MCQ in Taxation
During the proceedings before the CTA, an issue regarding the constitutionality of the tax measure was brought before the attention of the court. The tax magistrate is divided on whether the such issue issue could be properly properly ruled on? decide. a. CTA can decide decide on the constitu constitution tionality ality of of a tax measure measure as an off-shot off-shot of the case under litigation; b. CTA can decide on the the constitutionality constitutionality as a tax court c. CTA has no jurisdi jurisdiction ction over over constituti constitutionali onality ty of a law, includin including g tax laws; d. The CTA CTA should should transfer transfer the issue issue to the the regular regular court. court. The supreme court of China finally sentenced to death 3 filipinos for illegal possession of dangerous drugs in China. The vice-president of the Philippines was sent to China, together with a catholic priest and relatives of the convicted 3 filipinos. All of their expenses were paid from the public public fund. Is the the disbursement of public fund proper proper ? a. Matsokoy Singh, an Indian national, engaged in 5-6 operations and married to a Japanese citizen Suki Moto with 4 children has been residing in Davao City for the past 10 years. As tax consultant, is he required to report his income derived from India ? a. yes. all person person who derived derived income income from from whatever whatever source source within within or without without is liable to pay tax ; b. yes. being a resident resident alien, he similar to a resident Filipino Filipino taxpayer who is obliged to report all his income from whatever source within or without; c. no. being being a resident resident alien, he is only only required required to report report income income derived derived from the the Philippines; d. no. because because its its operat operation ion is illeg illegal. al. In filing his ITR, should he be entitled to personal exemption and additional exemption for the 4 children ? a. no. becaus becausee he he is an alien; alien; b. no. because of absence absence of reciprocity clause; c. yes. yes. due to proce processu ssual al presum presumpti ption; on; d. yes.
Adidas Corporation, a resident foreign corporation, is asking whether the taxes paid in their homeland be considered as a deduction (expenses) in filing CITR in Manila ?
a. yes. taxes paid are considered expenses of the taxpayer; b. yes. taxes paid in their homeland should be treated as tax credit; c. no. taxes paid in their homeland does no inure to the benefit of the Philippine government; d. no. due to absence of reciprocity clause; e. yes. due to the doctrine of processual presumption. A Filipino domestic corporation had a branch in Hongkong. As far as the Philippine taxation is concerned, Such taxes paid to the Hongkong government is to be treated as : a. tax refund b. expenses c. tax credit d. tax allowance A foreign corporation had an isolated transaction in Davao City. As its tax consultant, what proper tax it should should file ? a. remittance of final withholding tax; b. CITR c. remittance of Sales tax d. remittance of VAT For purposes of taxation, how will the P100,000.00 tax refund received by Makoy Corporation be treated or payment of the debt that was previously written-off and considered as bad debt ? a. as subsidy b. as income c. as tax allowance d. as tax credit Tax refund shall be included in the gross income of the taxable period of its receipt to the extent of income tax benefit of such deduction. This is known as : a. tax deduction rule b. tax benefit rule c. tax refund rule d. tax collection rule Out of his commission income unknown to his wife, Carlo purchased a car worth P1M as a gift to his wife on February 14, 2011. Is this an activity subject to tax ? a. yes. such such activity activity partakes partakes of a donation. donation. Hence, Hence, subject subject to a donor’s donor’s tax; b. yes. such activity partakes partakes of a donation donation intervivos. Hence, Hence, subject to donor’s donor’s tax c. no. such activit activity y is not subject subject to a donor’s donor’s tax because because the “gift” was was taken from from the community property and will form part of the community property; d. no. such activity is is exempt from tax because husband husband and wife wife is prohibited to make donation to each other. After finishing his farms works, Mang Teban would go for fishing. He is the most lucky one because every time he goes fishing, his catch would be no less than P2,000.00. ½ of which is sold to the market while the other half is for their consumption. He goes fishing twice a week. Due to “ingit”, his neighbor reported him to the BIR for not paying the corresponding tax derived from fishing. The newly hired BIR personnel fresh from the
school send him a notice to pay the corresponding income tax within 30 days. Decide whether he is liable to pay income tax ? a. yes . ______________________________________ b. no. ______________________________________ Aling Osang sells vegetables at the bangketa for her daily needs. A month ago, she received a summon from the MTC requiring her to answer within 15 days for collection of taxes filed by the BIR. As PAO lawyer, what possible action(s) you may institute in behalf of Aling Osang ? a. motion to dismiss due to lack of jurisdiction; b. motion to dismiss due to lack of cause of action; c. motion o dismiss due to failure to observe the barangay conciliation as a condition precedent for filling action in court; d. motion to dismiss due estoppel. Juan purchases ammunitions from Mubarak gun factory in Cairo, Egypt, worth $1M. The shipment arrives in Manila but withheld because of non-payment of the sales tax ? Decide. a. the withholding is improper, such importation is not subject to sales tax; b. the withholding is improper, such importation is subject to import tax or duties; c. the withholding is proper, for every sale of an item is subject to a sales tax; d. the withholding is proper, Mubarak Gun Factory or Juan must pay the equivalent sales tax; To avoid paying the corresponding income tax, the corporation decided not to distribute a dividend to its stockholder despite of it accumulated unrestricted retained earning worth more than the capitalization of the corporation. Instead, the corporation just extends a loan to the stockholders equal to the amount of their supposed dividends. As an expert tax lawyer of the BIR, is there income taxes that may be collected from the corporation ? a. yes, in form of dividend tax; b. yes, in form of improper accumulation of retained earnings; c. no. because no dividend was declared; d. no. because there was no distribution of the dividends. Therefore no withholding tax collected; Matibay Realty Corporation decided to transfer its business from Davao City to Gensan City. Hence, its building was sold and the proceeds was used to buy a building in Gensan City. The management ask your opinion on what kind of tax be filed regarding such sale ? a. capital gains tax b. sales tax c. withholding tax d. tax credit
