time of death 500,000
Unpaid at the time of death 400,000
Funeral expenses:
Other obligations of the decedent 1,500,000
The net taxable estate is:

a. P1,250,000
b. P1,900,000
c. P2,250,000
d. P3,700,000
65. Decedent was married at the time of death and was survived by wife and their five legitimate children
when he was still alive. He died on November 1, 2021 leaving the following:
Real and personal properties in the Philippines Proceeds of life insurance: P11,000,000
Receivable by the estate a revocable beneficiary 5,000,000
Receivable by third party as irrevocable beneficiary 3,900,000
Medical expenses within one year prior to death:
Unpaid as at time of death 400,000
Funeral expenses:
Other obligations of the decedent 1,500,000
The estate tax due is:

a. P225,000
b. P135,000
c. P114,000
d. P75,000
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66. CONRAD HOTEL, VAT registered, offers different services to its guests. The following data taken
from the books of the taxpayer are for the first month of the first quarter of 2024:
Revenue Collections
Hotel rooms (local guests) P800,000 P700,000
Dining hall:
Sale of food and refreshments 1,000,000 850,000
Sale of wine, beer and liquor 700,000 600,000
Disco
Sale of food and refreshments 600,000 550,000
How much is the output tax using 12% VAT rate?

a. P432,000
b. P378,000
c. P258,000
d. P300,000
67. CONRAD HOTEL, VAT registered offers different services to its guests. The following data taken
from the books of the taxpayer are for the first month of the first quarter of 2024:
Revenues Collections
Hotel rooms (local guests) P800,000 P700,000
Dining hall:
Sale of food and refreshments 1,000,000 850,000
Disco
Sale of food and refreshments 600,000 550,000
How much is the total amusement tax?

a. P300,000
b. P180,000
c. P150,000
68. Which of the following interest expenses shall be deductible?

a. Interest expense on bank notes;
b. Interest expense on loans extended by stockholders;
c. Interest expense incurred on a loan to buy the company president a car;
d. Interest expense incurred on a loan to build a school building.
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69. Pinehurst Balintawak Incorporated filed a motion for reconsideration with BIR final assessment
notice, which was denied by the commissioner. When will Pinehurst file an appeal with the Court of
Tax Appeals?
a. After 60 days from submission of supporting documents;
b. After the 180 days decision period given to the commissioner;
c. 30 days form the receipt of denial;
d. At the option of Pinehurst either from lapse of decision period of 180 days or 30 days from receipt
of denial.
70. Illegal way of minimizing tax?
a. Tax avoidance
b. Tax dodging
c. Tax evasion
d. Tax fraud
THE END
CPA Review School of the Philippines
TAXATION (C. Llamado)

PRE-WEEK BATCH 96
1) Armed with an LOA, a Revenue Officer requested Chris Chico to submit his books of
accounts relating to a tax investigation being conducted by the BIR RDO where he is
registered. Chris Chico refused to comply with the request.
A. The CIR may authorize the issuance of a subpoena duces tecum against the taxpayer.
B. The BIR may file a motion with the Court of Tax Appeals or the regular courts to compel
the taxpayer to present the books of accounts.
C. The BIR may enter the office of the taxpayer to obtain the books of accounts.
D. The BIR shall issue final assessment based only on the available documents submitted by
Chris Chico.
2) If a taxpayer refuses to comply with a Subpoena Duces Tecum (“SDT”), the concerned BIR
Legal office may perform the following courses of action:1
Not a a) File a criminal case for “Failure to Obey Summons” against the taxpayer for violation
Question of Section 5 in relation to Sections 14 and 266 of the Tax Code; and/or
b) Initiate a proceeding to cite the taxpayer for contempt under Rule 71 of the Revised
Rules of Court.
3) Taxpayer received on June 10, 2020 from the Office of the Treasurer of Davao City an
assessment for the payment of permit fees to slaughter against its dressing plant for the years
2015 to 2019. The taxpayer paid the assessment after its protest with the City Treasurer was
denied. The taxpayer appealed with the RTC in Davao, which in turn upheld the City
Treasurer’s denial.
Can the taxpayer appeal the RTC’s decision to the CTA?
(a) Yes.
(b) No. The CTA has no jurisdiction to decide a case not involving a local tax case decided by
the RTC. Permit fees to slaughter are in the nature of a license fee, not a tax.
(c) It depends.
(d) None of the above.
4) The following shall be required in the application for a TIN card:

(a) Duly accomplished BIR Form No. 1905 (Application for Not a
Registration Update/Correction/Cancellation); Question
(b) ID picture;
(c) Any government-issued ID;
(d) Affidavit of Loss, in case of replacement;
(e) ₱100 replacement fee.
5) Statement 1: Liquidating dividends, if in the form of real property located in the Philippines,
are subject to the 6% capital gains tax.
Statement 2: Possession of more than one (1) TIN is criminally punishable under the Tax
Code.
1
RMO Nos. 45-2010; 16-2023.
1
a) All are true.
b) All are false.
c) Only Statement 1 is true.
d) Only Statement 2 is true.
6) Jamil Villanueva, Filipino, a social media influencer residing in Quezon City, received
₱10,000,000 ($200,000) from YouTube LLC, a foreign corporation based in the U.S., as his
share from advertising revenues. U.S. tax law considers such payments as royalties which are
subject to a 24% tax in the U.S. YouTube LLC thus withheld the equivalent of ₱2,400,000
from its payment to Jamil. He incurred ₱1,000,000 operating expenses in connection with
such income.
However, under the U.S.-Philippine Tax Treaty, royalties derived by a Philippine resident in
the U.S. shall be taxed at a maximum of only 15% of the gross amount. Apparently, Jamil
was unaware of this and failed to invoke the treaty to lower the tax withheld by YouTube
LLC.
Compute his tax payable in his Philippine ITR if the amount received from YouTube LLC is
his only income for the taxable year, and if he is claiming credit for taxes paid in the U.S.
Compute Jamil’s tax payable.

(A) ₱1,052,500
(B) ₱2,760,000
(C) ₱ 360,000
(D) None of the above
Gross income, U.S. ₱10,000,000

Less: Business expenses (1,000,000)
Net taxable income ₱ 9,000,000
Tax on ₱ 8,000,000 = ₱ 2,202,500

Tax on 1,000,000 x 35% = 350,000
₱ 9,000,000 ₱ 2,552,500
Less: Tax Credit

Tax actually paid in U.S. ₱2,400,000
Tax deemed paid in U.S. (15% x ₱10 M) 1,500,000
Limit: (₱9.0M/₱9.0M) x ₱2,552,500) 2,552,500
Tax Credit (lowest) (1,500,000)
Tax payable ₱ 1,052,500
2
Notes:
(1) A resident citizen is taxable on income earned within and without. Royalties sourced
abroad are therefore taxable to a resident citizen. It cannot be subject to final taxes, and
therefore will be included in the ITR of a resident citizen.
(2) Generally, credit for taxes paid in a foreign country is limited to that actually paid or
accrued in said foreign country.
A tax treaty may exist between the source state and the Philippines, but the taxpayer may
fail to invoke the provisions of such treaty to lower or totally eliminate his/its tax liability.
In such situations, the tax credit that may be claimed by the taxpayer shall be limited to
the tax that should have been paid by the taxpayer had he/it claimed the benefits under
such treaty.
7-13)
CRISTAL corporation (domestic), which started operations in 2010, has the following data
for FY ending April 30, 2021:
Sales, net of sales discounts 20,000,000

Cost of sales 5,000,000
Salaries of employees, net of payroll deductions of ₱350,000 5,000,000
Fringe benefits given to:
Rank and file employees 1,040,000
Managerial employees 325,000
EAR expenses 550,000
Rent expenses 1,200,000
Depreciation expense 700,000
Bad debt expense (1/3 charged off during the year) 105,000
Interest expense on BPI loan 400,000
Interest expense on loan from majority shareholder 100,000
Other income:
Cash dividends received from:
1) Domestic corporations 550,000
2) Foreign corporations 30,000
Interest income from Philippine bank deposits, net of FT 100,000
Royalty income (Phils.), gross of FT 125,000
Gain from sale of property:
1) Makati real property not used in business (SP = ₱10M) 2,000,000
2) Domestic shares (not listed) held as capital assets 100,000
3) Domestic shares (listed) held as capital assets 23,000,000
Liquidating dividend from ABC Corp. 100,000
(cost of ABC shares = ₱96,000)
CWT withheld by customers 68,000

Tax paid in first 3 quarters 30,000
3
7) Compute final taxes on the CRISTAL’s passive income.
(A) ₱50,000
(B) ₱45,000
(C) ₱40,000
Final taxes on passive income:

Interest income, Philippine bank deposit (₱125,000 x 20%) 25,000
Royalty income (₱125,000 x 20%) 25,000
50,000
8) Compute total CGT on CRISTAL’s capital gains.
(A) ₱ 753,000
(B) ₱4,065,000
(C) ₱ 615,000
CGT
Sale of Makati real property (6% x ₱10,000,000) 600,000
Domestic shares held as capital assets (15% x ₱100,000) 15,000
615,000
9) How much is the corporation’s net taxable income?

(A) ₱5,750,250
(B) ₱5,736,713
(C) ₱5,666,713
10) How much is the corporation’s RCIT?
(a) ₱1,481,793
(b) ₱1,721,714
(c) ₱1,485,290
(d) None of the above
11) How much is the corporation’s MCIT?
(a) ₱175,898
(b) ₱172,714
(c) ₱150,340
12) How much is the corporation’s income tax payable?
(a) ₱1,383,793
(b) ₱1,481,793
(c) ₱1,550,340
4
Computation of Blended Rate
RCIT MCIT Interest rate
arbitrage
May 1, 2020 to June 30, 2020 2 months 30.00% 2.00% 33.00%
July 1, 2020 to April 30, 2021 10 months 25.00% 1.00% 20.00%
12 months 25.83% 1.17% 22.17%
Net Sales 20,000,000

Cost of Sales (5,000,000)
Gross income from operations 15,000,000
Add: Other taxable income not subject to FTs:
Foreign dividends + liquidating dividend 34,000
Total Gross Income 15,034,000
Less: Ordinary Itemized Deductions
(a) Salary expense, net of payroll deductions 5,000,000
Add: Payroll deductions 350,000 (5,350,000)
(b) Fringe benefits of employees
Rank and file 1,040,000
Managerial 325,000 (1,365,000)
(c) FBT (₱325,000/65% x 35%) (175,000)
(d) EAR 550,000
Limit (1/2 of 1% of Net Sales) 100,000 (100,000)
(e) Rent expense (1,200,000)
(f) Depreciation expense (700,000)
(g) Bad debt expense (1/3 charged off) (35,000)
(h) Deductible interest expense 400,000
Less: Interest arbitrage (22.17% x ₱125,000) (27,713) (372,288)
Net taxable income 5,736,713
RCIT (25.83%) 1,481,793
MCIT (1.17% of Total Gross Income) 175,898
Tax due RCIT 1,481,793

Less: Tax Credits:
(1) Tax paid in previous quarters (30,000)
(2) CWTs (68,000)
Tax payable/(Tax credit/refund) 1,383,793
5
13) How much withholding tax should CRISTAL withhold and remit on its loan interest payments
assuming the corporation is included in the BIR list of top withholding agents?
A. ₱ 23,000 C. ₱10,000
B. ₱ 75,000 D. None of the above
Interest income derived from any debt instrument not within the coverage of deposit
substitutes is subject to a 15% CWT (RR 14-2012). (100,000 x 15%) = 15,000
Interest income received by banks from payors belonging to the Top 20,000 corporations
strictly arising from individual loans obtained from the banks that are not securitized,
assigned, or participated out, shall be subject to CWT at the rate of two percent (2%)
(RMC 84-2012) (400,000 x 2%) = 8,000
14) Statement 1: The income of an individual, trust, or estate that owns a proprietary
educational institution as a sole proprietor shall be taxed at the preferential rate
of 10% (1% from July 1, 2020 to June 30, 2023). Provided, the individual, trust,
or estate passes the predominance test.
Statement 2: The income of a proprietary educational institution organized as a resident
foreign corporation shall be taxed at the preferential rate of 10% (1% from July
1, 2020 to June 30, 2023). Provided, such resident foreign corporation passes
the predominance test.
(a) Only Statement 1 is true.

(b) Only Statement 2 is true.
(c) Both Statements are true.
(d) Both Statements are false.
15) First Investors, Inc., domestic corporation, invested its excess funds in money market
placements with BDC bank, a local bank. The interest income on such market placements
was not subjected to the final withholding taxes by the bank.
The BIR contends that First Investors should have included in its income tax return the same
interest income which was not subjected to final withholding taxes. The BIR thus assessed
First Investors deficiency income taxes.
(a) First Investors is liable for the deficiency taxes in its ITR. Otherwise, it would escape
tax on its interest income which is taxable.
(b) First Investor is not liable for any deficiency income tax. It is the payor, BDC, which is
mandated by law to withhold the final tax on such passive income, and remit the same
to the BIR.
16) Statement 1: Beginning 2024, a business expense will still be allowed as a deduction even
if the corresponding CWT has not been withheld and remitted to the BIR.
Statement 2: OSD cannot be disallowed due to non-withholding of the expanded or

creditable withholding tax pursuant to Section 34(K) of the Tax Code.
(a) Both are true.

