Ms. X is an employee of Isla Lipana, the local counterpart of PricewaterhouseCoopers (PWC) in the Philippines. She just celebrated her 61st birthday last November 2016. Ms. X has been working in the firm for almost eight (8) years and is now thinking of retiring from service. She comes to you now to ask opinion whether her total retirement package would be subject to tax diminution. 1. Provided Ms. X will earn a total of 2 million pesos under the company pension plan, what will be your advice? a. Benefit is taxable because the service rendered fell short of the ten-year requirement. b. Benefit is tax free because she is past 60 years old and has rendered more than 5 years of service. c. Benefit is taxable because there is no approved pension plan. d. Benefit is taxable because she is under 65 years old. 2. Provided Ms. X has worked for 10 years and will earn a total of 2 million pesos under the company pension plan which requires at least 11 years of service, among others, what will be your advice? a. Benefit is tax free because the service rendered met the tenyear requirement. b. Benefit is tax free because she is past 60 years old and has rendered more than 5 years of service. c. Benefit is taxable because service fell short of the eleven-year requirement. d. Benefit is taxable because she is under 65 years old. 3. Provided Ms. X will earn a total of 2.5 million pesos under the statutory retirement computation, what will be your advice? a. Benefit is taxable because the service rendered fell short of the ten-year requirement. b. Benefit is tax free because she is past 60 years old and has rendered more than 5 years of service. c. Benefit is taxable because there is no approved pension plan. d. Benefit is taxable because she is under 65 years old. 4. Consider problems 1 and 3, what will be your advice? a. Benefit is taxable because the service rendered fell short of the ten-year requirement. b. Benefit is tax free because she is past 60 years old and has rendered more than 5 years of service. c. Benefit is taxable because there is no approved pension plan. d. Benefit is taxable because she is under 65 years old. 5. Mel received from his first employer, P20,000 as retirement benefit and was subsequently employed by another employer. After rendering 10 years, Mel retired from his second employer and received P50,000. Payment was made under a BIR approved retirement plan. Is the said amount taxable or not? a. Yes, it is taxable because the benefit of exemption can only be availed of once. b. Yes, it is taxable because Mel is probably under 50 years old. c. No, it is not taxable because he is qualified under provisions of RA 4917. d. No, it is not taxable because he rendered at least 10 years of service. 6. If the second employer is a Government entity (assuming Mel was employed by the DPWH,) would the same be taxable? a. No, according to RA 7641 (Retirement Pay Law) all benefits falling under the minimum 60 years old and 5-year service
requirement is exempt regardless of the number of times earned by an employee. b. Yes, according to RA 4917 (Private Benefit Plan) the retiring employee must be of at least 50 years old. c. No, according to RA 8291 (The GSIS Act of 1997) all benefits he received are tax exempt, including retirement gratuity. d. Yes, the exemption can only be availed of once, without qualifications. 7. Which of the following statements is /are incorrect? i. Taxation is a process. ii. Enactment of tax laws is part of the taxation process. iii. The Constitution expressly conferred the power of Taxation to the President of the Philippines. iv. Taxation requires voluntary contribution from inhabitants to support the government. Choices: a. i, ii, iii and iv. b. i, ii and iii only. c. i and ii only d. i only 8. Which of the following is/ are natural qualities of Taxation Power? v. An inherent power vi. Essentially an executive function vii. An absolute power viii. Territorial in operation Choices: a. I and iv only b. Ii and ii only c. I and ii only d. I only 9. Taxation co-exist with the four elements of the state which includes all, except a. Government b. Property c. Sovereignty d. Territory 10. Which of the following statements is not correct? a. Only the national government exercises the inherent power of taxation. b. The power to tax by the local government units is a delegated power granted by the Constitution and other special laws. c. National legislation is exercised by Congress. d. Interpretation of Tax Laws is done by the Legislative branch of the government. 11. The BIR is under the supervision of the a. Department of Budget b. Bureau of Customs c. Department of Finance d. Department of Trade and Industry 12. Which of the following is not the activity involving tax administration a. Execution of judgment decided by the court in favor by the BIR b. Passage of tax laws and ordinances through the legislature c. Computation of tax due and payable
d. Taxpayer’s compliance to pay tax obligation 13. Which of the following statements is correct? a. Levying and collection of taxes are legislative functions. b. Assessment and collection are administrative function. c. Enacting of tax laws and its interpretations are legislative functions. d. Levying and imposition of judicial functions. 14. Which of the following is correct? Legislative a. Fixing of tax rates Yes b. Valuation of object of tax Yes c. Collection of taxes Yes d. Assessment of tax liability No
Administration Yes No Yes Yes
15. It has the executive supervision and control over tax administration a. Bureau of Internal Revenue b. Bureau of Customs c. Department of Finance d. Court of Justice 16. Which of the following is classified as income? a. Damage recovery due to physical injuries b. Return of capital c. Excess of selling price over cost of assets sold d. Gift received 17. Which of the following is not a characteristic of income? a. Increase in taxpayer’s wealth b. Return of taxpayer’s wealth c. Realization or receipt of gain d. Earnings constructively received 18. Which of the following is taxable with income tax at its gross amount when earned within the Philippines? a. Professional Fee c. Business Income b. Compensation Income d. Royalty Income 19. Which of the following income is/are earned through employee and employer relationship? I. Professional Fee II. Wages III. Pension Pay IV. Capital Gain a. I, II, III only c. II and III only b. I and II only d. II only 20. Statement1: Remuneration for casual labor not in the course of an employer’s trade or business is not considered as taxable compensation income/ Statement 2: Additional benefits received by the employee for the convenience of the employer are not taxable income of the employee. a. Only statement 1 is correct. c. Both statements are correct. b. Only statement 2 is correct. d. Both statements are incorrect. 21. Which of the following is a taxable compensation income? a. Separations pay due to resignation. b. Retirement pay under BIR approved retirement plan. c. Separations pay due to disability.