On the contrary, the management executess deed exchange of its building with a building of equal value in Gensan City. Would there be a tax payable that may arise from this transaction ? a. yes. both parties must pay its respective tax on this transaction; b. yes. both parties can not escape from taxation arising from exchange of properties; c. no. the parties are both exempt from taxation considering that no income was derived from the exchange of properties; d. no. no tax liabilities arise from the exchange of properties; The LGC grants the local government the power to raise revenue. From your point of view, does the power granted absolute ? a. yes. because the local government may impose tax on whatever matter within its jurisdiction; b. yes. because the local government may impose tax on all matters within the commerce of men; c. no. such power should not collide with the taxes imposed by the national government; d. no such power is absolute. Tong Ah Eatery is a licensed Hongkong restaurant located at 1234, Kowloon St., New Territory, Hongkong, specializing in cooked pansit. During the end of session, the Filipino congressmen flocked to the restaurant for the pansit paying an exorbitant tax of HK$1,000.00 as tax for a bowl of pansit. Upon retrun to the Philippines, they ask your opinion as to whether the said tax be allowed as a deduction or tax credit in their ITR ? a. yes. whatever tax payable to the BIR is subject to the deduction of the HK$1,000.00; b. yes. the HK$1,000.00 is a legitimate expense and therefore deductible to their ITR taxes; c. no. tax credit is already abolished; d. no. tax credit could only be availed of by the merchants; China Airline sold air fare tickets at its office in Hongkong for Manila-Hongkong-Manila flight. Is the sale subject to Philippine taxation ? a. no. the sale is not subject to Philippine taxation because was consummated outside the Philippine jurisdiction; b. no. the Philippine government can not imposed tax on the sale because China Airline is a foreign corporation; c. yes. China Airline is liable to pay the so called “Gross Philippine billing” of 2.5% based on the gross value of the fare;
d. yes. China Airline is liable to pay tax to the Philippine government. Otherwise, the Philippines may cancel its landing rights. On the other hand, due to unavailability of China Airlines plane, the carriage of passenger was transferred to PAL. Would such sale be subject to Philippine taxation ? a. yes. as Gross Philippine billing; b. yes. the activity should be counted upon the sale of China Airline; c. no. such activity is considered as a sale of a domestic corporation. hence, subject to the regular sales tax; d. no. such activity is the usual activities of the PAL. Juan purchased a JAL ticket for his around the world trip from Manila – Hongkong – USA – Germany – London – Spain –Manila. The JAL airline is asking your advise whether the whole or a particular portion of the trip is subject to “GPB”? a. The whole trip from Manila then back to Manila are subject to “GPB”; b. Only the Manila – Hongkong trip is subject to “GPB”; On the other, if the contract of carriage was subject to a connecting flight from Hongkong USA thru Cathay Airline, then thru American Airline from USA – Germany – London – Spain – Manila. The JAL airline is asking your opinion whether the whole or a particular portion of the trip is subject to “GPB” ? c. The whole trip from Manila then back to Manila are subject to “GPB”; d. Only the Manila – Hongkong trip is subject to “GPB”; In both cases justify your answer : _______________________________________________________________ Caltex Gasolines were stored in a storage tanks located within the jurisdiction Municipality of Kalipay. The municipal council is inquiring what possible tax ordinance may be enacted to raise revenues. a. petroleum tax b. storage tax c. percentage tax d. sales tax Ben won the P1M, house and lot and a car as jackpot prize offered by the Willing-Willie show. Ben is asking your opinion whether such winning is subject to income tax ? a. Yes.
Mark Trading is engaged in export-export business. When it load handicraft in Manila for Japan crates of bamboo lamp shades, what possible taxes it should pay ? (choose any 2 taxes) a. sales tax b. percentage tax c. export tax d. manufacturer’s tax If Mark Trading is located inside an export Free Port Zone . What possible taxes that may be imposed upon it for purposes of exportation ? a. sales tax b. percentage tax c. export tax d. manufacturer tax Unfortunately, the handicraft reach arrived in damage conditions which was rejected by the Japanese importer and returned to the exporter. In order to recover the capital, Mark Trading sold it to the local consumers at a discounted price just enough to recover its cost. Would such sale be subject to what tax ? a. sales tax b. percentage tax c. export tax d. manufacturer tax Juan Sari-sari store incurred losses due to debt. Hence, inquiring whether the MCIT is applicable to him considering that is his first time that happened to his business within the 10 years operations ? a. no. MCIT is applicable only to taxpayer juridical person; b. no. MCIT is not applicable to him being a sole proprietary business; c. yes. the MCIT is applicable to him for having losses after the 3 year operations; d. yes. the MCIT is applicable to him. In case of doubt, the doubt must be resolve in favor of the government; In what possible situation that the government may assess the corporate taxpayer thru MCIT ? a. when the corporate taxpayer has reported no income; b. or negative Zero income; c. whenever the tax due is lesser than the tax due based on MCIT d. under any and all of the above-situation; The power to impose MCIT may be suspended by the Secretary of finance due to : a. prolong labor disputes; c. force majeure b. legitimate business reversal; d. any or all of the above Caltex gasoline station is being tax for its gasoline tank buried underneath its premises. Is now asking whether such gasoline tank is subject to real property tax ? a. yes, being an improvement over the land; b. yes. being used for the business as an storage of gasoline; c. no. being part of the equipment of the gasoline business;
d. no. being hidden and not visible to the eyes of the government. Would your answer be the same if the gasoline tank was constructed above the surface of the land ? e. yes, being an improvement over the land; f. yes. being used for the business as an storage of gasoline; g. no. being part of the equipment of the gasoline business; h. no. being hidden and not visible to the eyes of the government. The lands expropriated from various owners are now being sold to its former owners when the plan of expansion of its airport was abandoned and transferred to Mactan Island. A P1,000.00 peso per sq. m. was added to the selling price due to increase of its valuation. Is the P1,000.00 added considered income on the part of the government and therefore subject to tax ? a. yes. the P1,000.00 is considered a flow of wealth and subject to taxation;
Due to the acute financial needs, the GRP declared and sold its Roppongi property to the Ayala Group of Manila, where the former Philippine embassy is located. Is the sale subject to capital gains tax ? a. no. sale of government properties are exempted from taxation; b. no. sale of government properties are exempted from taxation due to “actas jure imperi principle”; c. yes. sale of government properties owned under its proprietary function is subject to taxation; d. yes. sale of government properties is considered as an ordinary sale subject to tax; Pres. Noy is asking whether the Malacanang property be subject to real property tax ? e. government properties are exempted from taxation; f. government properties are exempted from taxation due to “actas jure imperi principle”; g. government properties owned under its proprietary function is subject to taxation; h. government properties is considered as an ordinary property subject to tax;
May the properties of the state used for public purpose be subject to tax or revenue receive by the BIR subject to tax ?
