BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 105

SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

CHAPTER 14

PERCENTAGE TAXES
Problem 141
1. False 3% of gross sales or gross receipts.
2. False business tax.
3. False advalorem tax.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

False if the business is VAT-registered or engaged in business tax-exempt transactions, it

shall not be subject to 3% OPT. Also not all OPT rate is 3%.
False Non-VAT business is not allowed to have Input VAT.
True
False expressly exempted from business tax by law. (R.A. 8424)
False the 3% is applicable only to transport by land. Transport by water and air is subject to
12% VAT.
True
False 2% percentage tax.
True
True
False Premium collections outside the Philippines from nonresident person is exempt.
True
False only gross receipts within.

Problem 142
1. False Option to register not required under OPT. The business can also register as VAT.
2. True
3. False minimum quarterly receipts or actual quarterly gross receipts, whichever is higher.
4. True
5. False Subject to VAT for being registered as VAT
6. False CNN is exempt from OPT because the communication is for news services.
7. True
8. True
9. False amusement taxes ranging from 10% to 30%
10. True
11. False Horse races cost of winning ticket is deductible.
12. False not deductible.
13. False only interest is subject to GRT
14. False national tax
15. True
Problem 143
1.
B
2.
A
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

B
B
C
C
A
B
D should be NOT covered by
P1,919,500 threshold.
C
D
C

Problem 144
1.
A
2.
A should be is NOT exempt
from OPT.
3.
C
4.
A
5.
D
6.
B
7.
A
8.
B
9.
D
10.
11.
12.

B
A
C

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 106
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 5

Zero. Monthly rental income of P12,800 or less per unit of residential property is exempt from
business tax regardless of the aggregate amount per year.
Problem 14 6
C
Beginning inventory
Add: Purchases
Total
Less: Ending inventory (P100,000 + P196,000)
Cost of sales
Add: Gross profit (P700,000 x 100%)
Sales
Multiplied by OPT rate
Business tax

100,000
896,000
P 996,000
296,000
P 700,000
700,000
P1,400,000
3%
P
42,000

Problem 14 7
D
Other percentage tax (P403,200/112%) x 3%
VAT (P403,200/9.333)
Surcharge (P43,200 x 50%)
Total amount due

P10,800
43,200
21,600
P75,600

Problem 14 8
C
Other percentage tax (P800,000 x 3%)

P24,000

Problem 14 9
A
Sales (P1,330,000/70%)
Multiplied by OPT rate
Business tax

P1,900,000
3%
P
57,000

Problem 14 10
B
Net taxable income (P180,000/30%)
Add: OSD (P600,000/60%) x 40%
Gross income
Add: Cost of sales
Gross sales
Multiplied by OPT rate
OPT

600,000
400,000
P1,000,000
800,000
P1,800,000
3%
P
54,000

Problem 14 11
1. Letter C
Sales (P35,000/25%) x 12
Multiplied by OPT rate
Annual business tax

P1,680,000
3%
P
50,400

2.

Letter D
Sales (P35,000/20%*) x 12
Multiplied by VAT rate
Annual business tax
*Computation of 20%:
Sales
125%
Cost
100%
Gross profit
25% (25%/125%) = 20%

P2,100,000
12%
P 252,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 107
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 12

Cooperatives are exempt from income and business tax on their sales. Furthermore all of the
sales reported are VAT and OPT exempt products.
Problem 14 13
1. Letter D
Percentage tax
There is no percentage tax because nonprocessed agricultural
food products are business tax exempt.

P - 0 -

2. Letter B
Total sales (P5M + P20M)
Less: Cost of sales (P3M + P12M)
Gross income
Less: OSD (P10,000,000 x 40%)
Net taxable income
Multiplied by corporate income tax rate
Income tax due and payable (OSD provides lesser income tax)

P25,000,000
15,000,000
P10,000,000
4,000,000
P 6,000,000
30%
P 1,800,000

Problem 14 14
C
OPT withheld (P90,000 x 3%)
Proof:
Sales (P86,400/96%)
Less: OPT withholding (P90,000 x 3%)
Creditable withholding tax (P90,000 x 1%)
Net sales proceeds
Problem 14 15
B
Service fee
Less: OPT (P30,000 x 3%)
Creditable withholding tax (P30,000 x 2%)
Net check payment

P 2,700
100%
(3%) P2,700
(1%)
900

P90,000
3,600
P86,400

P900
600

P30,000
1,500
P28,500

Problem 14 16
D
Gross receipts
Less: Operating expenses
Net income before personal exemption
Less: Personal exemption
Net taxable income

