FINAL ROUND - INCOME TAXATION

1. DIFFICULT - Which of the following statements is TRUE regarding

Itemized Deductions and Optional Standard Deduction (OSD)?

a. A taxpayer is not allowed to use a hybrid method of claiming its/his

deduction for a period of three (3) upon election of the use of either
the Itemized Deductions or OSD.
b. The availment of OSD is more beneficial for taxpayers with low
operating expenses.
c. A taxpayer should have reached at least its fourth (4 th) year of
operations before it can avail the OSD.
d. The election to avail the OSD is irrevocable for one taxable year
unless the concerned taxpayer can prove that the total deductible
Itemized Deductions account for only 30% of the taxpayers taxable
gross income.

2. DIFFICULT - BuildTrade Construction Services, Inc. has deposit with Bank

of the Philippines Islands (BPI). In 2016, BuildTrade earned interest income
from the said deposit amounting to 180,000, gross of final taxes. In the
same year, BuildTrade obtained a loan from Trustworthy Financing
Corporation to finance its planned acquisition of certain machineries.
BuildTrade paid interest amounting to 150,000.

Buildtrade has no other interest payments in 2016 and opted to claim

OSD as deduction, as reflected in its filed 1 st quarter tax return, how much
interest expense is allowed to be claimed by the BuildTrade in computing
its regular corporate income tax liability for 2016?

a. 102,480
b. 150,000
c. 90,600
d. 0

3. EASY - Which of the following statements is TRUE regarding the filing of

annual and quarterly income tax returns?

a. The deadline for the filing of corporate quarterly income tax returns
is on the 15th day following the close of the first (1 st) three (3)
quarters of the taxable year.
b. There is only one (1) type of annual corporate income tax return
available for taxpayers under different tax regimes.
c. The deadline for the filing of annual corporate income tax return on
the fifteenth (15th ) day of the fourth (4th) month following the close
of the taxable year is applicable to both eFPS and non-eFPS filers.
 d. Corporate taxpayers who will able to settle their net income tax
liabilities before the deadline can avail a maximum 20% prompt
payment discount, the amount of which will depend on the amount
of income tax liability settled.

4. DIFFICULT Mercury Logistics, Inc. (MLI), a company engaged in freight

forwarding, desires to claim as part of its Itemized Deductions for 2016
regular corporate income tax purposes the expenses recorded under its
expense account named Entertainment, Amusement and Recreation
Expense totalling 85,050. The system-generated breakdown of the said
account contains the following details:

Nature Amount
Prospective client 45,050
meetings
Directors meetings 12,500
Various sponsorships 7,500
Company promotion 20,000
activities
Total 85,050

In 2016, MLI earned service revenues amounting to 10,500,000, before

considering discounts granted to clients amounting 800,000. Moreover,
15% of the said discounts are on account of client prompt payments.

Considering the foregoing facts, which of the following is a CORRECT

statement?

a. MLI can claim the full amount of 85,050 as EAR expenses

because it is lesser than 1% of net service revenues.
b. MLIs EAR limit is 99,000.
c. MLIs valid EAR expense is less than the EAR limit by 51,950.
d. Discounts granted to clients should not be considered in the
determination of EAR limit if certain conditions were imposed to the
clients.

5. AVERAGE Value Chain Manufacturing Corporation (VCMC), which is

neither a Top 20,000 Corporation nor a Large Taxpayer, engaged the
services of AV Formulas, Inc. for the actuarial valuation of the formers
retirement plan. VCMC agreed to pay AV Formulas 350,000 for the 2016
actuarial valuation. In July 20, 2016, VCMC paid AV Formulas 75% of the
total agreed price.

AV Formulas did not furnish a notarized sworn declaration whether its

2016 gross income already exceeded 720,000 as of June 30, 2016.
 How much tax will VCMC withhold on the said payment?

a. 26,250 EWT
b. 39,375 EWT
c. No EWT is required to be withheld since VCMC is not a Top 20,000
Corporation or a Large Taxpayer
d. 52,500 EWT

6. EASY Which of the following is NOT a requisite for the deductibility of

interest expense for corporate income tax purposes?

a. The indebtedness was not incurred to finance petroleum operations.

b. If incurred on an indebtedness to acquire property, the interest was
not treated as a capital expenditure.
c. The indebtedness is not between related taxpayers.
d. The amount of deductible interest shall be reduced by an amount
equal to 33% of interest income earned which had been subjected
to final withholding tax.

7. EASY Which is the following is NOT TRUE regarding Minimum Corporate

Income Tax (MCIT)?

a. For MCIT purposes, the term gross income shall be equivalent to

gross sales less returns, discounts and allowances and cost of goods
sold.
b. All corporate taxpayers are subject to MCIT and shall commence
beginning on the fourth taxable year.
c. The MCIT is the corporate taxpayers income tax liability when the
said tax is higher than the regular corporate income tax.
d. The MCIT is computed on both quarterly and annual basis.