a. no. the government is exempt from taxation based on the “acta jure imperii principle which is exercise only by sovereign state. b. No. because it is just taking money from one pocket and placing it in another pocket c. Yes. as a general rule, all flow of wealth is subject to tax, except the return of the capital; d. Yes. because there is no specific law which provides that the revenue received by the government is exempt from taxation. Tax exemption must be interpreted under the concept of “strictissimi juris”. Congressman Manny owns a house and lot in California, USA. He is asking whether the Philippine government may imposed a real property tax on it : a. yes, being a property by a Pilipino located abroad; b. yes, as a Pilipino, he is obliged to pay the corresponding tax in support to the Philippine government; c. no. the property is beyond the territorial jurisdiction of the Philippine sovereignty. d. No. the property is located beyond the situs or jurisdiction of taxation; Supposing a treaty was executed between the state of California and the GRP agreeing that each country may may impose tax on the properties of their respective citizens’ property located in either country. Would it by then be proper to enact a law for the GRP to tax the house and lot of Congressman Manny ? a. whenever such law is enacted, would it be violative or not to the Philippine law regarding double taxation because the same property would now be taxed under the law of California and GRP ? a. such law is violative to the principle of double taxation ; In the recent boxing bout of Manny against Marquez, he received a $1M share from the television’s pay per view contract with the US network. Hence, the $1M was sent direct to the ATM bank account of Manny in Gensan Bank which could be withdrawn anytime. should the $1M be considered income of Manny and therefore subject to income tax ? a. yes. it is considered as an income subject to tax because under the doctrine of constructive receipt, such amount is now under the control of Manny which could eb withdrawn at anytime; b. yes. it is considered as flow of wealth and therefore subject to tax; c. no. the “income” was derived outside the Philippines. therefore beyond the situs of taxation ; d. no. income derived by OFW from abroad is exempt fro Philippine taxation;
Max resigned as a Pilot of the PAF. He was granted a tourist passport by the DFA and proceded to Afghanistan working with the underground group of Abdullah where he was paid a monthly salary of $100,000.00. The money is being deposited direct to the ATM account of his wife in Davao City. Decide whether the income is taxable; a. yes. All income derived from whatever source within and without is taxable; b. yes. All flow of wealth is subject, other than the return of the of the capital, is taxable; c. no. The earner is an OFW and the income was derived from employment abroad; d. no. it is not taxable because the same is unknown to the government. However, the money deposited at the ATM account of the wife was assigned to Bruno as payment for the interest of the loan obtained by Max. Is bruno liable to pay income tax ? e. yes. All income derived from whatever source within and without is taxable; f. yes. All flow of wealth is subject, other than the return of the of the capital, is taxable; g. no. The earner is an OFW and the income was derived from employment abroad; h. no. it is not taxable because the same is unknown to the government. In case of transfer of funds (salary) from Max to his wife and assigned it to Bruno for purposes of safe keeping. Who would be liable to pay the tax involved, if there is any ? a. Max b. wife c. Bruno d. no one is liable In cases of assignment of funds (salary in this case) to mislead the taxing authority. Against whom the tax may be imposed ? a. Max and his wife b. Max and Bruno c. Wife and Bruno d. no body is liable The authorities imposes tax on this situation due to : a. absorption method b. asssignment of income doctrine c. doctrine of constructive receipt d. shifting of burden of taxation On its 5th year business operations, Maharlika Trading corporation (MTC) suffered a setback when its importer-customers cancelled its order due to economic crises. Hence, the Taxpayer MTC reported a negative 0 income. Decide whether it is exempt from payment of CITR due to losses : a. MTC is exempted from paying CITR due to losses; b. MTC is free from any CITR liabilities due to absence of income; c. MTC is liable to pay the 2% MCIT as it tax liability; d. MTC is liable.