(b) Both are false.
(c) Statement 1 is true. Statement 2 is false.
(d) Statement 1 is false. Statement 2 is true.
6
17) Aside from the 20% discount on the purchase of certain goods and services, PWDs and
Senior Citizens (SCs) are also entitled to a special discount of five percent (5%) off the Not a
regular retail price of basic necessities and prime commodities.2 However, this 5% Question
discount is not available as a special deduction to establishments granting the same.
18) PWDs/Senior Citizens may avail the 20% discount and VAT exemption from the purchases
of certain goods/services upon submission of the following proofs of entitlement thereto:
(a) identification card issued by the city/municipal mayor, or barangay captain of the place
where the PWD resides; or the Senior Citizen’s ID card (for senior citizens);
(b) passport;
(c) transportation discount fare identification card issued by the National Council for the
Welfare of Disabled Persons (NCWDP);
(d) Any of the above.
19) Input VAT for the importation of goods shall be substantiated by the import entry or other
equivalent document showing actual payment of VAT on the imported goods. At present,
these documents include the following:
(a) VAT invoice

(b) VAT official receipt
(c) VAT Payment Certification, together with the Single Administrative Document (SAD)
or the Statement of Settlement of Duties and Taxes (“SSDT”)
Note: VAT Payment Certification ,and the Single Administrative Document (“SAD”)
and/or the Statement of Settlement of Duties and Taxes (“SSDT”) are issued by
the BOC.
2
Basic necessities shall include: (1) all kinds of variants of rice; (2) corn; (3) all kinds of bread (not
including pastries and cakes); (4) fresh, dried, and canned fish and other marine products (including those
which are frozen and in various modes of packaging); (5) fresh pork, beef, and poultry meat; (6) all kinds
of fresh eggs (not including quail eggs); (7) potable water in bottles and containers; (8) fresh and processed
milk (not including milk labelled as food supplement); (9) fresh vegetables including root crops; (10)
fresh fruits; (11) locally manufactured instant noodles; (12) coffee and coffee creamer; (13) all kinds of
sugar (not including sweeteners); (14) all kinds of cooking oil; (15) salt; (16) powdered, liquid, or bar
laundry and detergent soap; (17) firewood; (18) charcoal; (19) all kinds of candles; (20) household
liquefied petroleum gas (“LPG”), not more than 11 kilograms LPG content once every five (5) months
bought from LPG dealers; and (21) kerosene, not more than 2 liters per month (Joint DTI-DA-DOE
Administrative Order No. 17-01, Series of 2017; Sec. 2.8, Rev. Reg. No. 5-2017, as amended by Rev.
Reg. No. 9-2019).
Prime commodities shall include: (1) flour; (2) dried, processed, and canned pork, beef, and poultry meat;
(3) dairy products not falling under the definition of basic necessities; (4) onions and garlic; (5) vinegar,
patis, and soy sauce; (6) toilet/bath soap; (7) fertilizer; (8) pesticides; (9) herbicides; (10) poultry feeds,
livestock feeds, and fishery feeds; (11) veterinary products; (12) paper and school supplies; (13) nipa
shingle; (14) sawali; (15) cement, clinker, GI sheets; (16) hollow blocks; (17) plywood; (18) plyboard;
(19) construction nails; (20) batteries (not including cell phone and automotive batteries); (21) electrical
supplies and light bulbs; and (22) steel wires (Joint DTI-DA-DOE Administrative Order No. 17-01, Series
of 2017; Sec. 2.9. Rev. Reg. No. 5-2017, as amended by Rev. Reg. No. 9-2019).
7
20) Under what conditions may a Solo Parent (defined under R.A. No. 8972) be entitled to a
10% discount and to a VAT exemption on purchases?
(a) The purchase consists of baby’s milk, food, micro-nutrient supplements, sanitary diapers,
duly-prescribed medicines, vaccines, and other medical supplements.
(b) The purchase must be made from the birth of the child or children until 6 years of age.
(c) The Solo Parent is earning less than ₱250,000 annually.
(d) All of the above.3
21) What is the basis of the documentary stamp tax to be imposed when one of the contracting
parties on the sale of real property is the Government?
A. Consideration contracted to be paid for such realty

B. Consideration contracted to be paid for such realty or on its fair market value, whichever
is higher
C. Actual consideration
D. Consideration contracted to be paid for such realty or on its fair market value, whichever
is lower
22) Which of the following constitutes constructive affixture of documentary stamps in

connection with the payment of DST?
(1) Purchase of documentary stamps and affixing the same on the taxable document.
(2) Imprinting the DST, through a metering machine, on the taxable document.
(3) The DST return is filed and paid, and a copy of the DST return is attached to the taxable
document.
(4) For taxable certificates issued by government agencies and instrumentalities (“GAs”), the
attachment to the certificate of the official receipt issued by the GA upon payment of the
DST.
(a) 1 and 2
(b) 3 and 4
(c) 1, 2, 3, 4
23) HJ Cigarettes is a cigarette manufacturer which packs cigarettes by hand. CJ Cigarettes is a

cigarette manufacturer which uses machines to pack cigarettes.
Which manufacturer is subject to the excise tax?
(a) The manufacturer which packs cigarettes by hand.

(b) The manufacturer which packs cigarettes by machine.
(c) Both.
What type of excise tax?

(a) Specific tax.
(b) Ad valorem tax
(c) Both.
Note: The importation/manufacture of CIGARs are subject to both types of

excise taxes.
3
Sec. 15(b), R.A. No. 8972 as amended by R.A. No. 11861; Rev. Reg. No. 1-2023.
8
24) Which of the following is a distilled spirit?
(a) gin
(b) fermented liquor
(c) sparkling water
Importation/manufacture of distilled spirits is subject to what type of excise tax?
(a) Specific tax.

(b) Ad valorem tax
(c) Both.
Spirits or distilled spirits is the substance known as ethyl alcohol, ethanol or spirits of wine,
including all dilutions, purifications and mixtures thereof, from whatever source, by
whatever process produced, and shall include whisky, brandy, rum, gin and vodka, and other
similar products or mixtures.
Fermented liquor refers to beer, a generic term for all alcoholic beverages that are brewed
from malted cereal grains, such as malted barley, flavoured with hops, and fermented by
yeast. It includes lager beer, ale, porter, and other types of beer.
- Manufacture/importation of fermented liquor is subject to a specific excise tax only.
Wines include all alcoholic beverages produced by fermentation without distillation, from the
juice of any kind of fruit.
Wines includes (1) sparkling wines/champagnes; (2) still wines and carbonated wines
containing 14% of alcohol by volume or less; (3) still wines and carbonated wines containing
more than 14% but not more 25% of alcohol by volume; and (4) fortified wines containing
more than 25% of alcohol by volume.
- Manufacture/importation of wines is subject to a specific excise tax only.
25)
Excise tax on Non-Essential Goods
An excise tax equivalent to twenty percent (20%) based on the wholesale price or the value of
importation used by the Bureau of Customs in determining tariff and customs duties, net of
excise tax and VAT, shall be levied, assessed, and collected on the following goods:
(a) All goods commonly or commercially known as jewelry, whether real or imitation,
pearls, precious and semi-precious stones and imitations thereof;
(b) Goods made of, or ornamented, mounted or fitted with, precious metals or imitations
thereof or ivory;
(c) Opera glasses and lorgnettes;
9
(d) Perfumes and toilet waters;4
Perfumes and toilet waters shall include all preparations to be placed in contact with
the external parts of the human body that impart or give off an agreeable or pleasant
odor or smell.5
Articles, substances, or preparations which are similar or analogous to perfume or toilet

water shall likewise be classified as perfume or toilet water subject to the applicable
excise tax under Section 150(b) of the Tax Code.6
(e) Yachts and other vessels intended for pleasure or sports.
26) (a) VLL Corporation is a domestic manufacturer of Magic body cologne. Compute the
excise tax on one (1) box of Magic body cologne if one box contains 50 bottles with 20 ml.
per bottle, with a wholesale price (net of VAT and excise tax) of ₱150 per bottle.
The excise tax on a box of Magic body cologne is ₱1,500 computed as follows:
Number of bottles 50
x Wholesale price/bottle ₱ 150
Base for excise tax ₱7,500
x Excise tax rate x 20%
Excise tax due per box ₱1,500
(b) VLL imported 2,500 bottles of Bird body cologne. The importer paid the foreign seller
₱154 per bottle. The following were also paid in relation to the importation: ₱57,307
insurance cost; ₱19,231 freight costs; and other charges of ₱38,462. Compute the excise tax
on the importation:
The excise tax on importation is ₱100,000 computed as follows:
Number of bottles 2,500

x Invoice price/bottle ₱154
Value of imported goods ₱385,000
+ Insurance costs 57,307
+ Freight costs 19,231
4
Perfume shall refer to a finished product in liquid, semi-solid, solid, or aerosol (mist or spray) form
consisting of fragrant materials (natural and/or synthetic) dissolved in alcohol or any appropriate
solvent. The term shall include, but is not limited to extrait perfumes, eau de parfum, perfume
concentrates, cream perfumes, perfume gels, perfume balms, perfume rubs, aerosol perfumes, spray-on
perfumes, and roll-on perfumes containing a total of not less than 10% by weight of perfume
concentrate, perfume oil, or fragrant materials.
Toilet water shall refer to a less concentrated form of any other type of perfume in liquid form used as
body fragrance, aftershave, or skin freshener. The term shall include, but is not limited to eau de
toillete, eau de cologne, eau de fraiche, colognes, splash colognes, baby colognes, spray-on colognes,
body sprays, body mists, body splash, aerosol colognes, aromatic waters such as florida water and
lavender water, and aftershave lotions (Rev. Reg. No. 9-2023).
5
Rev. Reg. No. 9-2023.
6
Similar or analogous articles are those advertised or held to be suitable for the same purpose regardless
of the name by which it may be known or distinguished (Rev. Reg. No. 9-2023).
10
+ Other charges 38,462
Base for excise tax ₱500,000
x Excise tax rate x 20%
Excise tax due on importation ₱100,000
27)
Not a Donation of real Donor’s tax DST

Question property to
None None
government
28-31)
Five years ago, actor Coco Martin bought 5,000 shares of Lovie Corporation (domestic, not listed)
at par value. He sold his shares for ₱10,000,000 today. The corporation has 10,000 outstanding
shares with par value of ₱1,000/share. Per its latest Financial Statements, the corporation’s assets
totalled ₱30,000,000 and its liabilities totalled ₱5,000,000. With the exception of its real property,
the book value of Lovie’s assets and liabilities is equivalent to their market values.
The book, market, zonal, and appraised values of Lovie’s real properties are as follows:
BV per FS MV per TD* Zonal Value Appraised

Value
Land A ₱2,000,000 ₱2,500,000 ₱5,000,000 ₱6,000,000
Land B 2,000,000 2,200,000 4,000,000 3,500,000
Building A 1,000,000 2,400,000 3,000,000
Building B 500,000 2,000,000 1,950,000
*TD- Tax declaration
28) How much is the capital gains tax due on the sale of Coco’s shares of stock?
A. ₱1,046,250 C. ₱375,000
B. ₱1,087,500 D. ₱750,000
Selling Price ₱10,000,000

Less Cost (5,000,000)
Capital gain ₱5,000,000
CGT (15%) ₱750,000
29) How much is the documentary stamp tax due on the sale of Coco’s shares of stock?
A. ₱37,500 C. ₱18,750
B. ₱91,875 D. ₱75,000
11
DST on sale of shares:
DST rate: ₱1.50 Per ₱200 of par value
Total par value of 5,000 shares at ₱1,000 par value /share ₱5,000,000
Divided by ÷ ₱200
25,000
Multiplied by x ₱1.50
DST ₱37,500
30) How much is the donor’s tax due, if any?

A. ₱103,500 C. ₱135,000
B. ₱ 90,000 D. None
Computation of FMV (book value) per share:

Book Value
Equity ₱25,000,000
÷ 10,000 shares
Equity/share ₱2,500
Computation of Donor’s tax:

FMV (₱2,500 x 5,000 shares) ₱12,500,000
Selling Price (10,000,000)
Gross gift 2,500,000
Less (250,000)
Net Gift 2,250,000
Donor's tax (6%) 135,000
31) Assume that Coco donated the 5,000 shares of stock of Lovie Corporation, instead of selling
them. How much is the donor’s tax due on the said donation?
A. ₱435,000 C. ₱735,000
B. ₱585,000 D. ₱703,500
Book value/share ₱2,500

x Number of shares donated x 5,000
Total book value ₱12,500,000
Gross gift ₱12,500,000

Less (250,000)
Net gift ₱12,250,000
Donor's tax (6%) ₱ 735,000
12
32)
Income tax VAT Donor’s tax
Endowments or gifts received
NO NO YES
by homeowner’s associations
NO (except campaign
contributions made by
Campaign contributions to
YES (excess foreign corporations)
candidates for public office and
campaign NO Provided: Such
to political parties/party-list
funds) campaign contributions
groups
are utilized during
campaign period.
NOTES:
(a) Endowments or gifts received by such homeowners’ associations are not exempt
from donor’s tax. Such gifts do not qualify for exemption under Section 101(A)(2)
of the Tax Code. (RMC No. 53-2013; BIR Ruling No. DT-352-2022, July 14, 2022).
(b) Campaign contributions to candidates for public office and to political parties/party
list groups are not subject to VAT. All candidates and political parties/party list
groups shall register Non-VAT Official Invoices which shall be issued for every
contribution received, whether in cash or kind. (RMC No. 22-2022).
33-34)
33) Within 30 days from the deadline of filing their annual ITRs, what additional reports
Not a should business entities (a) registered with an Investment Promotion Agency (ex. PEZA,
Question BOI, TIEZA, SBMA, etc.) and (b) availing of tax incentives, submit?
(1) Beneficial Ownership Report

(2) Statistical Report
(3) Annual Tax Incentives Report
(4) Annual Benefits Report
(5) Certificate of Entitlement to Tax Incentives (“CETI”)
(a) Numbers 1 and 2

(b) Numbers 2 and 3
(c) Numbers 3 and 4
(d) All of the above
Annual Tax Incentives Report – which shall contain complete information on

income-based incentives, VAT incentives, duty exemptions, deductions, credits,
exclusions, and other information needed to analyse and monitor the impact of
the same to the Philippine economy.
Annual Benefits Report – which include data on (a) the approved and actual
amount of investments, (b) approved and actual employment level and job
creation including information on quality of jobs and hiring of foreign and local
workers, (c) approved and actual exports and imports, (d) domestic purchases,
(e) profits and dividend payout, and (f) all taxes paid.
13
34) What document must be attached to the Annual ITR of a business enterprise registered with
an Investment Promotion Agency (ex. PEZA, BOI, TIEZA, SBMA, etc.) and availing of tax
incentives?
(a) Numbers 1
Certificate of Entitlement to Tax Incentives (CETI) –
(b) Numbers 2
issued by the concerned Investment Promotion Agency
(c) Number 5
prior to the filing of the Annual ITR. It must be
(d) All of the above
attached to the Annual ITR filed with the BIR.
35) What is a stop-filer case?
Not a A “stop filer case” shall refer to a system-created case which arises when a taxpayer fails to
Question file a return for a required tax type for a taxable period.
36) Which of the following tax cases may not be compromised?