d. Terminal pay by fact of death. 22. Which of the following is a taxable compensation income? a. Professional fee net of creditable withholding tax. b. Separations pay due to closure of the employer’s business. c. Terminal pay inclusive of ₱15,000.00 13th month pay. d. Separations pay due to early retirement. 23. The monetary value of fringe benefit if given in money is a. Fair market value (BIR) or zonal value whichever is higher. b. Amount granted. c. Depreciated value. d. Acquisition cost plus other incidental costs. 24. Which value should be used as tax base to compute the fringe benefit on the property assigned for the use of employees? a. Fair market value of the property. b. Cost of the property. c. Equivalent rental value of the property. d. Fringe benefit value. 25. For property assigned for use of employee, the excess of fair market value over cost of the property assigned should be a. Amortized over the original life of the property. b. Depreciated over the original life of the property. c. Amortized over the remaining useful life of the property. d. Depreciated over the remaining useful life of the property. 26. The following are nontaxable housing fringe benefit, except a. Housing for military official of the armed forces of the Philippines. b. Housing within 50 meters of business premises. c. Temporary housing within three months or more. d. Free housing privilege to a corporate officer. 27. Which is true regarding taxation of ordinary gain? a. It is subject to the regular tax regardless of the taxpayer b. Individual taxpayers are always subject to regular tax c. It is subject to capital gains tax d. It is taxable to either regular or capital gains tax 28. Which capital asset is subject to the rules of capital gains tax? a. Exchange of residential lot used in business b. Sale of office building c. Sale of domestic common shares directly to buyer d. Sale of office equipment 29. Which is correct regarding gains from capital assets? a. Always subject to regular tax b. Always subject to capital gains tax c. Subject to both regular and capital gains tax d. Subject to either regular and capital gains tax 30. Which of the following can treat capital expenditure as outright deduction? a. Private educational institution b. Public schools or universities c. Non-profit schools or universities d. All of these 31. Research and development cost that are not chargeable to capital account can be claimed as a. Deductible expense
b. Deferred expense subject to amortization c. Both a and B d. Either A or B 32. Fringe benefit tax can be claimed as Deduction Tax credit a. Yes Yes b. No Yes c. Yes No d. No No 33. Under the PEZA Law, entities within ecozones can avail of the following, except: a. Income Tax Holiday b. 5% Income Tax i n lieu of all national and local taxes, except Real Property Tax c. Exclusive list of items for cost of sales d. Non-exclusive list of items for cost of sales 34. The following are the proper treatments for unused input vat, except: a. Carryover b. Refund or Credit c. Deduction from gross income if already prescribed d. Deduction form gross income if disallowed for refund Mercury Drug Store recorded the following sales: Customers Regular Senior citizens Gross sales P5,000,000 P1,200,000 Cost of sales 3,000,000 800,000 MDS adopts a policy of giving SC’s 25% discount. Consequently, it granted P300,000 total senior citizen’s discounts during the year. Assuming the taxpayer employs senior citizens and paid the following compensation during the period: Regular employees P200,000 Senior citizens above poverty level 50,000 Senior citizens below poverty level 40,000 35. What is the total deductible compensation expense of MDS? a. 290,000 b. 303,500 c. 240,000 d. 296,000 36. What is the taxable net income of MDS? a. 1,856,500 b. 2,104,000 c. 2,096,500 d. 1,864,000 37. When different type of income are subjected to common tax rate, the tax system is described as a. global tax system. b. gross income tax system. c. schedular tax system. d. Final tax system. 38. Schedular tax system of income taxation means
a. all types of income are added together to arrive at gross income. b. separate graduated rates are imposed on different types of income. c. Capital gains are excluded in determining gross income. d. Compensation income and business professional income shall be added together in arriving at gross income. 39. Which of the following taxpayers are taxed for income earned within and outside the Philippines? i. Resident citizen ii. Resident alien iii. Domestic corporation iv. Resident foreign corporation Choices: a. i, ii, iii and iv b. i, ii and iv only c. i and iv only d. i and iii only 40. An individual taxpayer, whose personal exemption is allowed is the lower amount provided between Philippine Tax Code and his Country’s Tax code. Citizenship a. Filipino b. Filipino c. Alien d. Alien