Global system/approach or Unitary system/approach – where a single tax is imposed on all income received or earned by a person irrespective of the activities which produced the income. Schedular system – income items are categorized into a schedules according to types of activity which produced them. Different tax rates are applied for each types of income The taxpayer may not avail the taxable period when: a. retiring from business b. leave the Philippines c. remove his property d. hide/conceal his property e. obstruct the collection of tax proceedings
the bIR may look into the bank deposit of a person without violating the law on secrecy of bank deposit (RA 1405) a. decent to determine his gross estate b. applied for a compromise for reason of financial incapacity
The management decided to give a uniform to its employees worth P1,000.00 every year. The BIR is asking your opinion whether such worth P1,000.00 is subject to income tax ? a. yes. all income derioved is taxable; b. no. it is considered as fringe benefit which is considered tax exempt; Max was sued for tax evasion. Having paid the amount. He filed a motion to dismiss the criminal action including the release of his properties. Decide on whether the motion to dismiss the criminal action. Decide. a. the payment of the tax extinguish the criminal liability ; b. the payment of the tax will not extinguish the criminal liability; Decide whether the motion to dismiss his real property should be granted : c. the payment of the tax extinguish the criminal liability ; d. the payment of the tax will not extinguish the criminal liability;
Johnny died leaving behind an estate worth P100,000.00 as reported in the estate tax return. But the BIR believes that it worth more than that amount. Hence, wanted to examine the bank account of the decedent. May the bank be ordered to submit the bank records of the decedent ? a. yes. in line with the estate tax return; b. yes. in view of the examination of the estate tax return; c. no. in view of the bank secrecy law; d. no. unless a consent or waiver of the decedent. The assessment of the real property of Max located at Tagum City was so exorbitant that he wanted to question the same. Where should the issue be brought for re-assessment ? a. court; b. assessor’s office c. local assessment board d. mayor’s office In the event that the re-assessment is not favorable to the taxpayer, where should the appeal be instituted ? a. court; b. assessor’s office c. local assessment board d. mayor’s office. In the event that the appealed decision is unfavorable, where should it be appealed ? a. court; b. provincial board of assessment. c. CTA d. SC
1. Ordinance # 1234 provides for a 10% of the total privately owned memorial park as allocation for the indigents burial space free of charge. What is your comment on this ? a. the ordinance is a valid exercise of police power; b. the ordinance is an exercise of power of eminent domain without payment of just compensation; c. the ordinance partakes of unlawful taking of property without due process of law; d. the ordinance is a form of taxation. 2. The Tira-Tira carnapper group headed by Tira brothers wee arrested and recovered from them various vehicles worth P1B allegedly carnapped since 2005. The City government is asking your opinion whether the Tira brothers could be liable for operating business without the necessary business permit ? a. yes. Any person engaged in business must secure first business permit before starting its operations; b. yes. Any person is required to have a business permit. Otherwise, the operation becomes illegal and subject to closure order ; c. no. illegal transactions/activities does not requires a business permit; d. no need because the government does not grant permit to illegal business.
2.1 On the other hand, considering the huge amount involved in the transaction which the BIR computed at 40% tax liabilities, they ask your opinion whether the Tira brothers could be liable for tax evasion due to failure to report their income ? a. yes. any person who derive income from whatever source is liable to pay the corresponding income tax; b. yes. they are liable to pay income tax based on their income; c. no. criminals are exempt from reporting and paying taxes; d. no. the carnapped vehicles does not belong to them. Hence, they are not liable to pay the income tax; 3. The City council passed an ordinance allowing the city sidewalks for rent at the rate of P100.00 per sq. m./month. The objective is to raise revenue pursuant the local government code. Decide on the merit of the ordinance ? a. the ordinance is valid. It is within the delegated power of the local government to raise revenue; b. the ordinance is valid. It undergo the legal process; c. the ordinance is invalid. Streets is beyond the commerce of men; d. the ordinance is invalid. Streets and sidewalks are properties owned by the state intended for public use. Therefore, ordinance is an ultra-vires act of the local government. 4. Don Pepot owns 5 hectares of agricultural land in IGACOS and in Calinan, Davao City. He was surprised why the real property tax imposed by IGACOS is different from the real property tax imposed by Davao City. As counsel of the government, resolve the issue : a. the difference of taxes imposed was due to different taxing authorities; b. the difference of taxes imposed was due to location of the property; c. the difference of taxes lies on the financial needs of the taxing authorities; d. the difference of taxes lies on the status of the taxing authorities; e. the difference of taxes lies on the different ordinance of each taxing authorities. 5. Max owns a 500 sq. meters lot located at Davao City. Paying P1,000.00 yearly real property tax. Since 2000 up to the present, the said property was rented by the Mahabagin Religious group for their venue of their daily prayers. Since there was no record of payment of real property tax since 2000, the City government initiated a foreclosure proceedings which eventually lead to auction sale. As counsel of Max, is the foreclosure valid ? a. the foreclosure is valid. It is a recognized mode of collecting delinquent taxes; b. the foreclosure is valid. the power to impose tax carries with it the power to impose collection. And foreclosure is a mode of collecting the unpaid taxes; c. the foreclosure is invalid. Properties which are directly, actually and exclusively used for religious purposes are exempt from the real property tax. Hence, it is erroneous to impose real property on the 500 sq. m. ; d. the foreclosure is invalid. Being use directly, actually and exclusive by the religious group is exempt from real property tax. 6. From your opinion, is there a need of publication before any tax measure be implemented as required under the civil code ? a. yes. to inform the taxpayer;