A. Criminal violations, other than those already filed in court or those involving criminal tax
fraud
B. Collection cases filed in courts
C. Delinquent accounts with duly approved schedule of installment payments
D. Civil tax cases being disputed before the courts
37) TVT Corporation (“TVT”) imported a shipment of engine spare parts which arrived in the
port of Manila on March 18, 2014. It paid the VAT, one of the taxes imposed under the
Tax Code, on April 8, 2020. TVT intends to file an application for refund of the VAT it
paid.
a) The application for refund must be filed with the District Collector of the Bureau of
Customs by April 8, 2022.
b) The application for refund must be filed with the Commissioner of Customs by April 8,
2022.
c) The application for refund must be filed with the Commissioner of Internal Revenue by
April 8, 2022.
d) None of the above.
38) In applying for registration with the PEZA, what documents shall be submitted?
A. Project brief
B. AOI and by laws
C. Project feasibility study
D. Board Resolution
E. List of Machineries/Equipment
F. Company brochure
G. Photographs of product
H. Mayor's permit
a) All except the (D)

b) All except (B) and (G)
c) All except (H)
d) None.
14
39) Jomel is an agricultural producer. An agricultural producer is an individual who is a
supplier/producer/seller, contract grower, or miller of agricultural food products. Under RR
12-2023, if the annual gross sales/receipts of an agricultural producer do not exceed
₱1,000,000, such individual shall be exempt from issuing principal receipts/invoices.
Jomel’s total annual sales do not exceed ₱400,000 in a taxable year.
a) Jomel is not required to file an ITR since his taxable net income when he avails of the
40% OSD is less than ₱250,000.
b) Jomel is not required to file an ITR since he does not issue principal receipts on his sales
transactions.
c) Jomel is required to file only the annual ITR.
d) Jomel is required to file the quarterly ITRs and the annual ITR.
e) None of the above.
40) What is tax mapping?

a) It is equivalent to tax assessment within the applicable reglementary periods depending
on whether the taxpayer is guilty of fraud or not.
b) It is a mere verification made by the BIR of a taxpayer’s compliance with registration and
other requirements prior to, during, and after its business operations such as the following:
(a) registration of the head office and branches; (b) payment of annual registration fee and
posting of the same in the place of business; (c) authority to print receipts and invoices; (d)
the issuance of receipts and invoices on every sale; (e) the contents of such receipts and
invoices; (f) registration of cash register machines, point-of-sale machines, and
computerized accounting systems; and (g) registration of books of accounts.
c) This is the directory of the Revenue District Offices of the BIR with a listing of all officers
and revenue agents.
d) None of the above.
41) Ho Corporation (Seller) and Ha Corporation (Buyer), both domestic corporations, entered
into a Deed of Absolute Sale involving 4 parcels of land in Cavite. In order to secure the
Certificate Authorizing Registration (“CAR”) from the BIR, the CGT and DST due on the
sale transaction were paid by Ha Corporation.
However, before effecting the transfer of the titles in favor of the buyer, they mutually agreed
to rescind, revoke, and cancel the aforesaid sale as evidenced by the Revocation/Cancellation
of Deed of Absolute Sale executed between their representatives.
Ha Corporation filed an application for refund of the CGT and DST paid.
(a) Ha Corporation is entitled to the refund of both CGT and DST paid.
(b) Ha Corporation is entitled to the refund of the CGT, but not the DST paid.7
7
In order to be liable for the CGT, there must be a transfer of ownership resulting from the sale,
disposition, or conveyance of real property. Because of the mutual rescission of the Deed of Absolute
Sale, the sale transaction was not consummated, and thus no actual conveyance or transfer of real
property was made between the parties. As a consequence, the seller did not derive any presumed gain
that shall be subject to CGT.
On the other hand, DST must be paid upon the issuance of an instrument evidencing the transfer or
conveyance of real property, irrespective of whether the contract that gave rise to is rescissible, void,
voidable, or unenforceable. DST is an excise tax imposed on the privilege to transfer or convey a real
property through the execution of a Contract of Sale, and not upon the transfer or conveyance itself.
(Great Landho, Inc., TT&T Development, Inc., and Tama Properties, Inc. vs. CIR, CTA Case No. 10184,
August 4, 2023).
15
(c) Ha Corporation is entitled to the refund of the DST, but not the CGT paid.
(d) Ha Corporation is not entitled to any refund.
42) Statement 1: Donation by a VAT-registered person of a property classified as an

ordinary asset shall be considered a transaction deemed sale, hence subject to VAT.
Statement 2: If the donor is a VAT-registered person, the donation of real property used
in business is subject to VAT. If the donor is not VAT-registered, the donation is exempt
from VAT.
a) Both are true.

b) Both are false.
c) Statement 1 is true.
d) Statement 2 is true.
43) A VAT-registered taxpayer bought a parcel of land with the objective of using the same to
expand his supermarket business. Eventually though, he decided to donate the land to his
son. Is the donation subject to VAT?
a) Yes, the land is an ordinary asset, and the donation is a deemed sale transaction.
b) No, once the donor’s tax is paid, the donation can no longer be subject to VAT.
44) Statement 1: An FLD/FAN which is issued in violation of a

taxpayer’s right to due process becomes valid where the taxpayer is able to
protest the FLD/FAN or where the taxpayer pays the assessed deficiency
taxes.
Statement 2: If a taxpayer files a Petition for Review with the CTA

without validly contesting the BIR’s final assessment,
such petition is considered premature, and the CTA has
no jurisdiction to entertain the same.
Statement 3: As part of due process in the issuance of tax assessments, the PAN, FAN,
and FDDA, must respectively state the facts and law on which the
assessment is based. Otherwise, the FAN and/or FDDA shall be void.
a) All statements are true

b) 2 statements are true.
c) Only 1 statement is true
d) All statements are false.
45) Statement 1: An LOA is the authority given to the appropriate

revenue officer to examine the books of account and other accounting
records of the taxpayer in order to determine the taxpayer’s correct internal
revenue liabilities. It commences the audit process and informs the
taxpayer that it is under audit for possible deficiency tax assessment.
Statement 2: A Mission Order, on the other hand, empowers the

concerned revenue officer to conduct surveillance activities necessary to
expose violations that would serve as grounds for the issuance of notices to
the taxpayer, and ultimately the Closure Order.
16
Statement 3: A business can be closed even without being preceded by a Mission Order if
there is an LOA which led to an audit exposing the taxpayer’s non-
compliance with the Tax Code.
Statement 4: The collection of taxes via a Compliance Notice and/or Closure Order may
proceed even without a formal assessment.
(a) All are true.

(b) Two statements are true.
(c) One statement is true.
(d) All are false.
46) A warrant of distraint and/or levy (“WDL”) is void if the assessment on which it is based is
void.
(a) True
(b) False
(c) It depends.
47) The following events transpired:
February 25, 2015 Taxpayer filed its protest (Request for Reconsideration).
March 28, 2015 Taxpayer received a Letter Notice from the BIR wherein the latter
designated the taxpayer’s protest as a Request for Reinvestigation.
In the same Letter Notice, the BIR directed the taxpayer to submit
all supporting documents by June 24, 2015.
June 24, 2015 Taxpayer submitted the documents.
January 20, 2016 Taxpayer filed its appeal (Petition for Review) with the CTA.
Was the January 20, 2016 appeal with the CTA filed on time?
(a) Yes. The CIR is given 180 days from the submission of the supporting documents to act
on the protest, or from June 24, 2015 to December 21, 2015. Since no decision was
received, the taxpayer may file an appeal with the CTA within 30 days from December 21,
2015 or until January 20, 2016.
(b) No. The CIR is given 180 days from the filing of the protest or from February 25, 2015 to
August 24, 2015, to act on the protest. Since no decision was received, the taxpayer may
file an appeal with the CTA within 30 days from August 24, 2015 or until September 23,
2015 only.
(c) Both are correct.
48) The following events took place:
Date Event
December 28, 2021 Taxpayer receives the FAN/FLD.
January 19, 2022 Taxpayer files protest with the BIR.
October 21,2022 Taxpayer receives the CIR’s FDDA.
November 18, 2022 Taxpayer files a Motion/Request for
Reconsideration with the CIR.
June 10, 2023 Taxpayer files appeal with the CTA.
17
Did the CTA acquire jurisdiction over the case?
(a) Yes. The end of the 180-day period from November 18, 2022 was on May 17, 2023.
Since the CIR had not rendered a decision by May 17, 2023, the taxpayer had 30
days from May 17, 2023 or until June 16, 2023 to file the judicial appeal.
(b) No. The taxpayer’s remaining option is to wait for the CIR’s decision on its
administrative appeal before elevating its case to the CTA.8
49) Prior to January 22, 2024, an annual registration fee (“ARF”) in the amount of Five
Hundred Pesos (₱500) for every separate or distinct establishment or place of business,
Not a including facility types where sales transactions occurred, was paid upon registration and
Question every year thereafter on or before the last day of January.
Beginning January 22, 2024, the ARF shall no longer be required by the BIR for
registration.9 As a result, business taxpayers are exempt from filing BIR Form No. 0605,
and paying the ₱500 ARF for new business registration and for the annual renewal
thereof.10
50) Statement 1: Since the Philippine income tax of a taxpayer is not an

allowable deduction of a taxpayer, it follows that interest imposed by the BIR
on any income tax delinquency is also not deductible from gross income.
Statement 2: For the interest expense paid by a taxpayer on a loan given to him by his
brother to be deductible, the contract of loan must be notarized.
Statement 3: Where the amount of interest expense actually incurred or paid is greater than
the amount of depreciation/amortization of the capitalized interest, the
taxpayer is allowed to claim the difference as a deduction against gross
income in its ITR.
a) All statements are true. c) 2 statements are true.

b) All statements are false. d) 2 statements are false.
8
The petitioner could have filed its appeal before the CTA within 30 days from receipt of the FDDA on
October 21, 2022 or until November 20, 2022. However, it chose to file an administrative appeal against
the FDDA.
It is to be noted that the 180-day period is confined only to the period within which the CIR may act
on the initial protest. Thus, if the taxpayer opts to file an administrative appeal and the same is not acted
upon by the CIR within the 180-day period from the filing of the protest, the taxpayer may either (1) appeal
to the CTA within 30 days from the expiration of the 180-day period, or (2) await the decision of the CIR
and appeal the unfavorable decision to the CTA within 30 days from receipt thereof.
Option 1 was not availed of by the taxpayer. The end of the 180-day period from January 19, 2022 was on
July 18, 2022. The last day to appeal the non-decision of the CIR to the CTA was 30 days from July 18,
2022 or August 17, 2022.
Option 2 is the only one available. Therefore, the taxpayer must first wait for an unfavorable decision by
the CIR before it can elevate the same to the CTA.
9
R.A. No. 11976 effectively repealed the former Section 236(B) of the Tax Code providing for the
collection of the ₱500 ARF upon registration.
10
RMC No. 14-2024.
18
51) Wilfredo Benitez, resident citizen, was employed by WBC TV, domestic corporation, for the
last 15 years as a segment producer. When Wilfredo reached the compulsory retirement age
of 65, he became entitled to retirement benefits under R.A. No. 7641 since WBC TV did not
have a tax qualified retirement benefit plan.
After receiving the retirement benefits, WBC TV continued to employ him for 5 years. He
finally retired at the age of 70.
(a) Both the retirement benefits, and the income and benefits Wilfredo received beyond the
age of 65, shall be subject to the income tax and to the withholding tax.
(b) Both the retirement benefits, and the income and benefits Wilfredo received beyond the
age of 65, shall be exempt from the income tax and from the withholding tax.
(c) Only the retirement benefits shall be subject to the income tax and to the withholding tax.
(d) Only the income and benefits received beyond the age of 65 shall be subject to income tax
and to the withholding tax.
19
Tax Treatment of Foreign Currency Transactions11
Foreign currency transactions shall be converted into the functional currency using the exchange
rate at the time an asset, liability, income, or expense is recognized (at the date of transaction),
measured (at the reporting or balance sheet date), and/or settled (at the settlement date).
Foreign Exchange (“Forex”) Difference
A forex difference or forex gain/loss results when there is a change in the exchange rate
between the transaction date, the balance sheet date, and the date of settlement of any of the
monetary items arising from a foreign currency transaction.
Upon remeasurement on the balance sheet date, unrealized forex gains/losses result from
fluctuations in exchange rates between the transaction date and the balance sheet date. Such
gains/losses represent only potential gains/losses since there is no real flow wealth yet
generated from the remeasurement. Hence, the term unrealized forex gain/loss.
On the date of settlement, realized forex gains/losses shall result when there is a change in the
exchange rate between the transaction date and the date of settlement. At this time, these
represent actual gains/losses from a closed and completed foreign currency transaction.
Hence, the term realized forex gain/loss.
Tax Treatment of Forex Gains/Losses

Unrealized Forex Gains/Losses
Unrealized forex gains/losses arising from the periodic remeasurement of assets and
liabilities are not considered as incomes/losses for income tax purposes. Such
differences are temporary as they reverse when the respective assets or liabilities are
disposed of or settled. These temporary differences give rise to deferred tax
assets/liabilities which are required to be disclosed in the Notes to the Audited Financial
Statements.
Realized Forex Gains/Losses
Only realized forex gains/losses shall be considered as taxable income or deductible

expenses for income tax purposes. This is based on the Realization principle where
income is recognized when (1) the earning process is complete or virtually complete, and
(2) an exchange has taken place.12, 13
11
RMC No. 12-2024.
12
Rev. Reg. No. 2-1940.
13
Examples of events that shall give rise to actual forex gains/losses reportable for tax purposes include:
(1) Exchange rate at the time of receipt of advance payments is different from the exchange rate at the
time income is earned and debited against advance payments;
(2) Exchange rate at the time of recording accounts receivables is different from the exchange rate at the
time of actual collection;
(3) Exchange are at the time advance payments are made to subcontractors is different from the exchange
rate at the time expenses on the subcontract are incurred/recorded;
(4) Exchange rate at the time of recording accounts payable is different from the exchange rate at the
time the accounts payable are paid; and
(5) Exchange rate at the time downpayments for materials are made is different from the exchange rate
at the time of full payment or settlement of the balance on the purchase price of the materials (RMC
No. 12-2024).
20
Realized forex gains/losses shall be substantiated with sufficient evidence that the same
arose from a closed and completed transaction (e.g. schedule of foreign currency
transactions with reference to bank statements on actual collection of receivables and
payment of payables, etc.).
Realized forex gains shall be presented as part of Other Taxable Income in the ITR.
Realized forex losses, on the other hand, shall be presented as part of Ordinary Allowable
Itemized Deductions in the ITR.
Notes: The practice of offsetting transactions is prohibited for income tax purposes. The
gross amounts of realized forex gain or loss must be presented in the ITR.
Summary of Tax Treatment of Foreign Currency Transactions
Particulars Tax Treatment

1) Initial measurement Not considered in determining taxable income.
using the spot rate on the
date of the transaction. However, the Philippine peso equivalent shall be the basis of
reportable transactions for taxes other than the income tax.
2) Unrealized gain or loss Not considered in determining taxable income.

on remeasurement of
monetary assets and Results to a temporary difference for which deferred tax
liabilities denominated in accounting should be applied to reconcile accounting net
a foreign currency. income to taxable net income in the ITR.
3) Unrealized gain or loss Not considered in determining taxable income.

on remeasurement of non-
monetary items carried at
fair value.
4) Realized gain or loss Forex gains and losses arising from closed and completed
on settlement of a foreign transactions are considered taxable income and deductible
currency transaction. expense, respectively for income tax purposes.
52)
Company A is a VAT-registered domestic corporation engaged in the export sales of goods.