Residency Within Outside Within Outside
Business Income No Yes No Yes
41. Statement 1: If both husband and wife are earning income, only on them could claim for the additional personal exemption. Statement 2: the husband is the rightful claimant of addition personal exemption, unless he waives his rights in favour of his wife. a. Only statement 1 is correct b. Both statements are correct c. Only statement 2 is correct d. Both statements are incorrect 42. Statement 1: A tax credit will reduce the taxable income. Statement 2: A tax credit will be available when there is foreign income tax paid by resident Filipino for income earned without. a. Only statement 1 is correct b. Both statements are correct c. Only statement 2 is correct d. Both statements are incorrect 43. One of the following is not creditable against the total computed per ITR. a. Final withholding tax b. Foreign income tax paid by resident citizen c. Creditable withholding tax on compensation d. Income tax paid for the first three quarters for the business income earned. 44. Statement 1: An alien who shall reside in the Philippines with no definite intention as to his stay is a resident of the Philippines. Statement 2: A foreigner who has acquired residency in the Philippines shall only become a non-resident alien when he actually departs with the intention of abandoning his residency in the Philippines. a. Only statement 1 is correct
b. Only statement 2 is correct c. Both statement are correct d. Both statements are incorrect 45. All of the following taxes are classified as income taxes, except a. 20% royalty tax b. 10% dividend tax c. ½ of 1% tax on the selling price of shares of stock tradedin the local stock exchange d. 6% capital gains tax on sale of land 46. Which of the following amount of winnings/ prizes is subject to final tax of 20%? a. P10,000 winnings outside the Philippines b. P10,000 winnings earned within the Philippines c. P1,000 Philippines Sweepstakes winnings d. P9,000 first prize singing contest 47. Which of the following is not correct income tax rate? a. 20% on P50,000 compensation income earned by senior citizen b. 20% on dividend income earned within by non-resident alien doing business within c. 25% on gross income earned within by non-resident alien not doing business in the Philippines d. 7.5% on interest income earned within by a resident Filipino citizen under the expanded foreign currency deposit system. 48. The minimum corporate income is applicable in determining the tax liability of a corporation except when the corporation a. Is in its third year b. Is in its fourth year c. Incurred net loss or zero taxable income d. Has normal income tax which is lesser than minimum income tax 49. Nonresident foreign corporations are subject to normal tax rate based on a. Net taxable income within b. Gross income within c. Net taxable income from all sources d. Net taxable income from all sources 50. The tax imposed on inter-corporate dividends received by a resident foreign corporation from a domestic corporation is a a. Tax-exempt b. Subject to 10% final tax c. Subject to 15% final tax d. Subject to 30% corporate tax 51. Royalty income derived within the Philippines by a nonresident foreign corporation shall be subject to a. 20% final tax b. 7.5% final tax c. 30% normal corporate tax d. 2% minimum corporate tax 52. The following corporate income are subject to income tax, except a. Cash dividends received from a domestic corporation by another domestic corporation b. Royalty income received from a domestic corporation c. Interest income on foreign loans
d. Inter-corporate dividends received by a nonresident foreign corporation from a domestic corporation 53. The net taxable income of regional operating headquarters established in the Philippines by multinational companies engaged in administrative services is a. Tax-exempt b. Subject to 10% final tax c. Subject to 15% final tax d. Subject to 30% corporate tax 54. For taxation purposes, the following are taxable corporation, except a. National Power Corporation b. EGV & Company Auditing Firm c. ABC Trading Partnership d. PAGCOR 55. Which of the following is an incorrect determination of income tax? a. 25% on gross income within of a nonresident cinematographic film b. 30% income tax on the net taxable income of a nonresident foreign corporation c. 10% income tax on proprietary education institution d. 30% income tax on net business income