b. no. what is to be taxed or how much is the tax is a prerogative of the state; c. yes. pursuant to the civil code which provides that laws shall take effect after 15 days of it complexion of its publication in an OG. d. no need for publication any way the taxpayer can not object. 7. Issues arise as to whether taxes may be collected even without tax measures ? a. yes. because it is an inherent power of the state; b. yes, because of the life blood theory; c. no. imposition of taxes without any tax measure amounts to oppression; d. no. because of absence of the basis for the amount of the tax to be collected; 8. The power to tax is considered as power to destroy, except when : a. existence of “matuwid na landas” d. senate inquiry c. presence of truth commission b. kayo ang boss ko; e. there is a court. 9. As preparation for the coming araw ng Dabaw, the over all committee purchase from Hapay store various items, including office supplies who issued a post date cheque payable 6 months thereafter. The owner of store ask your opinion whether the check could be used to pay his quarterly real property tax ? a. yes. because it refers to same fund of the government; b. no. because the obligation towards the funding of the check arise from a contractual obligation. While the obligation of the taxpayer arising from law. Hence, compensation can not be applied. 9.1 Due to insufficiency of the budget for the araw ng dabaw celebration, the Mayor issued an executive order that a 1 peso tax be imposed on sale of every liter of gasoline. Decide the validity of such imposition ? a. the imposition is in valid. Being contained in an executive order and likewise, the local government is empowered to raise revenue; b. the imposition is invalid. The mayor has no authority. The imposition of such tax should emanate from the Sanguniang in for of an ordinance; c. the imposition is valid. The mayor is empowered under its residual power as the local chief executive d. the imposition is invalid. The power to enact tax measure is lodge with it the congress. 9.2 The 1 peso tax imposed is : a. invalid for being an ultra-vires act of the Office of the Mayor ; b. invalid for being an encroachment of power; c. valid for being an act of a paren patriae; d. valid for being intended for public welfare (araw ng dabaw) 10. The City government of Davao expropriated the land of taxpayer Juan worth P100,000.00. instead of paying his real property tax to the City, he consulted you whether the real property tax could be off-sited (compensation) with his claim arising from the expropriation ? a. yes. both liabilities will form part of the public fund; b. no. Obligation to pay the just compensation arise from a contract while obligation to pay real property tax arise from law. Therefore, compensation can not take place;
11. Juan had filed a claim for tax refund amounting to P10,000.00 which was approved but unreleased due to absence of public fund. Comes April 15, he ask you whether the tax refund be off-sited with his tax due P10,000.00 ? a. yes. both liabilities will form part of the public fund; b. no. Obligation to pay the just compensation arise from a contract while obligation to pa y real property tax arise from law. Therefore, compensation can not take place; c. yes. both obligations (government and taxpayer) arise from the same law; d. no. claim fro tax refund is subject to a suspensive condition while obligation to pay is subject to a resolutory condition. 12. Imposed by the state in line with its police power to regulate : a. license b. business permit c. taxes d. revenue 13. Due to the recent “Typhoon Ondoy” the Department of Agriculture grants the farmers free seedlings. This is a form of : a. taxes b. compensation c. subsidy d. revenue e. loan 14. Supposing the NIRC failed to provide for its prescription to collect taxes. Would it result to unconstitutionality of the NIRC ? a. yes, because it now amounts to tyrannism; b. yes. absence of prescription would result to absolute power to destroy; c. no. because it is an inherent power of the state to collect taxes; d. no. because the taxes collected redounded to the benefits of the people. 14.1 In the absence of the prescriptive period to collect, may the law on prescription provided under the civil law be applied ? a. yes, because it is a law itself ; b. yes. in the absence of the agreement, the law comes in; c. no. taxes does not arise from contract, therefore, the provisions of civil code can not supplement; d. no. taxes is an obligation of the taxpayer which is imprescriptible. 14.2 Do you agree to the proposition that collection of taxes is imprescriptible ? a. no. the government’s right to collect of taxes is subject to prescription just like all other laws; b. yes. the state is not barred by prescription; c. no. it is subject to prescription. The maximum period to collect is ten years from date of discovery of such tax fraud; d. yes. it is impliedly imprescriptible. 15. Taxpayer Juan filed an injunction to prohibits the imposition of real property tax which had increased by 300%. Decide on the petition : a. the petition should be granted. The law is exhorbitant; b. the petition should be granted. Taxpayer has the right to express their grievance in a legal way; c. the petition should be denied. The court can not prohibit the collection of taxes being the life blood of the government; d. the petition should be denied. The court has no authority to enjoined collecting of taxes. 16. Refers to the act of the legislature in choosing the persons, properties rights to be subject of taxation :
a. levying b. collection c. assessment d. payment 17. What is the approach adopted for purposes of individual taxpayer ? a. combination of schedular & global approach; b. combination of sectorial & schedular approach; c. combination of modular & sectorial approach; d. combination of modular and global approach; 17. 1 What is the approach adopted under the 1997 NIRC for purposes of taxation ? a. modular approach b. sectorial approach c. global approach d. schedular approach 17.2 What is the approach adopted in corporate tax ? a. modular approach b. global approach c. sectorial approach
d. schedular approach
18. The Cooperative bank consulted you as its in-house counsel expert in taxation for having reviewed at the Vinta Legis Review Center as to whether the interest paid to the savings/time deposit to its members /nonmembers depositors is subject to withholding final tax of 20% to b e remitted to the BIR. a. yes. taxes are the lifeblood of the government; b. yes. every person who derives income, within and without the Philippine is liable to pay its income tax ; c. no. the State’s power to tax must give way to foster the creation and growth of cooperatives; d. no. Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions to members. This exemption extends to members of cooperatives. Although the tax exemption only mentions cooperatives, this should be construed to include the members. 18. 1 The employees of the Maruri logging company organized a foundation which will administer their employee’s trust fund. Out of the fund contributed, the foundation was able to accumulate a huge income when it purchase a lot and later sold it at a profit. The BIR wanted to imposed a tax on the huge income accumulated. Decide. a. The income derived shall be subject to tax. Under the life blood theory. Tax being the life and the blood of the government. b. The income derived is exempt from any form of taxation. Sec. 60(b) of the NIRC provides that - The tax imposed by this Title shall not apply to employee’s trust which forms part of a pension, stock bonus or profitsharing plan of an employer for the benefit of some or all of his employees if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan. c. Tax-exemption is to be enjoyed by the income of the pension trust. Otherwise, taxation of those earnings would result in a diminution of accumulated income and reduce whatever the trust beneficiaries would receive out of the trust fund. This would run afoul of the very intendment of the law. d. The income derived shall be subject to taxation. All income derived from whatever source, within and without, shall be subject to income tax.