Company B is a non-resident foreign corporation (“NRFC”) which regularly buys from
Company A.
On November 15, 2022, Company A sold to Company B goods worth $1,000,000.
On January 15, 2023, Company B remitted to Company A the amount of $1,000,000. On the
same day, Company A’s bank credited the corresponding collection of $1,000,000 into its Peso
account using the prevailing spot rate.
Below are the forex rates on the following dates:
Measurement Date Date Forex Rate

Initial measurement November 15, 2022 $1 : ₱50.00
Subsequent Measurement December 31, 2022 $1 : ₱51.00
Settlement Date January 15, 2023 $1 : ₱50.50
21
(a) Company A’s initial entry to record the sale and account receivable shall be as follows:
Accounts receivable ($1.0 M x ₱50) ₱50,000,000

Sales ₱50,000,000
To record the sale of goods on November 15, 2022.
(b) On December 31, 2022, the account receivable shall be re-measured to ₱51.0 M = $1.0 M
x ₱51 with an attendant unrealized forex gain of ₱1.0 Million:
Accounts receivable ($1.0 M x (₱51-₱50)) ₱1,000,000

Unrealized forex gain ₱1,000,000
To record the subsequent measurement on December 31, 2022, the balance
sheet date.14
Note: Being unrealized, the forex gain of ₱1.0 Million shall not subject to income tax.
(c) Upon collection of payment on January 15, 2023, the taxpayer shall receive $1.0 Million
valued at ₱50.50 per dollar or ₱50,500,000, with a realized loss of ₱500,000.
Cash ($1.0 M x ₱50.50) ₱50,500,000

Realized forex loss ($1.0 M x ₱0.50) 500,000
Accounts receivable ₱51,000,000
To record the collection of payment on the sale in 2023.
It will also realize a forex gain of ₱1,000,000 from the reversal of the previously recorded
unrealized forex gain.
Unrealized forex gain ₱1,000,000

Realized forex gain ₱1,000,000
To record the realization of the 2022 unrealized forex gain upon collection in
2023.15
14
Assuming an RCIT of 25%, Company A shall also record a deferred tax liability of ₱250,000:
Income tax expense – current xxxxxx

Income tax expense - deferred 250,000
Income tax payable xxxxxx
Deferred tax liability (₱1.0 M x 25%) 250,000
To record the income tax payable, and the deferred tax entry on the temporary
difference for year 2022.
15
The taxpayer shall also make the following entry to reverse the previously recorded deferred tax
liability:
Deferred tax liability 250,000

Income tax expense - deferred 250,000
22
(d) Assume that in 2023, Company A had net sales of ₱20.0 Million, cost of sales of ₱4.0
Million, and allowable itemized expenses (before any realized forex losses) of ₱1.0
Million. Compute Company A’s income tax due in its annual ITR.
Answer: ₱3,875,000
Net Sales ₱20,000,000

Cost of sales (4,000,000)
Gross income ₱16,000,000
Other taxable income: Realized forex gain 1,000,000
Total gross income ₱17,000,000
Itemized deductions: Allowable expenses (1,000,000)
Realized forex loss (500,000)
Taxable net income ₱15,500,000
RCIT (25%) ₱ 3,875,000
MCIT (blended 1.5%) ₱ 255,000
Tax due (RCIT) ₱ 3,875,000
23
Illustration of Tax Treatment of Lease Accounting by Lessees under PFRS 1616
53) A 5-year lease agreement over a piece of real property was entered into by Lessor and
Lessee. The annual rental amounted to ₱100,000 inclusive of the 5% CWT and exclusive of
the VAT.
(1) Assuming a discount rate of 3%, the Lessee shall compute the lease liability (which is the
PV of the lease payments) of ₱457,970.72 based on PFRS 16, as follows:
PV of
Lease PV Factor at Lease
Year Payments 3% Payments
1 ₱100,000.00 0.9708738 ₱ 97,087.38
2 100,000.00 0.9425959 94,259.59
3 100,000.00 0.9151417 91,514.17
4 100,000.00 0.8884870 88,848.70
5 100,000.00 0.8626088 86,260.88
Total ₱500,000.00 ₱457,970.72
Without any other adjustments, the Right-of-Use Asset (“ROUA”) shall be equivalent to
the amount of lease liability of ₱457,970.72.
(2) The lease liability is amortized over the lease period at the rate of 3%. Interest expense is
recognized based on the outstanding amount of lease liability, as follows:
Lease Lease
Liability, Payments Liability,
Beginning Lease Interest Related to Ending
Year Balance Payments expense Principal Balance
(C) = (A) (D) = (B) - (E) = (A) -
(A) (B) x 3% (C) (D)
1 ₱457,970.72 ₱100,000.00 ₱13,739.12 ₱86,260.88 ₱371,709.84
2 371,709.84 100,000.00 11,151.30 88,848.70 282,861.14
3 282,861.14 100,000.00 8,485.83 91,514.17 191,346.97
4 191,346.97 100,000.00 5,740.41 94,259.59 97,087.38
5 97,087.38 100,000.00 2,912.62 97,087.38 -
Total ₱500,000.00 ₱42,029.28 ₱457,970.72
Financial depreciation of the ROUA is then recognized over the useful life of the
leased asset as follows:
₱457,970.72
= ₱91,594.14 depreciation expense per year
5 years
16
From RMC No. 11-2024.
24
(3) However, for income tax purposes, such interest expense and depreciation expense
computed above shall not be considered as deductible expenses. Only the actual
periodic lease payments shall be allowable as deductions on the part of the Lessee.
The difference between the sum of the interest expense on the amortization of the lease
liability and the depreciation expense pertaining to the ROUA, and the annual lease
payment shall form part of the year-end reconciling items in computing the Lessee’s
annual taxable income:
Year-End
Non-Deductible Expense Deductible
Adjustment
Expense
Year
Annual
Interest Depreciation Total Lease
Expense Expense Payments
1
13,739.12 91,594.14 105,333.27 100,000.00 5,333.27
2
11,151.30 91,594.14 102,745.44 100,000.00 2,745.44
3
8,485.83 91,594.14 100,079.98 100,000.00 79.98
4
5,740.41 91,594.14 97,334.55 100,000.00 (2,665.45)
5
2,912.62 91,594.14 94,506.77 100,000.00 (5,493.23)
Total 42,029.28 457,970.72 500,000.00 500,000.00 0.00
54) Statement 1: Unless specifically exempted by law, even a non-stock, non-profit organization
or government entity may be liable to pay VAT on the sale of goods or services.
Statement 2: When LGUs perform corporate or private functions which are proprietary in
nature, they shall be held liable to the 12% VAT on the gross sales derived from
VATable activities.
Statement 3: An LGU is subject to the 20% final tax on interest income derived from its
deposit accounts, and on the yield and other monetary benefit from its
investments in government securities, commercial papers, and similar
arrangements under Section 27(D)(1) of the Tax Code.17
a) All are true.

b) All are false.
17
The obligation of an LGU to maintain depository accounts for its funds is proprietary in character.
Similarly, by maintaining investments, an LGU engages primarily in an economic activity with a view
to obtaining profit which is considered proprietary or private in character. See RMC No. 89-2024.
25
Unless specifically exempted by law, even a non-stock, non-profit organization or government
entity is liable to pay VAT on the sale of goods or services. As long as the entity provides
goods or services for a fee, remuneration or consideration, then such sale is subject to VAT.
When local government units (“LGUs”) perform corporate or private functions which are
proprietary in nature, they shall be held liable to the 12% VAT on the total gross sales derived
from such activities.
55) Statement 1: Income derived by LGUs from the performance of governmental functions shall
be exempt from OPT. 18
Statement 2: LGUs entering into private contracts/agreements relating to the performance of
corporate/private functions that are proprietary in nature shall be liable for
DST.19
a) All are true.
b) All are false.
56) Statement 1: All income payments received by an LGU are exempt from withholding tax.20
Statement 2: Payments made to the SSS, GSIS, Pag-Ibig, Philhealth, and the local water
districts are not subject to withholding tax.
a) Only Statement 1 is true.

b) Only Statement 2 is true.
c) Both statements are true.
d) Both statements are false.
57) Statement 1: Self-employed individuals and professionals availing of the 8% tax shall also be
exempt from the payment of the 12% VAT.21
Statement 2: Beginning January 1, 2024, the sale or importation of (1) capital equipment
necessary for the production of personal protective equipment for COVID-19
prevention, and (2) drugs, vaccines, and medical devices for the treatment of
COVID-19, shall be subject to VAT.
a) All are true.

b) All are false.
18
On the other hand, income derived by LGUs from the performance of proprietary functions that fall
under Title V of the Tax Code shall be subject to OPT based on the percentage tax rates provided
therein (RMC No. 89-2024).
19
RMC No. 89-2024.
20
For LGUs, this rule only applies to income payments received in the performance of governmental
functions. Hence, income payments to LGUs by reason of the performance of proprietary functions
shall be subject to withholding tax (RMC No. 89-2024).
21
Sec. 4.109(B)(cc), Rev. Reg. No. 16-2005 as inserted by Rev. Reg. No. 3-2024.
26
58) Taxpayers, who are mandated to file tax returns electronically, shall be allowed to file their
tax returns manually in the following instances:
a) When there is an advisory on the unavailability of the electronic filing systems.

b) When the tax return form is not yet available in any of the electronic platforms.
c) When there are justifiable reasons as may be determined by the CIR or his authorized
representative.
d) All of the above.
e) None of the above.
59) With regard to the assessment of Silver Raid Corporation, a domestic corporation, the BIR
conducted a “no-contact-audit-approach”. In such methodology, data (e.g. sales, purchases,
importations, etc.) submitted by VAT taxpayers under the RELIEF System of the BIR were
matched with information from 3rd party sources.
The BIR issued Letter Notices to inform Silver Raid of discrepancies discovered in the BIR’s
matching/cross-referencing procedures. Subsequently, preliminary and formal assessments
were issued to Silver Raid.
(a) The assessments are valid. There is no need for the issuance of an LOA where the BIR
does not conduct a physical examination of the taxpayer’s records.
(b) The assessments are not valid. An LOA remains to be a statutory requirement even under
the BIR’s RELIEF System. The rationale for an LOA is the same whether or not the CIR
conducts a physical examination of the taxpayer’s records.
60) Out-of-district return refers to a tax return filed outside the jurisdiction of the RDO (or
LTDO, or LT Division) where the taxpayer is registered.22
Not a
Question In line with the out-of-district filing and payment prescribed under R.A. No. 11976 (EOPT
Act), all AABs shall accept the printed copies of electronically-filed tax returns and the
payment of taxes, regardless of the RDO’s jurisdiction.
61) A 25% surcharge shall be imposed on a taxpayer who manually files and pays the tax due to
an Authorized Agent Bank (“AAB”) outside the jurisdiction of the RDO where the taxpayer
is registered.
(a) TRUE
(b) FALSE
62) When there is an overpayment in the Annual ITR of a corporate taxpayer, the taxpayer must
signify therein its intention to either carry over the excess credit, or to claim a refund/TCC
therefor.
(a) The default choice is to carry over the excess credit, and once chosen is irrevocable.
(b) The choice of claiming a refund/TCC may be changed, but if it is changed to carry-over,
the same cannot be changed anymore.
22
Rev. Reg. No. 13-2010, as amended by Rev. Reg. No. 6-2023.
27
(c) As an exception to the irrevocability rule, a corporate taxpayer which chooses to carry-
over its excess tax credits may still file a claim for refund/TCC, provided it has
permanently ceased operations.23
(d) All of the above.
(e) None of the above.
63) Statement 1: Partial payments made by a taxpayer pursuant to a void assessment should
be refunded as a void assessment bears no fruit. The amounts remitted by
a taxpayer pursuant to a void assessment cannot be validly retained by the
BIR.
Statement 2: In case a taxpayer does not file a claim for refund, the withholding agent
may file the claim. However, when the claim is successful, the withholding
agent has the obligation to remit the amount refunded to the taxpayer.24
a) All are true.

b) All are false.
64) Taxpayers can now register with the BIR through the following options:25
(1) Manually at the RDOs. Taxpayers can just walk-in and apply for their TINs and/or
register their businesses.26
Not a
Question (2) New Business Registration (“NewBizReg”) Portal. This is an alternative option in
submitting the application for registration of businesses (head office and branch) with the
BIR.
(3) Taxpayer Registration-Related Application (“TRRA”) Portal. Beginning October 16,

2023, the TRRA Portal can be used by taxpayers to submit registration-related
applications via e-mail. The application and documentary requirements are submitted
electronically thru this portal via email.
(4) Philippine Business Hub (“PBH”). Also called the Central Business Portal, the PBH is
an online platform developed by the Department of Information and Communication
Technology (“DICT”) that aims to streamline and integrate the business registration
processes of the SEC, DTI, BIR, SSS, PhilHealth, Pag-IBIG Fund, and selected LGUs in
Metro Manila.
23
Rev. Reg. No. 5-2024.
24
A withholding agent has the legal right to file a claim for refund for 2 reasons. First, he is considered a
taxpayer as he is personally liable for the withholding tax as well as for deficiency assessments,
surcharges, and penalties, should the amount of tax withheld be found to be less than what should have
been withheld under the law. Second, as an agent of the taxpayer, his authority to file the necessary
withholding tax returns and to remit the tax withheld to the government impliedly includes the authority
to file a claim for refund.
25
RMC No. 91-2024.
26
For business taxpayers, their registration shall be processed using the Singe Window Policy where the
application and the documentary requirements are submitted and processed through the New Business
Registration Counter (RMC No. 91-2024).
28
(5) Online Registration and Update System (“ORUS”). The ORUS is a web-based system
that gives taxpayers an alternative facility for an end-to-end process for registration,
including the updating of registration information.
65) Invoice refers to the written account evidencing the sale of goods and/or services issued to
customers in the ordinary course of business. It is issued to customers or buyers in the
ordinary course of business, whether cash sales or credit or charge sales. This includes the
Not a Sales Invoice, Commercial Invoice, Cash Invoice, Charge/Credit Invoice, Service Invoice,
Question Billing Invoice or Miscellaneous Invoice.27, 28
(a) All persons subject to an internal revenue tax shall issue, for each sale or transfer of
merchandise or for services rendered valued at Five Hundred Pesos (₱500) or more, duly
registered invoices, showing the (seller’s) name and TIN, the date of transaction, quantity,
unit cost, and a description of merchandise or nature of service.
(b) Provided, the seller shall issue an invoice when the buyer so requires regardless of the
amount of the transaction. However, if the sales amount per transaction is below the
threshold but the aggregate sales amount at the end of the day is at least ₱500, the seller
will issue one (1) invoice for the aggregate sales amount for such sales at the end of the
day.
(c) VAT-registered persons shall issue duly registered invoices regardless of the amount of the
sale and transfer of merchandise, or for services rendered.
66) Company A, domestic corporation, maintains a fund to cover the pension plan of its
employees. During the taxable year 2023, it reported pension expense of ₱1,200,000 in its
income statement. It also reported a ₱100,000 net remeasurement loss in its other
comprehensive income.
During the same year, it made a total of ₱1,000,000 in contributions to the pension fund, and
₱1,500,000 of benefits were paid to its retirees.
If the pension fund is a tax-qualified plan, and the normal cost of the contributions to the
fund based on the latest actuarial valuations is ₱800,000, what is the amount that can be
deducted by Company A in its ITR?
a) ₱1,000,000 c) ₱1,500,000
b) ₱1,200,000 d) ₱ 820,000
27
It is also referred to as Principal Invoice as is categorized as follows:
(1) VAT Invoice – a written account evidencing the sale of goods, properties, services, and/or leasing of
properties subject to VAT. This shall be the basis of the output VAT liability of the seller, and the
input tax credit of the buyer.
(2) Non-VAT Invoice – a written account evidencing the sale of goods, properties, services, and or leasing
of properties not subject to VAT. This shall be the basis of the percentage tax liability of the seller,
if applicable.
28
An invoice is a document evidencing the sale of goods or services. However, such invoice may contain
information acknowledging the receipt of payment for the said sales transaction (RMC No. 77-2024).
A supplementary document is a written document, other than a sales or commercial invoice, which
serves as a source of accounting entries in the books of accounts. This includes but is not limited to
official receipts, delivery receipts, order slips, debit and/or credit memos, purchase orders,
acknowledgment or cash receipts, collection receipts, bills of lading, billing statements, statements of
accounts, and any other document by whatever name it is called (Rev. Reg. No. 7-2024).
29
67) In number 66, if the pension fund is not a tax-qualified plan, what is the amount that can be
deducted by Company A for tax purposes?
a) ₱1,000,000 c) ₱1,500,000
b) ₱1,200,000 d) ₱ 820,000
68) Costs such as service fees and commissions paid to banks and/or lending institutions for
borrowing funds shall not be classified as interest expense. Instead, these shall be classified
Not a as ordinary and necessary business expenses which shall be available as deductions in the
Question year paid or incurred.29
69)
Tax Amnesty on Real Property Taxes and Special Levies on Real Property 30
Legal basis Section 30 of R.A. No. 12001.