8. AVERAGE Which of the following is a FALSE statement regarding

Charitable and Other Contributions?

a. Donations made by individual donors to accredited non-stock, non-

profit corporations are deductible to the extent of 10% of the
donors income derived from trade, business or profession
computed before the donation.
b. Donations made to accredited non-stock, non-profit corporations are
deductible in full as long as the donee can substantiate the said
amount with a Certificate of Donation issued by the donor.
c. Donations to the Philippine Government or to any of its agencies or
political subdivisions, including fully-owned government
corporations undertaking priority activities, are deductible in full.
 d. Deductible donations can be in the form of cash or property,
whether real or personal.

FINAL ROUND LOCAL BUSINESS TAXATION

1. AVERAGE Which of the following statements is NOT TRUE regarding

Local Business Tax (LBT)?

a. The payment of LBT should be made on or before the 20th of

January.
b. Taxpayers have the option to pay on a quarterly basis.
c. Like RPT, the local government do not impose 25% surcharge if the
LBT is not paid on time.
d. For LBT purposes, 100% of sales of branches or sales outlets should
be reported where the branch or sales outlet is located.

2. DIFFICULT Which of the following statements is NOT TRUE regarding

Real Property Tax (RPT)?

a. Idle lands are subject to RPT.

b. Interest imposed on late RPT payments is at the rate 2% per month
but for a maximum of 60 months.
c. Depreciation allowance shall be made at a rate not exceeding 5% of
its original cost or replacement cost of machineries for each year of
use.
d. Machineries which are of general purpose and not directly and
exclusively used to meet the needs of a particular industry,
business or activity shall not be considered within the definition of
machinery for RPT purposes.

3. AVERAGE Which of the following is not a general business type for Local
Business Tax (LBT) purposes?

a. Manufacturers
b. Banks and Other Financial Institutions
c. Healthcare providers
d. Contractors

FINAL ROUND EFFECTIVE COMMUNICATION TO STAKEHOLDERS

1. AVERAGE Which of the following is not required to be disclosed in the

financial statements?
 a. The landed cost of imports and the amount of customs duties and
tariff fees paid or accrued
b. Date of registration with the BIR
c. The amount of input VAT claimed wit breakdown
d. Periods covered and amount/s of deficiency tax assessments,
whether protested or not

FINAL ROUND TRANSFER TAXES

1. EASY
I. When a donors tax return was filed and it was found by the Bureau
of Internal Revenue to have errors which gave rise to a deficiency
donors tax, the donor may be required to pay the deficiency
although he does not possess or own the property anymore.
II. The Government is not bound by any agreement between the donor
and the donee that latter shall pay the tax on the donation.

a. First statement is false, while second statement is true.

b. Both statements are false.
c. Both statements are true.
d. First statement is true, while second statement is false.

2. EASY - When is the time for filing of the estate tax return?

a. Thirty (30) days from the decedents death

b. Six (6) months from the decedents death
c. Two (2) months from the decedents death
d. Two (2) years from the decedents death

3. AVERAGE - Donations to a legitimate child of properties:

Property in the Philippines 210,000

Property outside the Philippines, on account of marriage 200,000
Donors tax paid to foreign country 4,500

Donors tax due after tax credit for foreign donors tax paid:
 a. 4,625.50
b. 3,208.33
c. 2,200
d. 5,500

4. DIFFICULT - A non-stock, non-profit school always had cash flow

problems, resulting in failure to recruit well-trained administrative
personnel to effectively manage the school. In 2010, Dong Dong
donated P100 million pesos to the school, provided the money shall be
used solely for paying the salaries, wages, and benefits of
administrative personnel. The donation represents less than 10% of
Dong Dong taxable income for the year. Is he subject to donor's taxes?

a. Yes, since he did not obtain the requisite NGO certification before
he made the donation
b. Yes, because the donation is to be wholly used for administration
purposes
c. No, because the donation does not exceed 10% of his taxable
income for 2010
d. No, since the donation is actually, directly, and exclusively used
for educational purposes.

5. DIFFICULT - Which of the following statements is false? When an

estate tax return had been filed and the estate tax had been paid but
subsequently, because of errors in the return, a deficiency estate tax
has to be paid:
 a. The Bureau of Internal Revenue can ask payment from the heirs to
whom the estate had been distributed.
b. The Bureau of Internal Revenue cannot ask the executor or
administrator to pay because he would have been discharged from
liability for the estate tax to the state, the estate and the heirs once
an estate tax had been paid on the estate that he administered.
c. The Bureau of Internal Revenue can still ask the executor or
administrator to pay,even if the heirs have dissipated the
inheritance, if the executor or administrator did not ask for a written
discharge from liability from the Bureau of Internal Revenue.
d. The Bureau of Internal Revenue shall have a lien on the properties
of the estate once a demand for payment had been made.