19. Whether the Magsaysay park and the Peoples park are subject to realty tax ? a. they are exempt from taxation because they are owned by the city government in its proprietary capacity; b. they are exempt from taxation being owned by the national government under the theory that there can be no tax against the taxing authority; c. yes. they are subject to tax as a property owned by the government in its proprietary capacity; d. yes. they are subject to tax because they are listed as an exempt from taxation; 20. The city government purchased a parcel of land intended as a fish port. However, due to the recent strike of the fish which made them to migrate to Japan, the plan was abandoned. The city council is confused whether the abandoned parcel of land be subject to realty tax ? a. it is subject to realty tax; b. it is not subject to realty tax. Justify what ever is your chosen answer : _______________________________________________________________________________ 21. The Pagcor reported a P1B income derived from casino operation. Hence, its legal counsel is asking your opinion whether the Pagcor, as a GOCC is liable to file its income tax ? a. Pagcor is now liable to pay its corporate income tax. The prior exemption as a GOCC was already withdrawn; b. Pagcor is liable to pay its corporate income tax. Any natural or juridical person who derives income from whatever source is liable to pay its income tax; c. Pagcor is exempt from paying its corporate income being a GOCC; d. Pagcor is exempt from paying its corporate income tax as an incentive; 22. The American government exempt the building of the Philippine consular office located in California from realty tax. Hence, the Solicitor General is asking your opinion whether it is proper to tax the American Embassy in Manila because there was no treaty or agreement that exempted it from realty tax ? a.there is no violation whenever the American Embassy is subjected to a realty tax. The power to chose or select properties to be subject to tax exclusively lies to the legislative body; b.any imposition of realty tax falls within the jurisdiction of the Philippines as a sovereign state ; c.the government should not imposed any realty tax because the American government had exempted the Philippines from realty tax in America. Therefore, we should adhere to the principle of international comity among nations; d.the Philippine government should exempt the American government from realty tax as a sign of goodwill. 23. Pres. Noynoy feels uncomfortable due to the very slow deliberation in the legislative body for the amendment of the EVAT law to make it 20%. Hence, he issued an executive order # 4321 imposing a 20% EVAT which is valid until the new EVAT law is submitted to him for approval. a. the EO is valid. It is a presidential prerogative to issue such; b. the EO is valid. It is issued to meet any exigencies, like tax; c. the EO is invalid. The president commits an act of intrusion into the function of the legislative body because the constitution provides that tax measure must originate from the
legislative body; d. the EO is an ultra vires act of the office of the President. 23.1 On the other hand. The president issued an EO increasing the tariff rate. Comment on the said EO. a. the EO is valid. It is a presidential prerogative to issue such; b. the EO is valid. It is issued to meet any exigencies, like tax; c. the EO is invalid. The president commits an act of intrusion into the function of the legislative body because the constitution provides that tax measure must originate from the legislative body; d. the EO is an ultra vires act of the office of the President. 24. The power to tax is plenary but not absolute because the constitution provides for its safeguards from possible abuses that the taxing authority may imposed, such as : a. due process of law b. equal protection clause c. rule of uniformity d. all of them mentioned. 25. Pursuant to RA 000 which grants 10 years tax exemption for foreign investors from filing their CITR. Adidas Corp. (USA) extend its factory in Subic Bay Export Processing Zone. 2 years later, RA 000 was repeal by RA 111 by shortening the period of exemptions to 5 years because the government realized that they are losing in terms of revenues. As counsel of the affected investors, what is your comment “ a. the withdrawal of tax exemption is untenable. The constitution provides that no law shall be passed impairing the obligations of contract; b. the withdrawal of the exemption is improper. It creates an atmosphere of uncertainty on the part of the investors and possible lost of trust on the government; c. the congress is prohibited to enact irrepealable laws. The withdrawal happens in the repealing of the law. d. The granting of such tax exemption is similar to a privilege which could be withdrawn at anytime. 26. The municipality of Tarangtang, Davao del Norte was devastated by the recent typhoon. Residents finds shelter inside the church. Hence, the municipal government sent relief goods to the residents which was received by the parish priest. Decide on the legality of such grant of relief . a. the granting of relief goods violates the constitutional separation of ch urch and the state; b. the granting of such relief goods is tantamount to supporting the church which is not allowed; c. there is no irregularity in granting such relief goods. The goods is intended for the needs of the residents being a victim of the typhoon; d. the granting of such relief is proper. It is an aid to the needy and an exercise of police power particulary for the general welfare of the people. 26.1. On the other hand, if the victims of the typhoon happens to be the member of religious organization, would such grant of relief goods proper ? a. improper due to the establishment clause under the constitution; b. improper. Because the constitution provides that no public funds shall be allotted to any religious group. c. Proper. The members are entitled to protection by the government; d. Proper. The relief goods is not intended to propagate any religious activities but for the benefits of its members as a Filipino citizen.
26.2 Due to such calamity, the doctor-priests were commissioned by the City Government to render service for the health of the residents staying inside the church. Would they be entitled to receive compensation from the public fund ? a. no. due to separation of church and the state; b. no. public money may be use to pay religious people when they served at the armed forces, penal institutions, government orphanage or leprosarium; c. they are entitled to compensation. Otherwise, it would amount to unjust enrichment of the part of the government; d. public fund may be used to pay the salaries of the doctor-priests for service rendered. No one should unjustly enriched himself at the expense of another. 27. Don Pepot owns a 5 hectares land located within the vicinity of Davao City. The St. Mary religious congregation rented the same and divided it into 5 areas as church area, charitable hospital area, convent area, medical school area and for lease area. On the church area, a church was built with a mini zoo. After the mass, devotees goes to the mini zoo where a P10.00 entrance fee is collected. Decide whether the P10.00 entrance fee is subject to tax ? a. the P10.00 entrance fee is subject to tax. Any income derived is subject to taxation; b. the P10.00 entrance fee is subject to taxation. It represent an income; c. the P10.00 entrance fee collected is exempt from taxation being operated by tax exempt entity; d. the P10.00 entrance fee collected is exempt from taxation for being minimal in nature. 27.1 Aside from the entrance fee, visitors of the zoo have to pay P2.00 in case they want to urinate in its comfort room. Strickly speaking, is the P2.00 fee collected subject to tax ? a. b. c. d.
yes. any income derived from whatever source is subject to tax; the P2.00 entrance fee is subject to taxation. It represent an income; the P2.00 entrance fee collected is exempt from taxation being operated by tax exempt entity; the P2.00 entrance fee collected is exempt from taxation for being minimal in nature.