Penalties, surcharges, and interests from all unpaid real property taxes,
Coverage of
including the SEF, idle land tax, and other special levy taxes, prior to the
amnesty
effectivity of R.A. No. 12001.
Who may avail
The delinquent real property owner.
of amnesty
When to file Within two (2) years after the effectivity of R.A. No. 1200131
One-time payment or installment payment of delinquent real property

Payment option
taxes
(a) Delinquent real properties which have been disposed of at
public auctions to satisfy real property tax delinquencies;
Cases not
(b) Real properties with tax delinquencies which are being paid
included in the
amnesty pursuant to a compromise agreement; and
(c) Real properties subject of pending cases in court for real
property tax delinquencies.
END
29
RMC No. 19-2024.
30
Sec. 30, R.A. No. 12001.
31
The law became effective 15 days after the publication in the Official Gazette. R.A. No. 12001 was
published in the Official Gazette on June 18, 2024. The law therefore became effective on July 3, 2024.
30
Manila
Taxation July 27, 2024

Batch 96 – First Pre-Board Examination Saturday 8-11am
Instructions:
Choose the BEST answer for each of the following items. Mark only one answer for each item on the
Special Answer Sheet provided. Strictly no erasure allowed.
1. Who can avail 8% Gross Sales/Receipts Tax?

a. Self-employed with Gross Receipts or Sales not exceeding 3,000,000.
b. Compensation earners with Gross Compensation not exceeding 3,000,000
c. Mixed income earners with Gross Receipts or Sales and other income not exceeding 3,000,000
d. All of the above.
2. 1st Statement: A partner of a General Professional Partnership may avail the Optional Standard
Deduction even when the GPP has already availed of the OSD.
2nd Statement: A GPP and the partner may avail OSD only once.
a. True, true
b. True, false
c. False, false
d. False, True
3. Statement 1: Cash and/or property dividends received from domestic corporation by a

nonresident alien engaged in trade of business are subject to 25% final tax.
Statement 2: Share of an individual in the distributable after-tax net income of a general
professional partnership is subject to final tax.
a. True, True c. False, False
b. True, False d. False, True
4. Mr. A, a non-resident alien stockholder, received a dividend income of P300,000 in 2026 from a
foreign corporation doing business in the Philippines. The gross income of the foreign corporation
from within and without the Philippines for three years preceding 2026 are as follows:
Source of income 2023 2024 2025
From within the

Philippines P16,000,000 P12,000,000 P14,000,000
From without the

Philippines 18,000,000 14,000,000 16,000,000
How much of the dividend income received by Mr. A is considered income from sources within
the Philippines?
a. Zero c. P300,000
b. P150,000 d. P270,000
Page 2
5. The following must be contained in ITR:
i. Personal profile and information;
ii. Total gross sales, receipts or income from compensation of services rendered, conduct of
trade or business or the exercise of a profession, except income subject to final tax;
iii. Allowable deductions;
iv. Taxable income;
v. Income tax due and payable.
a. i, ii, iii and iv c. i, ii, iii, iv and v

b. ii, iii, iv and v d. iv and v
6. Keynard, single parent, sold through the local stock exchange 10,000 PLDT shares that it bought 2 years
ago. Keynard sold the shares for P2 million and realized a net gain of P200,000.00. How shall
Keynard pay tax on the transaction?
a. It shall declare a P2 million gross income in its income tax return, deducting its cost of
acquisition an expense.
b. It shall report the P200,000.00 in his income tax return adjusted by the holding period.
c. It shall pay 15% tax on the gain P200,000.
d. It shall pay a tax of 6/10 of 1% of the P2 million gross selling price.
7. Bacolor Pegasus Yambing total compensation income amounted to P3,000,000 and Gross Sales from
business amounting to P3,000,000 in a given year. Which of the following statement is correct?
a. Bacolor Pegasus Yambing is a mixed earner has the option to avail Gross Receipt Tax of 8% or
Progressive Income Tax.
b. Bacolor Pegasus Yambing is a mixed earner cannot avail of Gross Receipt Tax of 8%, he
exceeded the threshold of P3,000,000.
c. Bacolor Pegasus Yambing is a mixed earner and has no option but all his income shall be
subjected to progressive income tax.
d. Bacolor Pegasus Yambing is a mixed earner and can only be subjected to Gross Receipt Tax of
8%.
8. The payor of passive income subject to final tax is required to withhold the tax from the payment due
the recipient. The withholding of the tax has the effect of
a. A final settlement of the tax liability on the income
b. A credit from the recipient’s income tax liability
c. Consummating the transaction resulting in an income
d. A deduction in the recipients income tax return
9. Passive income includes income derived from an activity in which the earner does not have any
substantial participation.
This type of income is
a. Usually subject to a final tax
b. Exempt from income taxation
c. Taxable only if earned by a citizen
d. Included in the income tax return
10. Jose was employed by Timberland Inc. Within how many days from his employment should he
obtain his Tax Identification Number?
a. 1st day of employment
b. 10th day of employment
c. 1st month of employment
d. 1st year of employment.
Page 3
11. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfer the tax to the consumer by adding the tax to the selling price of the
goods sold;
b. The tax forms part of the purchase price;
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination
abroad, so that the title passes abroad instead of in the Philippines.
d. The manufacturer transfer the sales tax to the distributor, then in turn to the wholesaler, in turn
to the retailer and finally to the consumer.
12. In case of conflict between the tax code and generally accepted accounting principles (GAAP):
a. Both tax codes and GAAP shall be enforced
b. GAAP shall prevail over tax code
c. Tax code shall prevail over GAAP
d. The issue shall be resolved by the courts
13. Which of the following statements is not correct?

a. Taxes may be imposed to raise revenues or to regulate certain activities within the state
b. The state can have the power of taxation even if the Constitution does not expressly give it the
power to tax
c. For the exercise of the power of taxation, the state can tax anything at any time
d. The provisions of taxation in the Philippine Constitution are grants of power and not limitations
on taxing powers
14. Statement 1: Tax based on values are ad valorem.

Statement 2: Tax based on weight are specific
a. Both are correct.
b. Both are false.
c. Only 1st statement is correct.
d. Only 2nd statement is correct.
15. Value-added tax is an example of:

a. Graduated tax
b. Progressive tax
c. Regressive tax
d. Proportional tax
16. Which statement refers to police power as distinguished from taxation?

a. It can only be imposed on specific property or properties
b. The amount imposed depends on whether the activity is useful or not
c. It involves the taking of property by the government
d. The amount imposed has no limit
17. 1st Statement – Tax exemptions are strictly construed against the government.
2nd Statement – When the tax law is not clear and there is doubt whether he is taxable or not, the
doubt shall be settled against the government.
a. Only the first statement is correct
b. Only the second statement is correct
c. Both statements are correct
d. Both statements are incorrect
Page 4
18. 1st Statement – The income from bank deposit of a Tax-exempt Catholic Church is taxable.
2nd Statement – The charitable contributions given to a church are also taxable.
a. True; False c. True; True
b. False; True d. False; False
19. 1st Statement - Tax imposed outside the situs of Taxation is void.
2nd Statement - International Comity is an exception to the territoriality doctrine.
a. True, False c. True, True
b. False, True d. False, False
20. Imposed based on the control and superiority of one country over another:
a. TITHE c. TRIBUTE
b. TAX d. TOLL
21. All are similarities of taxation, police power, and power of eminent domain, EXCEPT
a. All are necessary attributes of the Constitution
b. All exist independently of the Constitution
c. All contemplate an equivalent benefit
d. All are superior to the non-impairment clause of the Constitution
22. Below are characteristics of a sound taxation system, EXCEPT:

a. Administrative feasibility and compliance
b. Fiscal adequacy
c. Theoretical justice
d. Uniformity of taxation
John and Marcia inherited a commercial lot and building from their parents 2 years ago. In 2023
(current year), the inherited property realized rental income of P300,000 per month, in which both
shared the revenues equally. The co-ownership remained unregistered with the Securities and
Exchange Commission. In addition, Jose and Maria reported their following personal income and
expenses.
➢ John, gross compensation income (inclusive of 13th month and other benefits amounting to
P100,000), P1,300,000
➢ Marcia, net income from her laundry service business (net of cost and expenses of P600,000),
P200,000.
23. How much final withholding income tax should the co-ownership remit representing the revenue
distribution to the co-owners?
a. P360,000
b. P540,000
c. None
d. P180,000
24. How much is the taxable income of John in his annual income tax return, assuming optional
standard deduction is used in determining his expenses?
a. P2,290,000
b. P1,860,000
c. P3,010,000
d. Exempt
Page 5
25. How much is the taxable income of Marcia in his annual income tax return, assuming optional
standard deduction is used in determining his expenses.
a. P2,000,000
b. P1,280,000
c. P1,560,000
d. Exempt
26. When is the deadline for filling of the annual income tax return of the co-ownership for taxable year
2023?
a. April 15, 2024
b. May 15, 2025
c. Not applicable
d. April 15, 2023
27. San Miguel Corporation a domestic corporation declared dividends in favor of a non-resident
foreign corporation, Mc Donald’s USA in the amount of 200M. How much is the tax payable in the
Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt
28. Using the preceding number in case there is no tax sparring, how much is the tax due/payable in
Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt
29. CRP is one of the Philippines registered top 20,000 private corporation. As the company’s
accountant you were tasked to account for all payments made local/resident suppliers. What
percentage of withholding tax rates of income payments made by top 20,000 private corporations to
their local/resident suppliers of goods?
a. 1% of the gross payments.
b. 2% of the gross payments
c. 3% of the gross payments
d. 4% of the gross payments
30. Tan Torres a non-stock and non-profit charitable institution pays for its regular repairs and
maintenance of its facilities to Carmel Manpower Service Incorporated. As the accountant of the
exempt entity, how much withholding tax will you impose to its supplier (Carmel) for the repairs
and maintenance expense?
a. Exempt from withholding tax.
b. 1% withholding tax on its gross payment.
c. 2%withholding tax on its gross payment.
d. 5% withholding tax on its gross payment.
31. Bruno Mars performed in Philippine Arena for once in a lifetime concert. The fringe benefit given
will be
a. Tax of 32% and grossed-up rate of 68%
b. Tax of 15% and grossed-up rate of 85%
c. Tax of 25% and grossed-up rate of 75%
d. Tax of 35% and grossed-up rate of 65%
Page 6
32. What would be the allowable deduction for P8,000 contribution made by a resident citizen to
a religious organization from his P70,000 net income after contribution?
a. P8,000
b. P7,000
c. P7,800
d. P3,900
33. A bought a condominium unit under installment basis, to be used as his office in the practice
of his profession and paying P10,000 monthly. For income tax purposes, the P10,000 monthly
payment shall be
a. Treated as business rental, hence deductible
b. Treated as capital expenditure, hence not deductible
c. Treated as depreciation expense, hence deductible
d. Treated as ordinary business expense
34. A domestic corporation made a borrowing from ABC bank thereby incurring a business
connected interest expense of P60,000 for taxable year 2022. During the same year, the
corporation earned an interest income subject to final tax in the amount of P100,000. The
deductible interest is
a. P40,000
b. P33,000
c. P60,000
d. P27,000
35. In a year, ABC Corp. paid total premiums of P1,000 for the life insurance policy of the vice
president, where the beneficiary is the corporation. At the end of the year, ABC received
dividend of P100 because of the policy. The corporation should indicate a claim for a
deduction for life insurance premium of
a. P1,000
b. P 900
c. P1,100
d. Zero
36. A tax is classified as ____________________ where the liability for the tax falls on the original
taxpayer, but the burden thereof is shifted to another.
a. ad valorem
b. specific
c. direct
d. indirect
e. progressive
37. Statement 1: The primary purpose of taxation is the exercise of police power thru the influencing of
human actions via taxation.
Statement 2: The President may suggest proposals for tax reforms addressed to both houses of
Congress, but the revenue bill embodying those reforms must originate from the Finance Committee
of the Senate.
a. Both are true.
b. Both are false.
c. Only Statement 1 is true.
d. Only Statement 2 is true.
Page 7
38. A non-resident foreign corporation (NRFC) shall generally be subject to a 25% final tax on gross
income received from all sources within the Philippines. However, an NRFC shall be exempt from tax
on:
a. Philippine Charity and Sweepstakes Office (PCSO) winnings less than ₱10,000.
b. De minimis prizes of less than ₱10,000.
c. Interest income paid by a depositary bank under the foreign currency deposit system.
d. Interest income from a long-term deposit or investment certificate issued by a bank in the
Philippines, and held for a period exceeding 5 years.
39. If refunded, the amount of refund does not constitute taxable income:
a. Donor’s Tax
b. Local taxes
c. OPT
d. Fringe Benefit tax
40. One of the following represents taxable income:

a. Refund of the estate tax paid in a prior year.
b. Refund of donors’ tax paid in a prior year
c. Refund of income tax paid in a prior year
d. Refund of the local special assessment paid in a prior year
41-53)
Deen, single Filipina, resident of Makati City, is employed as a professor in the CPA School of
Makati. At the end of taxable year 2023, her employer provided her with BIR Form No. 2316
showing the following information:
13th month pay and other benefits ₱24,062
SSS, PHIC, Pag-ibig contributions and union dues 5,876
De minimis fringe benefits 3,998
Total non-taxable/exempt compensation income ₱33,936
Basic salary ₱400,000