FINAL ROUND PRINCIPLES OF TAXATION

1. EASY - Which of the following is not considered as a step in making

a revenue regulation effective?

a. Legislation by Congress
b. Recommendation by the Commissioner of Internal Revenue to
the Secretary of Finance
c. Approval by the Secretary of Finance
d. Publication in a newspaper of general circulation
Solution:

Although revenue regulations have the force and effect of law they are,
strictly speaking not tax laws. Hence, legislation by Congress is no longer
necessary for its implementation.

2. EASY - The usual modes of avoiding the occurrence of double

taxation are:

a. All of the answers are correct

b. Deduction for foreign taxes paid
c. Tax credit for foreign taxes paid
d. Reciprocal exemption either by law or treaty

FINAL ROUND REMEDIES

1. Which of the following violations cannot be subject to compromise

penalties?

A. Keeping two sets of books of accounts or records.

B. Failure to keep/preserve books of accounts and accounting records.
C. Failure to keep books of accounts or records in a native language or
English.
 D. Failure to have books of accounts audited and have financial
statements attached to income tax return certified by independent
CPA.

FINAL ROUND VAT

1. EASY - Value-added tax is an example of

A. Progressive tax
B. Regressive ta
C. Graduated tax
D. Proportional tax

2. EASY - One of the following is a zero-rate sale.

A. Export of a person who is not VAT registered
B. Sale of non-food agricultural products
C. Sale of cotton and cotton seeds
D. Sale of gold to Bangko Sentral ng Pilipinas

1. AVERAGE - Which statement is correct? Leasing of property shall be

subject to value-added tax on sale of services.

A. If the property is in the Philippines and the lease agreement was

executed within or outside the Philippines.
B. All of the choices are correct.
C. If the property is in the Philippines and the lease agreement was
executed outside the Philippines.
D. If the property is in the Philippines and the lease agreement was
executed in the Philippines.

2. AVERAGE

I. A value-added tax payment is not an expense in the books of accounts

of the VAT taxpayer
II. The excess of input taxes over the output taxes in a given month or
quarter is a deferred charge.
A. False, false.
B. False, true.
C. True, true.
D. True, false.

3. DIFFICULT

1. Sale by a real estate dealer

 Date of Sale June 2,
2014
Consideration in the deed of sale 5,000,000
Fair Market Value in the Assessment Rolls 4,800,000
Zonal Value 5,200,000
Payments on the consideration:
June 2, 2014 1,000,000
June 2, 2015 2,000,000
June 2, 2016 2,000,000

Installment output/input tax on payment of june 2, 2016:

A. 124,800
B. 249,600
C. 624,000
D. 0

2. DIFFICULT - Ka Pedring Matibag, a sole proprietor, buys and sells

"kumot at kulambo" both of which are subject to value-added tax.
Since he is using the calendar year as his taxable year, his taxable
quarters end on the last day of March, June, September, and
December. When should Ka Pedring file the VAT quarterly return for his
gross sales or receipts for the period of June 1 to September 30?
A. Within 45 days from September 30
B. Within 30 days from September 30
C. Within 15 days from September 30
D. Within 25 days from September 30

3. DIFFICULT - The general manager of Singapore Airlines company

which operates in the Philippines, decided to rent a house for his house
while assigned here in the Philippines. The lease of the house was for
the account of Singapore Airlines and amounted to P200,000 per
month. The taxes imposed on the lease payments would be:
A. VAT of 0% since Singapore Airlines is the official international airline
of the Singapore government
 B. VAT of 12% since the lease of the property cannot be directly
connected to the international flights made by the airline company
and would not be covered by the 0% VAT
C. VAT of 0% since the lessee is an international airline company and
the supply of the lease services is part of the cost of operating a
company engaged in international travel subject to 0% under the
NIRC
D. VAT of 12% since the lease was for a property in the Philippines
exceeding P10,000 per month.

FINAL ROUND TARIFF AND CUSTOMS CODE

1. AVERAGE - Is an article previously exported from the Philippines

subject to the payment of customs duties?
A. No, if it is covered by a certificate of identification and has not been
improved in value
B. No, because there is no basis for imposing duties on articles
previously exported from the Philippines
C. Yes, because exemptions are strictly construed against the importer
who is the taxpayer
D. Yes, because all articles that are imported from any foreign country
are subject to duty.