27.2 Within the hospital area. A charitable hospital was constructed where poor patients were being treated medically free of charged. However, on one occasion, Billionaire Bill Gates pays the hospital $1M for a successful operation. For accepting the $1M issues were raised :
a. b. c. d.
1. Does the hospital ceases to be a charitable one ? the hospital remains as a charitable hospital which is its primary objective. The occasional receipt of payment is only incidental to its operation; the hospital remains as a charitable hospital. The primary purpose of the hospital is to render charity to the needy; the receipt of the $1M convert the hospital into a paying hospital. It ceased to be a charitable one; the hospital ceases to be a charitable one.
2. Is the $1M received subject to income tax ? a. yes. all income derived from whatever source is taxable; b. yes. due to absence of law granting tax exemption;
c. no. it is not the intention of the hospital to charge hospital bill. If ever patients would insist to “pay” as a sign of their gratitude, it may be treated as a donation; d. no. the occasional payment made by the patient does not convert a charitable hospital into a paying one.
a. b. c. d.
a. b. c. d.
a. b. c. d.
a. b. c. d.
3. Due to increase of patients availing the free hospitalization, the City government and the St. Mary Congregation executes a MOA that qualified poor families residing in Davao City be given a priority for all their medical needs and for which the City Council provided the Congregation a monthly subsidy of P1M. Decide whether such subsidy is proper ? the subsidy is improper. No public shall be disbursed in favor of any religious organization; the subsidy is unlawful. Due to establishment clause of the constitution; the subsidy is proper. It is intended for the health of the public and it is within the police power of the state (City Government) to provide; the subsidy is proper. It is not an aid to the congregation but intended for the public to be administer by the congregation. 4. Due to such MOA, the congregation constructed an extension clinic in Calinan, Davao City, to exclusively serve the natives residing in the hinterlands of Paquibato. Decide whether the said clinic is subject to pay realty tax ? yes. it is considered separate building and no longer directly, actually and exclusively used for charitable purposes; yes. all real property is subject to realty tax unless exempted by an ordinance/law; no. the extension is considered as an “appurtenant” of the hospital and therefore, enjoys the same exemption; no. it is a charitable clinic. 5. The hospital staffs decided to open a botica inside the hospital where medicines were procure for the patients. The City government ask your opinion whether the botica be required to have a separate business permit from the hospital ? yes. for every business activities, a business permit is needed for purposes of regulation ; yes. the botica must have its own business permit. It deals on medicines and not as treatment to the patients; no need to have business permit. The business permit of the hospital extends to the botica as a one unit operation rule; no need to have a business permit. It operates within the premises of the hospital. 6. The management of the hospital opens a carenderia adjacent to the hospital building where patients watchers take their meals for a fee, ask you opinion whether a separate business permit be required ? yes. for every business activities, a business permit is needed for purposes of regulation; yes. the carenderia must have its own business permit. It deals on foods and not as treatment to the patients; no need to have business permit. The business permit of the hospital extends to the carenderia uner the one unit operation rule; no need to have a business permit. It operates within the premises of the hospital.
a. b. c. d.
7. Would the “income” derived from the activities of the hospital, botica and carenderia be subjected to income tax ? yes. all income derived from whatever source is taxable; yes. taxes are the life and blood of the nation; no. since the hospital is exempt from income tax, all activities related thereto, also enjoys tax exemption under the “one operation rule”; no. if ever there is an accumulated income, it is used for the improvement of the hospital, botica or carenderia itself;
8. In the for lease area, the congregation constructed a building which Jolibee and Mcdo rented. Is the rental subject to income tax ? a.yes, all revenue derived from whatever source is taxable; b. yes. leasing a property for a fee is no longer within the ambit of religious acivities. Hence, taxable; c.no. because the lessor enjoys tax exemption; d. no. because the property subject of lease enjoys realty tax exemption. 9. To propagate their religion, they decided to sell its religious pamphlets in order to cover the cost of printing and the allowances of those selling them. The city council is asking whether it is proper to subject such activities of selling to a business permit ? a. no. to require them to have a business permit is tantamount to curtailment of their religious freedom; b. no. such activities is exempt from any form of taxation as an exercise of freedom of religion; c. yes. the suppose allowances of those selling the pamphlets is considered as an income. Therefore, any person who derives income from whatever source is liable to pay income tax; d. yes. for purposes of regulation. MCQ on Taxation of _______________________ 1. The management decided to give a uniform to its employees worth P1,000.00 every year. The BIR is asking your opinion whether such worth P1,000.00 is subject to income tax ? a. yes. all income derieved is taxable; b. no. it is considered as fringe benefit which is considered tax exempt; 2. Max was sued for tax evasion. Having paid the amount. He filed a motion to dismiss the criminal action including the release of his properties. Decide on whether the motion to dismiss the criminal action. a. the payment of the tax extinguish the criminal liability ; b. the payment of the tax will not extinguish the criminal liability; 2.1 Decide whether the motion to dismiss his real property should be granted : c. the payment of the tax extinguish the civil liability ; d. the payment of the tax will not extinguish the civil liability; 3. Johnny died leaving behind an estate worth P100,000.00 as reported in the estate tax return. But the BIR believes that it worth more than that amount. Hence, wanted to examine the bank account of the decedent. May the bank be ordered to submit the bank records of the decedent ?
a. b. c. d.
yes. in line with the estate tax return; yes. in view of the examination of the estate tax return; no. in view of the bank secrecy law; no. unless a consent or waiver of the decedent.