P350,000
50,000
P300,000
50,000
P250,000

Income tax due of P250,000 (Sec. 24A,NIRC)

P 50,000

Note: Owners of bancas and owners of animal-drawn two-wheeled vehicles are business taxexempt; but subject to income taxes.
Problem 14 17
B
Percentage taxes:
Taxi (P1,500,000 x 3%)
Bus (15 x P7,200 x 3%)
VAT (P50,000 x 12%)
Common carrier tax due

P45,000
3,240
6,000
P54,240

Note: The gross receipts from the transport of cargoes by domestic carriers by land shall still subject to
12%VAT. (R.A. 9337)

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 108
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 18
D
Total gross receipts (P1,000,000 + P6,000,000)
Multiplied by applicable business tax rate
Total business tax

P7,000,000
12%
P 840,000

Note: Common carrier by sea is subject to VAT of 12%.

Problem 14 19
A
Percentage tax (P10,000,000 x 3%)
VAT (P6,000,000 + P1,000,000) x 12%
Average business tax in a year
Divided by number of quarter in a year
Estimated average business tax per quarter
Problem 14 20
C
Percentage tax (P10,000,000 x 3%)
Problem 14 21
1.
Letter D
Business tax
If Philippine registry, zero-rated on their transport of passengers and
cargo from the Philippine port to a foreign port (vice versa).
2.

Letter C
Manila to USA (P1,000,000 x 3%)
Manila to China (P1,400,000 x 3%)
Philippine business tax

300,000
840,000
P1,140,000
4
P 285,000
P 300,000

P - 0 -

P30,000
42,000
P72,000

Problem 14 22
C
Percentage tax water franchise (P1,000,000 x 2%)

P 20,000

Problem 14 23
B
Percentage tax water franchise (P2,000,000 x 2%)
Percentage tax radio franchise (P10,000,000 x 3%)
Total percentage tax

P 40,000
300,000
P 340,000

Problem 14 24
NOT IN THE CHOICES
OPT Overseas call (P5,000 x 10%)
VAT - Local calls (P2,000 x 12%)
Total percentage tax or business tax
Problem 14 25
Exempt

Problem 14 26
D
Service charge (P75,000/10%)
Add: Percentage tax (P750,000 x 10%)
Total collection
Problem 14 27

P500
240
P740

P 750,000
75,000
P 825,000

P - 0 -. Premium on life insurance from a nonresident alien is not covered of business tax in the
Philippines.

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 109
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 28
C
Life insurance (P10,000,000 x 80% x 5%)
Non-life insurance (P5,000,000 x 12%)
Total
Less: Life insurance refund within 6 months
(P2,000,000 x 30%) x 5%
Total percentage tax

P400,000
60,000
P460,000
30,000
P430,000

Problem 14 29
NOT IN THE CHOICES
Amusement tax (P3,500,000 x 18%)

P630,000

Problem 14 30
D
Amusement tax (P500,000 + P200,000 + P100,000) x 18%

P 144,000

Problem 14 31
1. Letter A
Percentage tax (P2,000,000 + P1,000,000) x 10%
2.

P300,000

Letter D
Exempt

Problem 14 32
B
Percentage tax [P1,000,000 - (P200,000/100)] x 10%
Problem 14 33
A
Percentage tax (P100,000 P1,000) x 10%
Problem 14 34
A
Percentage tax [400,000 x P12) x 1%

P 99,800
P 9,900
P 48,000

IPO tax rate (400,000/1,150,000) = 34.5% more than 33 1/3% = 1% percentage tax.
Problem 14 35
D
Percentage tax [P600,000 x 4%)

P 24,000

IPO tax rate (600,000/20)/ (2,600,000/20) = 23% = 4% percentage tax.

Problem 14 36
A
Number of shares sold during the IPO (400,000 x 50%)
Total outstanding shares (500,000 x 120%) + 200,000
Percentage of IPO sales
Applicable IPO tax rate

Percentage tax (P1,000 x 200,000 x 4%)

Problem 14 37
B
Percentage tax [P1,000,000 x .005)
Problem 14 38

200,000
800,000
25%
4%

P8,000,000
P 5,000

P - 0 -. The sale is subject to capital gains tax because the shares of stock were sold directly to
the buyer.