of government owned and controlled corporation 56. The following are correct income tax rate, except a. 7.5% on gross income within earned by nonresident foreign cinematographic film owner b. 2.5% on gross receipts within received by foreign international carrier. c. 4.5% on gross income within earned by nonresident lessor of vessel chartered by Philippine nationals d. 7.5% on gross income within earned by nonresident foreign lessor of aircraft 57. The tax imposed on inter-corporate dividends received by a nonresident foreign corporation from a domestic corporation is a. Tax-exempt b. Subject to 10% final tax c. Subject to 15% final tax d. Subject to 30% corporate tax 58. Which of the following corporation is subject to IAET? a. Publicly-held corporations b. Family-closed corporation c. Banks and other nonbank financial intermediaries d. Insurance companies The following Income and Expenses are shown by X Corporation: Within Outside Gross Income P 8,000,000 4,000,000 Business expenses 5,000,000 3,000,000 Sale of land and warehouse (cost P2M) 3,000,000 59. If X is a domestic corporation, how much is the taxable income and income tax due in the Philippines per annual ITR? Taxable Income Income Tax Due a. P3,000,000 P 900,000 b. P4,000,000 P1,200,000
c. P5,000,000 d. P7,000,000
P1,500,000 P2,100,000
60. If X is a resident foreign corporation, how much is the taxable income and income due in the Philippines per annual ITR? Taxable Income Income Tax Due a. P3,000,000 P 900,000 b. P4,000,000 P1,200,000 c. P5,000,000 P1,500,000 d. P7,000,000 P2,100,000 The ABC Corporation has the following gross receipts and expanses for the calendar year 201A. Sources of Income: Gross Receipts Expenses Philippines P2,800,000 1,300,000 U.S.A 1,100,000 600,000 Saudi Arabia 400,000 500,000 61. If ABC Corporation is a non-resident foreign corporation, the Philippine income tax due for 201A is a. 175,000 b. 450,000 c. 700,000 d. 840,000 Unicor is a resident foreign corporation. For the fiscal year ending March 31, 201B, reported the following: Gross income derived from: Philippines P15,000,000 U.S.A 60,000,000 Mixed operating expenses 30,000,000 62. The Philippines income tax payable of Unicor for the fiscal year April 1, 201a to March 31, 201B is a. P2,700,000 b. P2,250,000 c. P1,750,000 d. P1,500,000 The Tacurong Company has the following business income and expenses in year 201A: From Philippines sources: Gross Income Expenses From Business 450,000 290,000 Dividends from domestic corporation 80,000 From other countries: Saudi Arabia 180,000 80,000 Australia 75,000 25,000 Japan 190,000 100,000 Total foreign income tax paid is P60,000 and Philippine quarterly income tax paid is P42,000. 63. The income tax still due and payable if Tacurong is a resident foreign corporation is: a. P120,000 b. P 72,000 c. P 30,000 d. P 18,000
64. The income tax still due and payable if Tacurong is a resident foreign corporation a. P120,000 b. P 72,000 c. P 30,000 d. P 18,000 65. Which of the following is a party in a joint venture? a. Partners b. Co-owners c. Co-venturers d. Shareholders 66. The share of a partner in the income of a commercial partnership is a. Subject to final tax of 10%. b. Subject to creditable tax of 10% if the amount is P720, 000and below and 15%if the amount is more than P720, 000. c. Subject to normal tax of individual taxpayer d. Tax-exempt J, a partner of a general professional partnership, showed the following income and losses: Net income from trading business – as sole proprietor Share from net loss of the partnership
P500,000 200,000
67. How much is the net taxable income of J? a. P700,000 c. P300,000 b. P450000 d. P250,000 M, a partner of a commercial partnership, showed the following income and losses: Net income from trading business – as a sole proprietor Share from net loss of the partnership
P500,000 200,000
68. How much is the net taxable income of M? a. P700,000 c. P300,000 b. P450,000 d. P250,000 69. The portion of income from irrevocable trust that would be distributed during the year is taxable against the a. Grantor b. Trustee c. Beneficiary d. Trust 70. The absolute exemption applicable to the income of estate ot trusts amounts to a. P75,000 b. P50,000 c. P30,000 d. P20,000
Amount of Net Taxable Rate Income Over P10,000 P30,000 P70,000 P140,000 P250,000 P500,000
But Not Over P10,000
5%
P30,000 P70,000 P140,000 P250,000 P500,000
P500 + 10% of the Excess over P10,000 P2,500 + 15% of the Excess over P30,000 P8,500 + 20% of the Excess over P70,000 P22,500 + 25% of the Excess over P140,000 P50,000 + 30% of the Excess over P250,000 P125,000 + 32% of the Excess over P500,000 in 2000 and onward