4. The assessment of the real property of Max located at Tagum City was so exorbitant that he wanted to question the same. Where should the issue be brought for re-assessment ? a. court; b. assessor’s office c. local assessment board d. mayor’s office 4.1 When the re-assessment is not favorable to the taxpayer, where should the appeal be instituted ? a. court; b. assessor’s office c. local assessment board d. mayor’s office. 4.2 In the event that the appealed decision is unfavorable, where should it be appealed ? a. court; b. provincial board of assessment. c. CTA d. SC 5. Max sold his land. what possible tax he should pay : a. sales tax b. capital gains tax c. business tax
d. percentage tax
5.1 on the other hand, if he is engage in real estate business, what possible tax he should pay whenever he sold a real property ? a. sales tax b. capital gains tax c. business tax d. percentage tax 6. Susan had an illegitimate child who was entrusted to her Lola for all the child’s needs. Who can claim the child as her or her dependent ? a. the Lola b. Susan c. the illegitimate father d. none of them
Chevron vs. BOC GR#178759 August 11, 2008 Taxation Facts : Chevron is engaged in importation of petroleum products which is immediately unloaded directly to its tanks upon arrival of the vessel. Unfortunately, the total import duties were not paid within the 30 days from the entry. Issue : what is meant by entry ? Held : The term “entry” in Tariff and customs law has a triple meaning. (1) the documents filed at the customs house; (2) the submission and acceptance of the documents and
(3) the procedure of passing goods through the customs house. Issue : when is there an entry ? Held : The operative act that constitutes “entry” of the imported articles at the port of entry is the filing and acceptance of the “specified entry form” together with the other documents required by law and regulations. Note : These duties and taxes must be paid in full before the BOC can allow the release of the imported articles from its custody. Issue : whether an injunction before the court be allowed to stop the implementation of the collection of customs duties ? NO Held : Taxes are the lifeblood of the nation. Tariff and customs duties enables the government to carry out the functions for the welfare of its constituents. Hence, their prompt and availability is an imperative need. and they must be collected without unnecessary hindrance. Concept of fraud Fraud comprises anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another. Hence, due to the presence of fraud, the prescriptive period of the finality of liquidation under Section 1603 was inapplicable: Section 1603. Finality of Liquidation. – When articles have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlements of duties will, after the expiration of one (1) year, from the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative. Issue : what would be the effect if there is a failure to pay the customs duties within the nonextendible period of 30 days from entry ? Held : When the importer fails to file the entry within the said period, he “shall be deemed to have renounced all
his interests and property rights” to the importations and these shall be considered impliedly abandoned in favor of the government: Guiding principle An Abandoned Article Shall Ipso Facto be Deemed the Property of the Government. Section 1802 of the TCC provides: Sec. 1802. Abandonment of Imported Articles. - An abandoned article shall ipso facto be deemed the property of the Government and shall be disposed of in accordance with the provisions of this Code. Explanation The term “ipso facto” is defined as “by the very act itself” or “by mere act.” or “by the fact itself.” Thus, there was no need for any affirmative act on the part of the government with respect to the abandoned imported articles since the law itself provides that the abandoned articles shall ipso facto be deemed the property of the government. Ownership over the abandoned importation was transferred to the government by operation of law under Section 1802 of the TCC, as amended by RA 7651. Issue : whether there is a need for an abandonment proceedings be conducted before the BOC ? NO Held : By using the term “ipso facto” in Section 1802 as amended by RA 7651, the legislature removed the need for abandonment proceedings and for a declaration that the imported articles have been abandoned before ownership thereof can be transferred to the government. Issue : when is there an abandonment ? Held : Section 1801. Abandonment, Kinds and Effect of. - An imported article is deemed abandoned under any of the following circumstances: a. When the owner, importer, consignee of the imported article expressly signifies in writing to the Collector of Customs his intention to abandon; or b. When the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft Note to the examinee It is enough that the importer fails to file the required import entries within the reglementary period. Issue : whether RA 7651 is arbitrary and confiscatory law ?
Held : Petitioner claims it is arbitrary, harsh and confiscatory to deprive importers of their property rights just because of their failure to timely file the IEIRD. In effect, petitioner is challenging the constitutionality of Sections 1801 and 1802 by contending that said provisions are violative of substantive and procedural due process. Collateral attack on a presumably valid law is not allowed. Held : We have ruled time and again that : 1. The constitutionality or validity of laws, orders, or such other rules with the force of law cannot be attacked collaterally. There is a legal presumption of validity of these laws and rules. Unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands. Law is deemed valid unless declared null and void by a competent court. The question of constitutionality must be raised at the earliest opportunity. Issue : whether there was abandoment when chevron failed to pay the import duties within the 30 days from entry ? Held : Petitioner’s failure to file the required entries within a non-extendible period of 30 days from date of discharge of the last package from the carrying vessel constituted implied abandonment of its oil importations. This means that from the precise moment that the nonextendible 30 day period lapsed, the abandoned shipments were deemed the property of the government. Issue : Since there is an abandonment. When Chevron withdraw the petroleum from is tank, is as if buying from the government the petroleum ? YES Held : When Chevron withdrew the oil shipments for consumption, it appropriated for itself properties which already belonged to the government. Accordingly, it became liable for the total dutiable value of the shipments of imported crude oil.