Overtime pay 53,262
Total taxable compensation income ₱453,262
Gross compensation income ₱487,198

Taxes withheld ₱42,500
Deen also worked as an independent financial consultant to a special client, ALAB Enterprises Inc, a
domestic corporation. She received from ALAB the following amounts in 2023:
Net Quarterly Fees

Quarter Consultancy Fees Less 10% CWT
Received
1 ₱600,000 ₱60,000 ₱540,000
2 ₱600,000 ₱60,000 ₱540,000
3 ₱600,000 ₱60,000 ₱540,000
4 ₱600,000 ₱60,000 ₱540,000
The monthly rental expenses related to her consultancy services amounted to ₱30,000, gross of the 5%
CWT.
Page 8
She is VAT-registered, and paid the following output VAT amounts:
Quarter VAT Paid
1 ₱72,000
2 ₱72,000
3 ₱72,000
4 ₱72,000
In 2023, Deen, a Barbie doll aficionado/collector, decided to sell her Barbie dolls which she acquired
10 years ago:
Barbie toy Selling price Cost
Sold on February 2023 ₱100,000 ₱ 50,000
Sold on April 2023 ₱100,000 ₱170,000
Sold on September 2023 ₱100,000 ₱104,000
Sold on October 2023 ₱100,000 ₱ 32,000
She has excess tax credits from the prior year of ₱37,500.
Her tax accountant, Gwen, advised her to avail of the OSD in calculating her income taxes for 2023.
She agreed with Gwen’s advice, but failed to indicate her choice in her 1st Quarterly ITR for 2023.
41. Calculate her tax payable/(overpayment) in the 1st Quarterly ITR for 2023.
a. (₱30,000)
b. (₱65,000)
c. (₱48,000)
d. None of the above.
42. Calculate her tax payable/(overpayment) in the 2nd Quarterly ITR for 2023.
a. ₱45,000
b. (₱48,000)
c. ₱37,500
d. ₱0
43. Calculate her tax payable/(overpayment) in the 3rd Quarterly ITR for 2023.
a. ₱90,000
b. ₱67,500
c. (₱28,500)
44. What can Deen do if indeed there is an overpayment of taxes in any of her first 3 Quarterly ITRs for
2023?
a. She can use the amount of overpayment as a tax credit against the tax due in the succeeding taxable
quarters.
b. She can apply for a tax refund and/or tax credit certificate.
c. She shall not pay anything more upon filing of the quarterly returns.
Page 9
45. For her annual ITR, she chose to file BIR Form No. 1701 (Annual ITR for Individuals (including
MIXED Income Earners). What is the correct amount to be placed on Part VII Line 3 in page 4 of BIR
Form No. 1701?
a. ₱ 60,000
b. ₱ 67,500
c. ₱180,000
46. What is the correct amount to be placed on Part VII Line 4 in page 4 of BIR Form No. 1701?
a. ₱180,000
b. ₱ 42,500
c. ₱ 60,000
47. What is the correct amount to be placed on Part VII Line 5 in page 4 of BIR Form No. 1701?
a. ₱180,000
b. ₱ 60,000
c. ₱ 42,500
48. What is the correct amount to be placed on Part V, Schedule 1, Line 3A (column c) in page 2 of BIR
Form No. 1701?
a. ₱453,262
b. ₱487,198
c. ₱ 33,936
49. What is the correct amount to be placed on Part V, Schedule 4, Line 11 in page 3 of BIR Form No.
1701?
a. ₱342,000
b. ₱360,000
c. ₱0
50. What is the correct amount to be placed on Part V, Schedule 2, Line 4 in page 2 of BIR Form No. 1701?
a. ₱453,262
b. ₱487,198
c. ₱ 33,936
51. What is the correct amount to be placed on Part V, Schedule 3A, Line 24 in page 2 of BIR Form No.
1701?
a. ₱2,062,000
b. ₱2,515,262
c. ₱2,040,000
Page 10
52. Calculate her tax payable/(refundable) in the Annual ITR for taxable year 2023.
a. ₱169,579
b. ₱102,079
c. ₱208,579
53. Is she qualified to avail the 8% tax option on her business income as provided in Section 24(A)(2)(c)
of the Tax Code?
a. Yes.
b. No.
c. It depends.
54. Statement 1: A corporate taxpayer which is not VAT-registered is qualified to avail the 8% tax option
in its ITR as long as its sales/revenues for the taxable year do not exceed ₱3,000,000.
Statement 2: A corporate taxpayer may avail of the option of paying the tax due in 2 equal installments
in its Annual ITR by signifying this option in the same Annual ITR.
a. Both are true.
b. Both are false.
55. Statement 1: A qualified individual taxpayer who avails of the 8% tax option is still required to file
his financial statements with his Annual ITR.
Statement 2: An individual taxpayer claiming the Optional Standard Deduction is not required to
attach his financial statements to his ITRs.
a. Both are true.
b. Both are false.
56-60)
On January 1, 2022, Baldur Company, domestic corporation, purchased Machine A, Machine B, and
Machine C to be used in its manufacturing process, valued at ₱500,000, ₱1,000,000, and ₱2,000,000,
respectively. The useful lives of Machine A, Machine B, and Machine C are 3 years, 5 years, and 6
years, respectively. Machine B will take 2 years for it to be ready for its intended use.
On the same date, Baldur acquired a 4-year loan in the amount of ₱500,000 to fund the purchase of
Machine A, and a 5-year loan in the amount of ₱3,000,000 to fund the purchase of Machines B and C.
Both loans come with an annual interest of 10%. The principal in both loans is payable in full at the
end of the loan term.
The company chose to capitalize the interest expense attributed to the purchase of Machines B and C
only. The company uses the straight-line method of depreciation.
It also earns a yearly interest income of ₱100,000 which is subject to final tax. The corporate income
tax rate of Baldur is 25%.
56. For taxable year 2022, compute the total available deductions related to the acquisition of Machine A
and the 4-year loan in the amount of ₱500,000.
a. ₱186,667
b. ₱216,667
c. ₱196,667
d. ₱166,667
Page 11
57. For taxable year 2022, compute the total available deductions related to the acquisition of Machine B
and the 5-year loan in the amount of ₱3.0 Million.
a. ₱300,000
b. ₱100,000
c. ₱200,000
d. ₱0
58. For taxable year 2022, compute the total available deductions related to the acquisition of Machine C
and the 5-year loan in the amount of ₱3.0 Million.
a. ₱500,000
b. ₱333,333
c. ₱100,000
d. ₱0
59. Compute the taxpayer’s income tax due in 2023 if in the same year it had sales, cost of sales, operating
expenses (excluding interest expense and depreciation expense), and non-operating income amounting
to ₱22.0 Million, ₱13.0 Million, ₱1.0 Million, and ₱3.0 Million, respectively.
a. ₱2,500,833
b. ₱2,570,833
c. ₱2,570,800
d. ₱2,575,833
60. Compute the taxpayer’s income tax due in 2024 if in the same year it had sales, cost of sales, operating
expenses (excluding interest expense and depreciation expense), and non-operating income amounting
to ₱24.0 Million, ₱14.0 Million, ₱750,000, and ₱2.75 Million, respectively.
a. ₱2,745,833
b. ₱2,750,833
c. ₱2,792,500
d. ₱2,688,333
61. ABE Corporation, a domestic trading corporation, had the following financial information for 2023:
Sales, gross of the 1% CWT ₱ 13,860,000

Operating expenses 7,990,000
Non-operating income 250,000
Total assets 480,000,000

Land 100,000,000
Building 125,000,000
Calculate the income tax payable/(refundable) of ABE Corporation in its 2023 AITR.
a. ₱ (14,000) c. ₱102,500
b. ₱126,000 d. None of the above.
62. Assume the same information in the preceding number, except the corporation adopts a fiscal year
ending August 31, 2023. Calculate its tax payable/(refundable) in its AITR.
a. ₱ (14,000) c. ₱ (42,000)
b. ₱ (37,500) d. None of the above.
Page 12
63. CPAR College Inc., a proprietary educational institution, has the following information for calendar
year 2023:
Tuition fees ₱199,850,000
Cost of services 159,750,000
Operating expenses 250,000
Non-operating income 150,000
Compute its tax due if it passes the predominance test in 2023.

a. ₱ 2,200,000 c. ₱8,000,000
b. ₱10,000,000 d. None of the above.
64. Assume the same financial information in the preceding number but CPAR College Inc.’s taxable year
ends on September 30, 2023. Compute its tax due in the AITR if it passes the predominance test.
a. ₱1,300,000 c. ₱6,000,000
65-68)
The records of GEORGINA Corporation, domestic, organized in 2010, engaged in retail, show the
following in calendar years 2020, 2021, 2022, 2023, and 2024:
2020 2021 2022 2023 2024

Sales 1,615,000 1,620,000 1,914,000 2,520,240 2,875,000
Cost of Sales 583,000 468,700 126,500 612,120 585,000
Operating expenses:
(a) Rental expenses 1,227,350 1,266,000 556,000 216,697 659,550
(b) Depreciation expense 1,650,500 1,477,000 1,731,200 1,663,358 862,500
(c) Deductible taxes 16,150 16,200 19,140 75,607 86,250
Non-operating income 630,000 340,000 62,300 246,100 93,500
CWT 16,150 16,200 7,400 25,202 28,750

Taxes paid in previous quarters 2,240 6,215 1,438 48,115 93,575
The corporation did not withhold any CWT from its rental payments it made thru all these years to its
only lessor, CHRISTIAN REAL PROPERTY HOLDINGS, INC.
The corporation chooses to credit in future years any excess tax credits it may have in a taxable year.
65. Compute GEORGINA’s the tax payable/(refundable) in its 2020 AITR.

a. ₱6,540
b. (₱1,770)
c. ₱14,850
66. What would be the tax payable/(refundable) of GEORGINA Corporation for taxable year 2021
a. (₱7,502)
b. (₱9,272)
c. (₱22,352)
Page 13
67. What would be the tax payable/(refundable) of GEORGINA Corporation for taxable years 2022 and
2023?
a. ₱0; ₱0
b. (₱1,770); ₱8,310
c. ₱6,888; ₱134,311
68. What would be the tax payable/(refundable) of GEORGINA Corporation for taxable year 2024?
a. ₱233,904
b. ₱69,017
c. ₱71,475
69. Atty. Roberto Duran rendered the following services during the year:
Gross receipts from legal fees ₱5,000,000

Value of 60 hours assistance to indigent clients 200,000
Value of other pro-bono services 400,000
Direct cost of services 1,200,000
Other deductible expenses 900,000
Compute his taxable net income for the year.

(a) ₱750,000
(b) ₱2,520,000
(c) ₱2,500,000
70. Under the Tax Code, as amended by the CREATE Law, what incentives may registered domestic
market enterprises avail of:
a. ITH, 5% SCIT, and Enhanced Deductions (EDs)
b. ITH, and Enhanced Deductions
c. Only EDs
d. None.
END
Page 14
Graduated Tax Rates: Effective January 1, 2023 onwards:
Range of Taxable Income (TI) Tax Due = a + [b x (TI - c)]
Over Not Over Basic Amount Additional Rate Of Excess Over
(a) (b) (c)
- 250,000 - -
250,000 400,000 - 15% 250,000
400,000 800,000 22,500 20% 400,000
800,000 2,000,000 102,500 25% 800,000
2,000,000 8,000,000 402,500 30% 2,000,000
8,000,000 - 2,202,500 35% 8,000,000

Manila
TAXATION October 5, 2024

Batch 96 – Final Pre-Board Examination Saturday 8am-11pm
Instruction: Choose the BEST answer for each of the following items. Mark only one answer for each
item on the Special Answer Sheet provided. Strictly no erasure allowed.
1. A test applied in the realization of income and expenses by an accrual basis taxpayer
a. All events test
b. Immediacy test
c. Rational basis test
d. Pre-dominance test
2. A test applied to determine whether the accumulation of after-tax profits by a domestic or resident
foreign corporation is really for the reasonable needs of the business
a. All events test
b. Immediacy test
3. A test applied to gauge the constitutionality of an assailed law in the face of an equal protection
challenge
a. All events test
b. Immediacy test
4. Which of the following items are not taxable?

a. Income from jueteng
b. Gains arising from expropriation of property
c. Income taxes paid and subsequently refunded
d. Gains on the sale of a car used for personal purposes
5. Which of the following are deductible from gross income tax purposes?
a. Interest on loans used to acquire capital equipment or machinery
b. Reserves for bad debts
c. Worthless securities which are ordinary assets
d. Worthless securities which are capital assets
6. An off-line international air carrier having a branch office or a sales agent in the Philippines which
sells passage documents for compensation or commission to cover off-line flights of its principal or
head office or for other airlines covering flights originating from Philippines ports is
a. Subject to 2 ½% income tax on its gross Philippine billings
b. Subject to 3% common carrier’s tax on gross Philippine billings
c. Not subject to 2 ½ gross Philippine billings tax nor to the 3% common carriers tax
d. Subject to both the 2 ½ gross Philippine billings and to the 3% common carriers tax
Page 2
7. In computing net income, no deduction in any case shall be allowed in respect of losses from sales or
exchanges of property directly or indirectly, except
a. Between the fiduciary of a trust and the fiduciary of another trust if the same person is the
beneficiary with respect of each trust
b. Between the fiduciary of a trust and the grantor
c. Between the fiduciary of a trust and the beneficiary of such trust
d. Between members of a family of an individual which shall include the brothers and sisters,
whether by the whole of half-blood, spouse, ancestors and lineal descendants
8. The following are characteristics of special assessment, except

a. It is levied on lands only
b. It is based on the improvements introduced by the government
c. It is based on the benefit derived by the owners of the land
d. It is a personal liability of the persons assessed
9. As to scope of legislature power tax, which of the following is correct?

a. The power to tax is supreme, plenary, comprehensive and without any limit because the existence
of the government is a necessity
b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if
the constitution provides otherwise
c. Congress has the right to levy a tax of any kind at any amount at it sees fit, even in the absence of
any constitutional provision
d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided the purpose is
public and the courts may not review the levy of the tax to determine whether or not the purpose is
public
10. A domestic proprietary educational institution improved its library facilities by adding a new wing to
its old library building. The capital outlay on library improvement, for income tax purposes, may be
a. Deducted in full at the time of completion of the improvement
b. Capitalized or expensed outright at the option of the school owner
c. Capitalized and depreciated over the estimated life of the improvement
d. Capitalized or expensed outright at the option of the government
11. Which of the following items is an income of a non- resident citizen subject to the net income tax
(progressive)?
a. Dividend received from a domestic corporation
b. Prizes from USA lotto
c. Interest income from PNB
d. Share in the net income of general professional partnership
12. Consider the following statements