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 110
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 39
B
Interest income with maturity more than 5 years (P400,000 x 1%)
Leasehold income (P300,000 x 7%)
Total gross receipt tax

P 4,000
21,000
P25,000

Note: The net trading loss is deductible only from trading gain of the same taxable year.
Problem 14 40
D
Interest income with maturity less than 5 years (P600,000 x 5%)
Royalty income (P300,000 x 7%)
Gain from sale of derivatives (P200,000 x 7%)
Total gross receipt tax

P 30,000
21,000
14,000
P 65,000

Note: The net trading loss for 200A is not deductible from trading gain of 200B.
Problem 14 41
D
1. Total gross receipts during the year (P360,000 x 3%)

P10,800

2. Total gross receipts

Less: OSD (P360,000 x 40%)
Net income before personal exemption
Less: Personal exemption
Net taxable income

P360,000
144,000
P216,000
50,000
P166,000

Tax on P140,000
Tax on excess (P26,000 x 25%)
Income tax due

P22,500
6,500
P29,000

Problem 14 42
Gross receipts (P480,000 + P190,000 + P100,000 + P1,950,000 + P2,480,000)
Multiplied by applicable business tax rate - VAT
Output VAT
Add: OPT on overseas calls (P100,000 x 10%)
Total business tax
Problem 14 43
Actual gross receipts (higher) City taxi (P195,000) from April to June
Multiplied by percentage tax rate
Percentage tax payable 2

nd

P195,000
3%

quarter (answer)

Problem 14 44
Tax units
1
2
3
4
5
Total amount = higher amount
Multiplied by percentage tax
Percentage tax

P5,200,000
12%
P 624,000
10,000
P 634,000

P
Actual
15,000
9,000
12,000
8,000
20,000

Minimum
10,800
10,800
10,800
10,800
10,800

5,850
Higher
15,000
10,800
12,000
10,800
20,000
68,800
3%
2,058

Note: The higher of the aggregate/total amount of the actual gross receipts or minimum amount
is subject to other percentage tax.

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 111
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 45
Subject to VAT:
Transport of goods (P2.5M x 12%)
Transport of passengers (P5M x 12%)
Transport of cargoes (P3M x 12%)
Transport of animals (P1.5M x 12%)
Total business tax

P 300,000
600,000
360,000
180,000
P1,440,000

Notes:
1.

Common carriers by air and water relative to the transport of passengers within the
Philippines is subject to 12% VAT. Transport of passengers by land however is subject to 3%
percentage tax.

2.

International air carriers and international shipping carriers with foreign registry doing
business in the Philippines shall pay a tax of three percent (3%) of their quarterly gross
receipts.

Problem 14 46
Gross receipts (P100,000 + P50,000 + P150,000 + P200,000)
Multiplied by applicable business tax rate
Business tax for the quarter
Problem 14 47
Gross receipts
Multiplied by applicable franchise tax rate VAT
Franchise tax
Problem 14 48
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000)
Multiplied by applicable business tax rate
Franchise tax due first quarter

P 500,000
18%
P 90,000
P50,000,000
12%
P 6,000,000

P7,000,000
12%
P 840,000

Note: During the taxable year, its business gross receipts must exceed P10,000,000; hence,
subject to VAT.
Problem 14 49
Gross receipts overseas calls (P500,000 x 10%)
Gross receipts local calls (P500,000 x 12%)
Total percentage taxes

P 50,000
60,000
P110,000

Problem 14 50
Total gross receipts (P600,000 + P400,000)
Multiplied by percentage tax for professional basketball organization
Percentage tax

P1,000,000
15%
P 150,000

Problem 14 51
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000)
Multiplied by applicable business tax rate for cockpits
Total business tax

P1,650,000
18%
P 297,000

Problem 14 52
Income tax on cockfighting winnings (P500,000 x 20%)
Percentage tax on horseracing winnings (P800,000 x 10%)
Income tax on horseracing winnings (P800,000 x 20%)
Total tax on winnings

P 100,000
80,000
160,000
P 340,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 112
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Problem 14 53
Sales proceeds (P15 x 500,000)
Multiplied by applicable IPO rate
Percentage tax

P7,500,000
2%
P 150,000

The percentage tax rate is 2% because the initial public offering is 33%, computed as follows:
Number of shares sold through IPO
Divided by outstanding shares (1,000,000 + 500,000)
Percent of IPO

500,000
1,500,000
33%

Applicable IPO tax rate

2%

Problem 14 54
1. Sales proceeds (P50 x 2,000 shares)
Multiply by percentage tax rate
Percentage tax
2.

