BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)

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57

Chapter 11: PERCENTAGE TAXES

CHAPTER 11

PERCENTAGE TAXES
Problem 111
1. False Non-VAT business is not allowed to have Input VAT.
2. False expressly exempted from business tax.
3. True
4. True
5. False 3% tax on gross receipts within. Gross receipts outside the Philippines is not subject
to business tax in the Philippines.
6. False 2% percentage tax.
7. False the VAT rate should be 12%.
8. False expense of the service consumer
9. False 10% on foreign insurance company
10. False Gross receipts on cabaret and nightclubs are now included in 12% VAT taxable
transactions.
11. False only gross receipts within.
12. True
Problem 112
1. False minimum quarterly receipts or actual quarterly gross receipts whichever is higher.
2. True
3. False grants from the government
4. False Subject to VAT for being registered as VAT
5. False exempt
6. True
7. False amusement taxes ranging from 10% to 30%
8. True
9. False Horse races cost of winning ticket is deductible
10. True
Problem
1. False
2. True
3. False
4. True
5. False
6. True
7. False
8. True
9. True
10. False
11. False

11 3
business tax.
3% percentage tax.
the percentage tax forms part of sellers expense
The of 1% is applicable for sale of shares of stock in the stock exchange.

7% percentage tax
within 20 days

Problem 11 4
1. B
8. A
2. C
9. D

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

3.
4.
5.
6.
7.

B
C
B
D
C

10.
11.
12.
13.
14.

D
D
C
B
C

Problem 11 5
C
Percentage tax (P40,000 x 3%) x 12
Problem 11 6
Exempt

P14,400

Problem 11 7
C
Business tax (P540,000 x 3%)

P16,200

Note: The actual sale has not yet reached the VAT threshold exceeding P1,500,000 in a year.
Problem 11 8
A
Percentage tax (P28,000/112%) x 3%
VAT (P28,000/9.3333)
Surcharge (P3,000 x 50%)
Business tax
Problem 11 9
C
Percentage tax payable (P500,000 x 3%)
Problem 11 10
C
Percentage tax due (P54,000 + P18,000 + P36,000) x 3%

Problem 11 11
D
Percentage tax (P65,700 x 3%) x 5

750
3,000
1,500
P 5,250

P 15,000

P 3,240

P9,855

Should be P9,855 instead of P9,859.

Problem 11 12
D
Taxi (P98,600 x 3%) x 10
Bus (P1,000,000 x 3%)
Common carrier tax due
Problem 11 13
D
Total gross receipts (P1,000,000 + P6,000,000)
Multiplied by applicable business tax rate
Total business tax
Note: Common carrier by sea is subject to VAT of 12%.

P29,580
30,000
P59,580

P7,000,000
12%
P 840,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

Problem 11 14
A
Percentage tax (P10,000,000 x 3%)
VAT (P6,000,000 + P1,000,000) x 12%
Average business tax in a year
Divided by number of quarter in a year
Estimated average business tax per quarter

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

Problem 11 15
C
Percentage tax (P10,000,000 x 3%)

P 300,000

Problem 11 16
A
Outside for trip - Manila to USA (P1,000,000 x 3%)
In the Philippines for trip Manila to USA (P1,100,000 x 3%)
Philippine business tax

P 30,000
33,000
P 63,000

Problem 11 17
C
Percentage tax water franchise (P1,000,000 x 2%)

P 20,000

Problem 11 18
B
Percentage tax water franchise (P2,000,000 x 2%)
Percentage tax radio franchise (P10,000,000 x 3%)
Total percentage tax
Problem 11 19
B
Percentage tax (P5,000 + P2,000) x 10%
Problem 11 20
Exempt

P 700

Problem 11 21
D
Service charge (P75,000/10%)
Percentage tax (P750,000 x 10%)
Total collection
Problem 11 22
P -0-

P 40,000
300,000
P 340,000

P 750,000
75,000
P 825,000

Problem 11 23
D
Percentage tax (P200,000 x 10%)
Problem 11 24
D
Amusement tax (P500,000 + P200,000 + P100,000) x 18%
Problem 11 25
1.
A
Percentage tax (P2,000,000 + P1,000,000) x 10%

P 20,000

P 144,000

P300,000

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Chapter 11: PERCENTAGE TAXES

2.

D
Exempt

Problem 11 26
B
Percentage tax [P1,000,000 - (P200,000/100)] x 10%

P 99,800

Problem 11 27
A
Percentage tax (P100,000 P1,000) x 10%

P 9,900

Problem 11 28
B
Percentage tax [P1,000,000 x .005)

P 5,000

Problem 11 29
D
P - 0 -. The sale is subject to capital gains tax because the shares of stock were sold directly to
the buyer.
Problem 11 30
C
Percentage tax [400,000 x P12) x 1%

P 48,000

400,000/1,150,000 = 34.5% more than 33 1/3% = 1% percentage tax.