I. A special assessment is an enforced proportional contribution from the owners of real property
especially or peculiarly benefited by public instruments
II. The power of eminent domain may be exercised even by the private individuals while the power
of taxation and police power may be exercised only by the government
III. Unlike tax, a debt draws interest, if stipulated
IV. The police power, power of taxation and power of eminent domain, being fundamental powers
of the state, may be exercised by the government even without any constitutional grant
a. I and II are correct
b. Only III is not correct
c. II and IV are correct
d. All are correct
Page 3
13. Tips or gratuities paid directly to an employee by a customer of the employer which are not
accounted for by the employee to the employer are
Statement 1- Considered as passive income
Statement 2- Subject to creditable withholding tax
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
14. The following, except one are basic principles of a sound tax system. The exception is
a. It should be capable of being effectively enforced
b. It should consider the taxpayers’ ability to pay
c. It is levied by the lawmaking body of the state
d. The sources of revenue must be sufficient to meet government expenditures and other public
needs
15. A presented the following data regarding the items of income he earned during taxable year 2023:
I. Rental income (gross)
a. From an apartment unit in USA P240,000
b. From a parcel of land in Makati 180,000
II. Royalties from book:
a. Published in the Philippines 30,000
b. Published in USA 20,000
III. Interest income earned on notes receivable
a. From a debtor who resides in USA 15,000
b. From a debtor who resides in Manila 25,000
IV. Net profit from sales
a. From Philippine outlet 300,000
b. From USA outlet 200,000
V. Dividend income from two domestic corporations. The gross income
from the Philippines for the past 3 years
a. 60% of its world income 60,000
b. 85% of its world income 80,000
VI. Dividend income from two resident foreign corporations. The gross
income from the Philippines for the past 3 years was equivalent to:
a. 40% of its world income 40,000
b. 60% of its world income 20,000
VII. Prizes received from Supermarket raffle:

A. From Philippines;
1. ABC Supermarket 8,000
2. DEF Superstore 12,000
B. From USA
1. UVW Supermarket 6,000
2. XYZ Supersavers 14,000
VIII. Prizes and winning from lotto
1. Philippine lotto 200,000
2. USA lotto 100,000
Page 4
The total income from sources within the Philippines is
a. P903,000
b. P703,000
c. P895,000
d. P907,000
16. The power to tax is not without limitations. Such limitations may be constitutional (expressly found in
the constitution or implied in its provisions) or inherent (restrict the power although they are not
embodied in the constitution). Which of the following is an inherent limitation?
a. No imprisonment for non-payment of a poll tax.
b. Equal protection of the laws.
c. Exemption from taxation of government entities
d. Exemption of religious, charitable, and educational entities, non-profit cemeteries, and churches
from property taxation.
17. Which of the following shall be allowed as deductions from gross sales?
a. Sales returns and allowances for which a proper credit or refund was made during the month or
quarter to the buyer for sales previously recorded as taxable sales
b. Discounts determined and granted at the time of sale, which are previously indicated in the invoice,
the amount thereof forming part of the gross sales duly recorded in the books of accounts
c. Sales discounts indicated in the invoice at the time of sale, the grant of which is dependent upon the
happening of a future event
a. b and c b. a and b c. a and c d. a, b and c
18. Ms. A operates a convenience store and also offers bookkeeping services to her clients. In 2023, her
gross sales amounted to Php 1,200,000 and her receipts from bookkeeping services amounted to Php
400,000. She incurred cost of sales and operating expenses amounting to Php 700,000 and Php
300,000, respectively. Her income tax liability for the year, if she signified her intention to be taxed at
8% income tax rate in her 1st quarterly return is
a. Php 108,000 b. Php 128,000 c. Php 48,000 d. Php 28,000
19. ABC Corporation was dissolved and liquidating dividends were declared and paid to the stockholders.
What tax consequence follows?
a. ABC Corporation should deduct a final tax of 10% from the dividends
b. The stockholders should declare their gain from their investment and pay income tax at ordinary
rates
c. The dividends are exempt from tax
d. ABC Corporation should withhold a 10% creditable tax
20. Mr. Alas sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR and
the municipal license tax based on the same gross sales to the City of Makati. He comes to you for
advice because he thinks he is being subjected to double taxation. What advice will you give him?
a. Yes, there is double taxation and it is oppressive
b. The City of Makati does not have this power
c. Yes, there is double taxation and this is illegal in the Philippines
d. Double taxation is allowed where one tax is imposed by the national government and the other by
the local government.
Page 5
21. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The law was thought
to be sufficient to drive many cigarette companies out of business, and was questioned in court by a
cigarette company that would go out of business because it would not be able to pay the increased tax.
The cigarette company is
a. Wrong because taxes are the lifeblood of the government
b. Wrong because the law recognizes that the power to tax is the power to destroy
c. Correct because no government can deprive a person of his livelihood
d. Correct because Congress, in this case, exceeded its power to tax.
22. XYZ Corporation manufactures glass panels and is almost at the point of insolvency. It has no more
cash and all it has are unsold glass panels. It received an assessment from the BIR for deficiency income
taxes. It wants to pay but due to lack of cash, it seeks permission to pay in kind with glass panels.
Should the BIR grant the requested permission?
a. It should grant permission to make payment convenient to taxpayers
b. It should not grant permission because a tax is generally a pecuniary burden
c. It should grant permission; otherwise, XYZ Corporation would not be able to pay
d. It should not grant permission because the government does not have the storage facilities for
glass panels.
23. PRT Corporation purchased a residential house and lot with a swimming pool in an upscale subdivision
and required the company president to stay there without paying rent; it reasoned out that the company
president must maintain a certain image and be able to entertain guests at the house to promote the
company's business. The company president declared that because they are childless, he and his wife
would very well live in a smaller house. Was there a taxable fringe benefit?
a. There was no taxable fringe benefit since it was for the convenience of the employer and was
necessary for its business
b. There was a taxable fringe benefit since the stay at the house was for free
c. There was a taxable fringe benefit because the house was very luxurious
d. There was no taxable fringe benefit because the company president was only required to stay there
and did not demand free housing
24. Pheleco is a power generation and distribution company operating mainly from the City of Taguig. It
owns electric poles which it also rents out to other companies that use poles such as telephone and
cable companies. Taguig passed an ordinance imposing a fee equivalent to 1% of the annual rental for
these poles. Pheleco questioned the legality of the ordinance on the ground that it imposes an income
tax which local government units are prohibited from imposing. Rule on the validity of the ordinance
a. The ordinance is void; the fee is based on rental income and is therefore a tax on income
b. The ordinance is valid as a legitimate exercise of police power to regulate electric poles
c. The ordinance is void; 1% of annual rental is excessive and oppressive
d. The ordinance is valid; an LGU may impose tax on income
25. Which of the following statements is not correct?

a. In case of doubt, statutes levying taxes are construed strictly against the government
b. The construction of a statute made by his predecessor is not binding upon the successor, if, thereafter
he becomes satisfied that a different construction should be given
c. The reversal of a ruling shall not generally be given retroactive application, if said reversal will be
prejudicial to the taxpayer
d. A memorandum circular promulgated by the CIR that imposes penalty for violations of certain rules
need not be published in a newspaper of general circulation or official gazette because it has the
force and effect of law
Page 6
26. Which statement below expresses the lifeblood theory?
a. The assessed taxes must be enforced by the government
b. The underlying basis of taxation is government necessity for without taxation, a government can
neither exist nor endure
c. Taxation is an arbitrary method of exaction by those who are in the seat of power
d. The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and
objects "within its jurisdiction for the purpose of raising revenues"
27. Which statement is wrong?

a. The power of taxation may be exercised by the government, its political subdivisions and public
utilities
b. Generally, there is no limit on the amount of tax that may be imposed
c. The money contributed as tax becomes part of the public funds
d. The power of tax is subject to certain constitutional limitations.
28. The Philippines adopted the semi-global tax system, which means that
a. All taxable incomes, regardless of the nature of income, are added together to arrive at gross
income, and all allowable deductions are deducted from the gross income to arrive at the taxable
income
b. All income subject to final withholding taxes are liable to income tax under the schedular tax
system, while all ordinary income as well as income not subject to final withholding taxes are
liable to income tax under the global tax system
c. All taxable incomes are subject to final withholding taxes under the scheduler tax system
d. All taxable incomes from sources within and without the Philippines are liable to income tax
29. For income tax purposes, the source of the service income is important for the taxpayer, who is a
a. Filipino citizen residing in Makati City, Philippines
b. Non-resident Filipino citizen working and residing in London, United Kingdom.
c. Filipino citizen who is married to a Japanese citizen and residing in their family home located in
Fort Bonifacio, Taguig City Philippines
d. Domestic corporation
30. In 2024 an individual, who is a real estate dealer, sold a residential lot in Quezon City at a gain of
Php100,000 with selling price of 8M. The sale is subject to income tax as follows:
a. 6% capital gains tax on the gain
b. 6% capital gains tax on the gross selling price or fair market value, whichever is higher
c. Ordinary income tax at the graduated rates of 15% to 35% of net taxable income
d. 30% income tax on net taxable income
31. Which among the following taxpayers is required to use only the calendar year for tax purposes
a. Partnership exclusively for the design of government infrastructure projects considered as practice
of civil engineering
b. Joint-stock company formed for the purpose of undertaking construction projects
c. Business partnership engaged in energy operations under a service contract with the government
d. Joint account engaged in trading of mineral ores.
32. During the audit conducted by the BIR official, it was found that the rental income claimed by the
corporation was not subjected to expanded withholding tax. Accordingly, the claimed rental expense
a. Is deductible from the gross income of the corporation, despite non-withholding of income tax by
the corporation
b. Is deductible from the gross income of the corporation, provided that the 5% expanded withholding
tax is paid by the corporation during the audit
c. Is not deductible from the gross income of the corporation due to non-withholding of tax
b. Is deductible, if it can be shown that the lessor has correctly reported the rental income in his tax
return
Page 7
33. Which statement is correct? A non-stock, non-profit charitable association that sells its idle agricultural
property is
a. Not required to file an income tax return, nor pay income tax on the transaction to the BIR, provided
the sales proceeds are invested in another real estate during the year
b. Required to pay the 6% capital gain tax on the gross selling price or fair market value, whichever is
higher
c. Exempted to pay regular corporate income tax on the gain from sale
d. Required to withhold the applicable expanded withholding tax rate on the transaction and remit the
same to the BIR
34. A has 4,000 shares of investment in the common shares of Delightful Corporation, costing P500,000.
During the current taxable year, he received from Delightful Corporation, 200 shares of Cheerful
Corporation with a par value of P100 per share as dividends. At the date of dividend declaration, the
fair market value of Cheerful Corporation was P120 per share and by the time he received the dividend,
the fair market value was P180/share. The dividend is
a. Subject to final tax b. Exempt from income tax c. Part of taxable income d. A stock dividend
35. A is the cost accountant of a domestic corporation. In 2023, he was promoted to chief accountant. Later,
he bought a new car worth Php1.5M and he traded his old car with a fair market value of Php 700,000
and paid the difference of Php 800,000 to the seller. His old car was donated by his father who bought
the car 2 years ago at a price of Php 600,000. His father paid the corresponding donor's tax. Which of
the following is incorrect?
a. The cost basis of the old car to A is Php 600,000
b. The old car is a capital asset
c. The capital gain subject to income tax is Php 100,000
d. The father of A is not required to report the capital gain as part of his taxable income
36-40.
LUGI Corporation, a VAT-registered domestic corporation, is being liquidated in order to settle all of
its corporate affairs. For this purpose, a liquidator, Mr. De la Rosa, was appointed by the court to
liquidate LUGI’s remaining assets. Pursuant to the court’s decision, LUGI’s ordinary assets were
ordered transferred to the liquidator.
After 2 months, properties of LUGI were transferred by the liquidator to the shareholders as liquidating
dividends.
36. Shall the liquidator be subject to income tax on the transfer of the corporation’s ordinary assets to him?
a. Yes. b. No. c. It depends. d. None of the above.
37. Shall the transfer of the corporation’s ordinary assets to the liquidator be subject to a donor’s tax?
38. Shall the transfer of the corporation’s ordinary assets to the liquidator be subject to the 12% output
VAT?
39. Is the transfer of LUGI’s properties to its shareholders as liquidating dividend subject to the income
tax on the part of the shareholders?
a. Yes. It is subject to final tax to be withheld by LUGI Corporation.
b. No. It is exempt from income taxes
c. It depends.
Page 8
40. Is the transfer of LUGI’s properties to its shareholders as liquidating dividend subject to VAT?
41. After topping the CPALE exam, Urs and Alyssa decided to enter into business together. They formed
URS-ALYSSA Company in October 2024 to provide professional cleaning services to industrial
clients.
They located their head office in Makati City. In February 2025, it sent a team of professional cleaners
to the factory of one its clients located in Puerto Princesa City in Palawan. URS-ALYSSA does not
maintain an office in Puerto Princesa City.
a. Makati City can require URS-ALYSSA to secure a business permit and to pay the local business
tax.
b. Puerto Princesa can require URS-ALYSSA to secure a business permit and to pay the local
business tax.
c. Makati City can require URS-ALYSSA to secure a business permit, but payment of the local
business tax can be required only by Puerto Princesa.
42. Section 17 of the Watershed Code of Davao City provides:

“The Environmental Tax collected shall accrue to the General Fund, and shall be appropriated in the
Annual Budget solely for the purpose of implementation of this Code, the operational expenses of the
Watershed Management Council and all its instrumentalities, and for watershed protection,
conservation, and management programs and projects, subject to the approval of the Davao City
Council.”
Is the imposition a tax, or a licence (or regulatory fee)?
a. It is a tax.
b. It is a license or regulatory fee.
c. It is both.
43-50.
CRISTAL corporation (domestic), which started operations in 2010, has the following data for FY
ending April 30, 2024:
Sales, net of sales discounts 20,000,000
Salaries of employees, net of payroll deductions of ₱350,000 5,000,000
Fringe benefits given to:
Rank and file employees 1,040,000
Managerial employees 325,000
EAR expenses 550,000
Rent expenses 1,200,000
Depreciation expense 700,000
Bad debt expense (1/3 charged off during the year) 105,000
Interest expense on BPI loan 400,000
Interest expense on loan from majority shareholder 100,000
Page 9
Other income:
Cash dividends received from:
1) Domestic corporations 550,000
2) Foreign corporations 30,000
Interest income from Philippine bank deposits, net of FT 100,000
Royalty income (Phils.), gross of FT 125,000
Gain from sale of property:
1) Makati real property not used in business (SP = ₱10M) 2,000,000
2) Domestic shares (not listed) held as capital assets 100,000
3) Domestic shares (listed) held as capital assets 23,000,000
Liquidating dividend from ABC Corp. 100,000
(cost of ABC shares = ₱96,000)
CWT withheld by customers 68,000