P100,000
0.5%
P
500

Sales proceeds (4,000* shares x P55 per share)

Multiply by percentage tax rate
Percentage tax

Supporting computation:
Original holding
Add: Stock dividend (5,000 x 20%)
Total shares available
Less: First sale
*Remaining shares for this sale

Shares
5,000
1,000
6,000
2,000
4,000

P220,000
0.5%
P 1,100
Unit Cost
P50.00
P41.67
P41.67

Amount
P250,000
.
P250,000
83,320
P166,680

Problem 14 55
1. Percentage tax (P0.50 x 1,000,000) x 0.005
2.

P 2,500

August 20, 200A = last day of remittance without penalty.

Problem 14 56
Gross receipts tax on:
Rent income (P30,000 x 7%)
Royalty income (P20,000 x 7%)
Interest income (P50,000 + P20,000 + P10,000) x 5%
Total percentage tax
Problem 14 57
1.
Year
Remaining maturity
2013
9
2014
8
2015
7
2016
6
2017
5
Total gross receipt tax paid
2.

Year
2013

Remaining maturity
4

P 2,100
1,400
4,000
P 7,500

Amount
of interest, etc.
P 200,000
200,000
200,000
200,000
200,000

Applicable
tax rate
1%
1%
1%
1%
5%

Amount
of interest, etc.
P 200,000

Applicable
tax rate
5%

Gross receipt tax

P 2,000
2,000
2,000
2,000
10,000
P18,000
Gross receipt tax
P10,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 113
SUGGESTED ANSWERS
2014
3
2015
2
2016
1
2017
Less than 1 year
Total gross receipt tax as recomputed
Less: Gross receipt tax previously paid
Gross receipt tax still due

200,000
200,000
200,000
200,000

Problem 14 58

Chapter 14: OTHER PERCENTAGE TAXES

5%
5%
5%
5%

10,000
10,000
10,000
10,000
P50,000
18,000
P32,000

Franchise
400,000
3,000,000
P3,400,000
100,000
P3,300,000

Non-franchise
P
- 0 1,800,000
P1,800,000
120,000
P1,680,000

1. Local telephone services

12%
P396,000

12%
P201,600

2. Water franchise

2%
P 66,000

3%
P 50,400

3. Fast food (P3,000,000 x 12%)

(P1,800,000 x 12%)

P360,000

Beginning receivables
Add: Revenues
Total
Less: Ending receivables
Gross receipts

P216,000

Note: The business tax on fast food is based on the revenue because the business is
acombination of sales of goods and service. Moreover, the fast food business is subject to12% VAT
because the total revenue exceeded the P1,919,500 threshold amount.
Problem 14 59
Collections:
Revenues
Accounts receivable
Advances
Gross receipts

Current
500,000
300,000
200,000
P1,000,000

Previous
P300,000
100,000
.
P400,000

3%
P 30,000

3%
P 12,000

2. Race track

30%
P300,000

30%
P120,000

3. Boxing exhibition

10%
P100,000

10%
P 40,000

4. Water utilities

2%
P 20,000

5. Life insurance

5%
P 50,000

5%
P 20,000

6. Agents of foreign insurance companies

10%
P100,000

10%
P 40,000

7. Overseas dispatch

10%
P100,000

10%
P 40,000

Computation of percentage taxes:

1. Common carrier of passengers (assume land transport)

2%
8,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 114
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES

Extra problems

Write True if the statement is correct, or False if it is incorrect.

1.

Buyers from non-VAT business are required to withhold the percentage tax on their
purchases from such business.

2.

Generally, the withholding tax on the payments by the government to persons who are
exempt from payment of VAT and who are not a VAT-registered person is 3%.

3.

The sale to the government is not subject to withholding tax if the seller is a non-VAT
person.

4.

The percentage tax on sale of shares of stocks outside stock exchange is of 1%.

5.

The tax on winning is required to be remitted to BIR within 20 days from the date
withhold.

6.

Boxing exhibitions for World and Oriental Championships are exempted from amusement
tax if one of the contenders is a Filipino and a Filipino Citizen promotes such exhibitions.

7.

Net trading gains obtained by banks and non-bank financial intermediaries are subject to
5% percentage tax.

8.

The gross receipt tax of financial institutions is to be paid to the BIR within 10 days
following the end of the taxable month.

9.

The pre-terminated loan agreement within 5 years shall be subject to a gross receipts tax
of 1%.

10. The payment of % of 1% tax on sale of securities will exempt the gain from such
transaction from capital gain tax.
Answer to Extra problems
1. False the percentage tax forms part of sellers expense
2. True
3. False subject to 3% OPT withholding and CWT withholding.
4. False The of 1% is applicable for sale of shares of stock in the stock exchange.
5. True
6. True
7. False 7% percentage tax
8. False within 20 days
9. False 5%.
10. True