Problem 11 31
D
Percentage tax [P600,000 x 4%)

P 24,000

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

Problem 11 32
B
Interest income with maturity more than 5 years (P400,000 x 1%)
Leasehold income (P300,000 x 7%)
Total gross receipt tax

P 4,000
21,000
P25,000

Note: The net trading loss is deductible only from trading gain of the same taxable year.
Problem 11 33
D
Interest income with maturity less than 5 years (P600,000 x 5%)
Royalty income (P300,000 x 7%)
Gain from sale of derivatives (P200,000 x 7%)
Total gross receipt tax

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

Note: The net trading loss for 2005 is not deductible from trading gain of 2006.
Problem 11 34
A
Percentage tax [P62,400/(100%-1%-3%) x 3%

P 1,950

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

Problem 11 35
C
Net payment (P200,000 x (100% - 1% - 2%)

P 194,000

Problem 11 36
Gross receipts (P480,000 + P190,000 + P100,000 + P2,000,000 + P2,500,000)
Multiplied by applicable business tax rate - VAT
Business tax liability

P5,270,000
12%
P 632,400

Note: Sale of service should be based on gross receipts (collections) while sale of foods and
beverages should be based on gross sales (revenues).
Problem 11 37
Minimum quarterly amount City taxi (P98,600 x 2)
Multiplied by percentage tax rate
Percentage tax payable 2nd quarter (answer)

P197,200
3%
P 5,916

The total actual gross receipts and related percentage taxes from April to June (2 nd quarter) were
lower than the minimum, hence not applicable.
Problem 11 38
Tax units
1
2
3
4
5
Total amount = higher amount
Multiplied by percentage tax
Percentage tax

Actual
100,000
80,000
95,000
90,000
105,000
470,000

Minimum
98,600
98,600
98,600
98,600
98,600
493,000
3%
14,790

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

Problem 11 39
Gross receipts (P2,500,000 + P5,000,000 + P3,000,000 + P1,500,000)
Multiplied by common carriers (by air /sea) VAT rate
Business tax
Notes:
1.

2.

P12,000,000
12%
P 1,440,000

Common carriers by air and sea relative to the transport of passengers within the
Philippines is subject to 12% VAT. Transport of passengers by land however is subject to
3% percentage tax.
International air carriers and international shipping carriers doing business in the
Philippines shall pay a tax of three percent (3%) of their quarterly gross receipts.

Problem 11 40
Gross receipts (P100,000 + P50,000 + P150,000 + P200,000)

P 500,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

Multiplied by applicable business tax rate

Business tax for the quarter

12%
P 60,000

Note: R.A. 9337 changed the business tax rate of day and night club from 18% to 12% VAT.
Problem 11 41
Gross receipts
Multiplied by applicable franchise tax rate VAT
Franchise tax
Problem 11 42
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000)
Multiplied by applicable business tax rate
Franchise tax due first quarter

P50,000,000
12%
P 6,000,000

P7,000,000
12%
P 840,000

Note: During the taxable year, its gross receipts exceeded P10,000,000.
Problem 11 43
Gross receipts
Multiplied by percentage tax rate collected
Percentage tax to be remitted

P 500,000
10%
P 50,000

Problem 11 44
Total gross receipts (P600,000 + P400,000)
Multiplied by percentage tax for professional basketball organization
Percentage tax

P1,000,000
15%
P 150,000

Problem 11 45
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000)
Multiplied by applicable business tax rate for cockpits
Total business tax

P1,650,000
18%
P 297,000

Problem 11 46
Income tax on cockfighting winnings (P500,000 x 20%)
Percentage tax on horseracing winnings (P800,000 x 10%)
Income tax on horseracing winnings (P800,000 x 20%)
Total tax on winnings

Problem 11 47
1.
Percentage tax (P0.50 x 1,000,000) x 0.005
2.

August 20, 2005 = last day of remittance without penalty.

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

P 2,500

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Chapter 11: PERCENTAGE TAXES

Problem 11 48
Gross receipts tax on:
Rent income (P30,000 x 7%)
Royalty income (P20,000 x 7%)
Interest income (P50,000 + P20,000 + P10,000) x 5%
Total percentage tax

Problem 11 49
1.
Year
Remaining maturity
2005
9
2006
8
2007
7
2008
6
2009
5
Total gross receipt tax paid
2.

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

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

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

Amount
Year
Remaining maturity
of interest, etc.
2005
4
P 200,000
2006
3
200,000
2007
2
200,000
2008
1
200,000
2009
Less than 1 year
200,000
Total gross receipt tax as recomputed
Less: Gross receipt tax previously paid
Gross receipt tax still due

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

Gross receipt tax

P 2,000
2,000
2,000
2,000
10,000
P18,000

Gross receipt tax

P10,000
10,000
10,000
10,000
10,000
P50,000
18,000
P32,000

Problem 11 50
Franchise
P 400,000
3,000,000
P3,400,000
100,000
P3,300,000

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

1. Telephone services

10%
P330,000

10%
P168,000

2. Water franchise

2%
P 66,000

3%
P 50,400

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

(P1,800,000 x 12%)

P360,000

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

P216,000

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BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

Note: The business tax on fast food is based on the revenue because the business is a
combination of sales of goods and service. Moreover, the fast food business is subject
to12% VAT because the total revenue exceeded the P1,500,000 threshold.
Problem 11 51
Collections:
Revenues
Accounts receivable
Advances
Gross receipts

Comprehensive Problem
Current
P 500,000
300,000
200,000
P1,000,000

Previous
P300,000
100,000
.
P400,000

3%
P 30,000

3%
P 12,000

2. Race track

30%
P300,000

30%
P120,000

3. Boxing exhibition

10%
P100,000

10%
P 40,000

4. Water utilities

2%
P 20,000

5. Life insurance

5%
P 50,000

5%
P 20,000

6. Agents of foreign insurance companies

10%
P100,000

10%
P 40,000

7. Overseas dispatch

10%
P100,000

10%
P 40,000

Computation of percentage taxes:

1. Common carrier of passengers (assume land transport)

2%
8,000