Tax paid in first 3 quarters 30,000
43. Compute final taxes on the CRISTAL’s passive income.

a. ₱50,000
b. ₱45,000
c. ₱40,000
44. Compute total CGT on CRISTAL’s capital gains.
a. ₱ 753,000
b. ₱4,065,000
c. ₱ 615,000
45. How much is the corporation’s total gross income in its AITR for taxable year ending April 30, 2024?
a. ₱15,000,000
b. ₱15,034,000
c. ₱20,000,000
46. How much is the corporation’s total available deductions in its AITR?
a. ₱ 9,266,000
b. ₱ 9,300,000
c. ₱14,266,000
47. How much is the corporation’s net taxable income?
a. ₱5,750,250
b. ₱5,734,000
c. ₱5,666,713
Page 10
48. How much is the corporation’s RCIT?
a. ₱1,433,500
b. ₱1,721,714
c. ₱1,485,290
49. How much is the corporation’s MCIT?
a. ₱275,122
b. ₱172,714
c. ₱150,340
d. ₱150,250
50. How much is the corporation’s income tax payable?
a. ₱1,335,500
b. ₱1,481,793
c. ₱1,550,340
51. Hey Jude Corporation (HJC), a domestic retailer of health drinks, owns shares of GPAP, another
domestic corporation. GPAP is in the merchant acquiring business whereby it enters into merchant
agreements with accredited merchants to honor credit cards it issues under various card associations
of which it is a member.
Later, HJC sold its GPAP shares to LEMON Corporation for ₱85.0 Million. In one of the Whereas
Clauses of the Share Sale and Purchase Agreement, it was mentioned that ₱20.0 Million of the total
selling price represented goodwill generated by GPAP over the years.
Will the ₱20.0 Million representing goodwill be subject to output VAT?
a. Yes. Goodwill is an ordinary intangible asset whose sale is subject to output VAT.
b. No. The shares sold are capital assets in the hands of the seller.
c. Either (a) or (b).
52. FEC Inc., a domestic corporation in the fuel distribution business, sold its service gas stations, to TEPI
Inc., another domestic corporation. The total purchase price of the service stations amounted
₱18,731,630. In the Deed of Sale, the total purchase price was broken down as Purchase Price of
₱5,794,280 plus Goodwill of ₱12,937,350.
According to the BIR, a 12% output VAT must be imposed on the total purchase price of ₱18,731,630.
FEC Inc., the seller, is claiming that output VAT must be imposed only on the purchase price of
₱5,794,280 since the sale of goodwill is a sale of a capital asset.
Who is correct?
a. The BIR is correct. The sale of the service gas stations is a sale of ordinary assets made incidentally
in the ordinary course of its trade or business, which is subject to output VAT.
b. FEC is correct. Since goodwill is a capital asset, the sale thereof is not subject to output VAT.
Instead, the sale of the goodwill shall be subject to CGT.
c. Both are correct.
Page 11
53-56.
H, Filipino, married to W in 1998, died on August 13, 2018. The estate reported the following
assets and deductions:
Conjugal properties:
Fishpond, Pampanga ₱ 2,000,000
Apartment house, Quezon City 1,000,000
Cash in bank 800,000
Family home 30,000,000
Exclusive properties of H:
Land, inherited from father who died on August 13, 2016. Value
of land when inherited was ₱210,000. The land had a mortgage of
₱30,000 when inherited, of which ₱10,000 was paid by H before
he died. 400,000
Land, donated on February 14, 2014 by H's mother who died on
November 2, 2018. Value of land when donated was ₱500,000. 600,000
Exclusive properties of W:
Farm in Leyte acquired during marriage 3,000,000
Deductions claimed:
Funeral expenses (actual) 250,000
Fire loss, apartment house (occurred 5 months after death) 80,000
Bad debt (unpaid receivable from an insolvent debtor) 100,000
Mortgage on inherited land 30,000
Vanishing deduction on inherited land 75,000
Vanishing deduction on donated land 90,000
Standard deduction 1,000,000
53. Determine the gross estate of H.

a. ₱34,900,000 c. ₱35,000,000
54. What is total amount of proper deductions chargeable against the conjugal properties of the estate?
a. ₱180,000 c. ₱458,510
55. What is total amount of proper deductions chargeable against the exclusive properties of the estate?
a. ₱195,000 c. ₱20,000
56. What is the net taxable estate?

a. ₱2,581,490 c. ₱2,601,341
Page 12
57-64.
Vincent Makadiyos and Jessa Santa, both resident citizens, met in CPAR where they reviewed for the
CPALE. They fell in love, and decided to get married. Before the wedding, they asked for advice
from Atty. Llamado who recommended that they execute a one-page pre-nuptial agreement which
would consist of only one sentence, namely: “The property relations that shall govern our marriage is
the Conjugal Partnership of Gains as described in the Family Code of the Philippines.”
They were horrified at the suggestion of Atty. Llamado. They decided to get married on December 25,
2023 without executing any pre-nuptial agreement.
The following transactions occurred involving the following properties in 2024:
Date Transaction
January 15, 2024 A parcel of land with zonal value of ₱5,000,000 and assessor’s value of
₱4,920,000 was donated to Christian Valix, a reviewer in CPAR. This
parcel of land was inherited by Vincent in July 2023.
Donation of ₱1,000,000 withdrawn from a bank account in the name of

Vincent. This bank account was opened 10 years ago in 2014, and no
deposits were made to this account since he got married.
February 20, 2024 A diamond necklace valued at ₱1,500,000 was donated to Jessa’s sister.
This piece of jewelry was previously donated to Jessa by her aunt during
the despedida de soltera or the bride-to-be’s send-off dinner held on
November 25, 2023.
June 30, 2024 Domestic common shares, unlisted, with a FMV of ₱2,000,000 and book
value of ₱1,900,000 was donated to Vincent’s sister. These shares were
previously bought with money which was donated to Vincent on June 1,
2024.
July 10, 2024 Cash amounting to ₱50,000 was donated to Congresswoman Magna T.
Nakaw for her birthday party. This amount was the rental income of an
apartment building. This apartment building was inherited by Jessa 2
weeks after her wedding.
November 15, 2024 The spouses sold one of the cars they acquired during their marriage.
The proceeds of the sale in the amount of ₱400,000 was donated to their
alma mater, the University of the Philippines, and to 2 other state
colleges in the Philippines.
December 1, 2024 The spouses donated ₱2,000,000 to an NGO named “Ronald’s Angels”.
This NGO is not accredited by any government agency nor by the BIR.
The money was withdrawn from a joint bank account in the name of the
spouses and was opened the day after their marriage. All the money in
this account came from the business they jointly own.
December 25, 2024 A generator unit used in their jointly-owned business and co-owned by
the spouses was sold for ₱250,000. At the time of sale, the generator
had a book value of ₱175,000. The generator was of good quality and
still had a FMV of ₱450,000 at the time of its sale.
57. Compute the donor’s tax payable of Vincent on the donation made on January 15, 2024:
a. ₱165,000 c. ₱135,000
58. Compute the donor’s tax payable of Jessa on the donation made on June 30, 2024:
a. ₱0 c. ₱60,000
Page 13
59. Compute the donor’s tax payable of Vincent on the donation made on November 15, 2024:
a. ₱24,000 c ₱14,000
60. Compute the donor’s tax payable of Jessa on the donation made on December 25, 2024:
a. ₱60,000 c. ₱12,000
b. ₱ 6,000 d. None of the above.
61. If spouses followed the advice of Atty. Llamado, what would be the donor’s tax payable of Vincent on
the donation made on February 20, 2024?
a. ₱345,000 c. ₱30,000
62. If spouses followed the advice of Atty. Llamado, what would be the donor’s tax payable of Jessa on the
donation made on July 10, 2024?
a. ₱1,500 c. ₱0
63. If spouses followed the advice of Atty. Llamado, what would be the donor’s tax payable of Vincent on
the donation made on December 1, 2024?
a. ₱60,000 c. ₱12,000
64. If spouses followed the advice of Atty. Llamado, what would be the donor’s tax payable of Jessa on
the donation made on December 25, 2024?
(a) ₱60,000 (c) ₱12,000

(b) ₱ 6,000 (d) None of the above.
65. Lufthansa Airlines (the flag carrier of Germany) filed its Annual ITR for the FY ended June 30, 2022.
It paid the corresponding tax payable therein amounting to ₱3,100,000 on October 14, 2022 based on
2.5% of Gross Philippine Billings.
The BIR subsequently issued a ruling confirming the entitlement of Lufthansa to the lower preferential
tax of 1.0% of Gross Philippine Billings pursuant to the Philippines-Germany Tax Treaty.
Based on this ruling, Lufthansa filed on June 21, 2024 an amended Annual ITR for FY ended June 30,
2022 wherein it applied the lower 1.0%. In such amended return, the amount of ₱1,860,000 was
reflected as an overpayment for the fiscal year.
When is the last day for filing a claim for refund/TCC?

a. June 30, 2024
b. June 21, 2026
c. October 14, 2024
66-67.
Atty. Llamado wanted to undergo plastic surgery because he wanted to look like the very popular Valix
brothers of CPAR. Being a tax professor, he went to a hospital for the surgery because he knew that
the sale of hospital services is VAT-exempt.
He eventually had the surgery in St. Danni Hospital in Makati City. The operation was done by a
certain Dr. Majika, a VAT-registered self-employed doctor practicing in St. Danni Hospital.
Page 14
The hospital bill Atty. Llamado received showed the following:
(1) Professional fee of Dr. Majika in the amount of ₱200,000. This amount already included a 12%
VAT, but did not include the excise tax on non-essential services.
(2) Hospital services and supplies in the amount of ₱80,000. This amount was exclusive of the excise
tax on non-essential services.
66. Compute the correct amount of output VAT and total excise taxes on the transaction.
a. VAT of ₱22,500, Excise tax of ₱12,929
b. VAT of ₱22,400, Excise tax of ₱8,800
c. VAT of ₱22,500, Excise tax of ₱8,928
d. VAT of ₱0, Excise tax of ₱12,929
67. Can Dr. Majika avail of the 8% income tax on gross sales/receipts plus non-operating income in his
income tax returns?
a. Yes.
b. No.
68-70.
MEGABIRD, Inc. is a VAT-registered breeder which sells white leg horn hens and fighting cocks from
its lone mega-farm in Alfonso, Cavite. White leg horn is a type of chicken bred for meat production.
During the 4th quarter of 2024:
(a) Total sales of fighting cocks amounted to ₱336,000, gross of VAT, and total sales of white leg
horn hens amounted to ₱200,000. MEGABIRD enjoys a gross margin of 25% on the sale of all
its products.
(b) The farm underwent repairs amounting to ₱67,200, gross of VAT. Purchase of supplies directly
attributable to the sale of fighting cocks amounted to ₱15,680, gross of VAT.
(c) MEGABIRD entered into the following transactions affecting its inventory accounts:
Fighting cock White leg horn

inventory inventory
Paid to veterinarian ₱ 382,000 ₱ 45,500
Paid to shareholders as 480,000 45,000
property dividends
Paid to creditors 525,000 56,250
Donation to Alfonso 128,000 7,000
city during fiesta
Total ₱ 1,515,000 ₱153,750
Additional information:
(a) Credit sales of white leg horns in the amount ₱150,000 were made in July 1, 2024 to July 15, 2024.
The buyers were all given 60 days to pay beginning on July 15, 2024. However, these remained
unpaid in the 4th quarter of 2024.
(b) Credit sales of fighting cocks in the amount of ₱224,000 (gross of VAT) were made in August 15,
2024. The buyers were all given 30 days to pay from August 15, 2024. However, these remained
unpaid in the 4th quarter of 2024.
68. Compute the adjusted output VAT of MEGABIRD for the 4th quarter of 2024.
a. ₱254,400
b. ₱263,250
c. ₱278,400
Page 15
69. Compute the available input tax credits of MEGABIRD for the 4th quarter of 2024.
a. ₱8,880
b. ₱7,788
c. ₱7,810
70. Compute the VAT payable of MEGABIRD for the 4th quarter of 2024.
a. ₱208,920
b. ₱246,590
c. ₱270,590
THE END

Cpar 96 Tax Preweek First Final Pb 2024

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CPA REVIEW SCHOOL OF THE PHILIPPINES

3. Which of the following is not correct?

The franchise tax due for the first quarter is

9. How much was the overseas communication tax?

10. How much is the output VAT, if any?

14. What is excise tax imposed on distilled spirit?

16. When pre-assessment notice not required, except?

20. Donor’s tax as distinguished from estate tax.

Compute the landed cost?

22. Below are characteristics of a sound taxation system, EXCEPT:

24. What law repealed Improper Accumulated Earnings Tax?

Assessor’s Value per assessment rolls:

Land use Assessment Levels

300,000.00 500,000.00 35%

500,000.00 750,000.00 40%

750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60%

2,000,000.00 5,000,000.00 70%

5,000,000.00 10,000,000.00 75%

29. When is he required to update his registration from non-VAT to VAT?

30. Taxable income of Bong if he claims itemized deductions:

31. Taxable income of Billy if he opted for OSD:

Joint venture A Co. B Co.

What is the income tax of the Joint venture?

33. What is the taxable income of the joint venture?

Interest from bank deposit Php20,000

36. Income tax due if he availed the 8% GRT?

What type of tax is imposed on March 31 donation?

38. What type of tax is imposed on June 30 donation?

39. What type of tax is imposed on September 30 donation?

40. What type of tax is imposed on December 31 donation?

Sales to registered activities P5,000,000

How much is due to National Government?

42. How much is due to Local Government?

Income tax due for the year is computed as follows:

Net income before income tax 2,024,000

Interest expense includes interest on late payment of tax, amounting to P5,000.

46. How much should be the deductible taxes and licenses?

47. How is the deductible entertainment and representation expense?

48. How much is the basic deficiency income tax due?

Export Sales P120,000,000

Additional information were made available as follows:

(a) Customs duties – P200,000

(a) Facilitation fee – P100,000

49. How much is the deductible direct labor cost?

Revenues from his profession 3,000,000

53. Compute OSD. Optional Standard Deductions

a. 1,150,00 and 1,100,000 respectively;

Real and personal properties in the Philippines P11,000,000

The net taxable estate is:

The estate tax due is:

How much is the output tax using 12% VAT rate?

How much is the total amusement tax?

68. Which of the following interest expenses shall be deductible?

TAXATION (C. Llamado)

Can the taxpayer appeal the RTC’s decision to the CTA?

4) The following shall be required in the application for a TIN card:

Compute Jamil’s tax payable.

Gross income, U.S. ₱10,000,000

Tax on ₱ 8,000,000 = ₱ 2,202,500