Choose the letter of the BEST answer:

1. Statement 1: The Constitution cannot take away the inherent powers of the state but may
only prescribe its limitations.
Statement 2: No laws are necessary to confer the inherent powers of the state upon any
government exercising sovereignty.
a. Only Statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
2. They exist independent of the constitution being fundamental power of the state, except
a. Power of Taxation
b. Police Power
c. Power of Eminent Domain
d. Power of Recall
3. Which of the following statements is NOT correct?
a. Taxes may be imposed to raise revenue or to provide disincentives to certain
activities within the state.
b. The state can have the power of taxation even if the constitution does not expressly
give it to the power to tax.
c. In the exercise of power of Taxation, the State can tax anything at any time.
d. The power of taxation in the Philippine Constitution are grants of power and not
limitations on taxing power.
4. The following are the similarities among the Fundamental Powers of the State, except:
a. They can be abolished by the Constitution.
b. They constitute the three methods by which the state interferes with private
property rights.
c. Each presupposes an equivalent compensation to the inhabitants.
d. The emergence of the State carries with it these fundamental powers.
5. Which of the following is correct?
Legislative Administrative
a. Fixing Tax Rates Yes Yes
b. Valuation of object of Tax Yes No
c. Collection of Tax Yes No
d. Assessment of Tax Liability No Yes
6. Where does taxing power of provinces, municipalities and cities precede from?
a. Constitutional Grant
b. Legislative enactment
c. Presidential Decree
d. Local Legislation
7. No law granting any tax exemption shall be passed without the concurrence of-
a. Majority of all members of the congress.
b. 2/3 vote of all members of the congress.
c. ¾ vote of all members of the congress.
d. Unanimous vote of all members of the congress.

1|TAXATION
8. _________ is finding out means of improvement in production so as savings would
compensate for taxes paid by manufacturers or producers.
a. Shifting
b. Capitalization
c. Transformation
d. Tax Dodging
9. The exploitation by the tax payer of legally permissible alternative tax rates or methods
of assessing taxable property or income, in order to reduce tax liability. It is otherwise
known as tax minimization.
a. Tax Exemption
b. Tax Evasion
c. Tax Avoidance
d. Transformation
10. Transfer of the tax burden by one whom the tax is assessed to another
a. Shifting
b. Capitalization
c. Transformation
d. Tax Exemption
11. In 2018, ABC Corporation gave the following fringe benefits to its employees:

To managerial employees P1,300,000

To rank and file employees P5,000,000
The allowable deduction from the gross income of the corporation for the fringe benefits
given to employees is
a. P2,000,000 c. P6,320,000
b. P810,000 d. P7,000,000
12. Larry sold his residential house for P5,000,000. Its FMV when he inherited it was
P6,000,000 although its present FMV is P8,000,000. The tax on the above transaction is:

a. P360,000 capital gains tax

b. P480,000 capital gains tax
c. 30% donor’s tax
d. Value added tax
13. Mikaela Flower Shop Inc. purchased a motor vehicle in 2018 for the use of its manager,
Mike. It was registered under Mike’s name. The cost of the vehicle was P400,000. The
vehicle will be partly used for the benefit of the company.

How much is the fringe benefit tax?

a. P188,235 c. P37,647
b. P215,385 d. nil
14. The taxpayer is a married nonresident alien engaged in business in the Philippines with
three(3) qualified dependent children. His country gives a nonresident Filipino with
income therefrom a basic personal exemption of P40,000 & P30,000 additional personal
2|TAXATION
 exemption for each qualified dependent child. For taxable year 2017, he is entitled to total
personal exemptions of:
a. P50,000 c. P130,000
b. P115,000 d. nil

15. Ms. EBQ operates a convenience store while she offers bookkeeping services to her
clients. In 2018, her gross sales amounted to P800,000, in addition, to her receipts from
bookkeeping services of P300,000. She incurred cost of sales and operating expenses
amounting to P600,000 and P200,000, respectively. She already signified her intention to
be taxed at 8% income tax rate in her 1st quarter return.
How much is the income tax liability for the year.
a. P68,000 c. P88,000
b. P10,000 d. P60,000
16. Based on the preceding number, if Ms. EBQ failed to signify her intention to be taxed at
8% income tax rate ion gross sales on her initial Quarterly Income Tax Return, her income
tax liability is:
a. P68,000 c. P88,000
c. P10,000 d. P60,000
17-18 are based on the following data:
Chris, married, supporting 3 minor children had the following data for taxable year 2018:

Philippines Abroad
Business income P1,000,000 $20,000
Professional income 400,000 10,000
Salaries 200,000
Business and professional
Expenses 250,000 8,000
Income tax paid 4,000

NOTE: $1 = 50
17. If he is a resident citizen, his income tax payable is:
b. P789,000 c. P589,000
c. P570,500 d. P434,000
18. If he is a non-resident alien not engaged in trade or business, disregarding professional
& business data, the total income that should be withheld from his income is:
a. P50,000 c. P31,500
b. P18,000 d. P338,500
19. On February 2019, the taxpayer tendered his resignation to concentrate on his business.
His total compensation income amounted to P150,000, inclusive of benefits of P20,000.
His business operations for 2019 remains the same. He opted for the 8% income tax rate.
His income tax liability is:
a. P200,000 c. P190,400
b. P589,200 d. P493,000

3|TAXATION
20. In 2017, Jana Corporation purchased a residential house and lot for P2,300,000. The
property was later sold to its General Manager for P1,980,000. The fair market value per
Assessor’s office is P2,200,000 while the zonal value is P2,100,000.
How much is the fringe benefit tax?
a. P103, 529 c. P150,588
b. P56, 471 d. nil
21. One of the following is NOT a distinction between Donation inter vivos and Donation
mortis causa.
a. Donation inter vivos takes effect during the lifetime of the grantor while Donation
mortis causa takes effect after the death of the grantor.
b. Donation inter vivos is subject to Donor’s Tax while Donation mortis causa is subject
to Estate Tax.
c. Donation inter vivos requires public document while Donation mortis causa may
not require a public document.
d. Donation inter vivos is valued at fair market value at the time the property is given
while Donation mortis causa is valued at the time of the death of the grantor.
22. For the donation to be valid acceptance of the donation must be made:
a. During the lifetime of the donor ONLY
b. During the lifetime of the done ONLY
c. During the lifetime of the donor and the donee
d. None of the choices
23. Which of the following statement is CORRECT?
I. A donation by a nonresident alien of shares of stock of a domestic corporation is
subject to donor’s tax if such corporation have acquired business situs in the
Philippines.
II. A donation by a resident alien of share of stock of a foreign corporation will only
be subject to donor’s tax if at least 80% of the business of such corporation is
located in the Philippines.
III. A donation by a nonresident citizen of a franchise is subject to donor’s tax even if
such franchise is exercised outside of the Philippines.
a. III only c. III and IV only
b. IV only d. II, III and IV only
24. Statement 1: Donor’s tax shall be levied, assessed, collected and paid upon the transfer of
property by any person, resident or non-resident, as a gift.
Statement 2: The donor’s tax shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect, and whether the property is real or personal, tangible
or intangibles.

a. Both statements are TRUE

b. Both statements are FALSE
c. ONLY statement 1 is TRUE
d. ONLY statement 2 is TRUE

4|TAXATION
25. If an individual performs services for a creditor who in consideration thereof cancels the
debt, the cancellation of indebtedness may amount to:
a. Gift
b. Capital contribution
c. Donation inter vivos
d. Payment of income
26. Jay sold his car to Jana for P200,000. Jay’s car costs P500,000 and had a fair market value
of P400,000 at the time of sale. What is the tax consequence of the sale?
a. There is a taxable gift of P300,000
b. There is a taxable gift of P200,000
c. The transfer is for insufficient consideration, hence, not subject to donor’s tax
d. The transfer involved a personal property, hence, not subject to donor’s tax
Next three questions are based on the following data:
Rody, a resident citizen made the following donations.
a) To Mar, a land worth P450,000 in Manila
b) To Leni, jewelry worth P100,000 in Japan
c) To Miriam, PLDT shares amounting to P150,000
d) To Jojo, a building in Italy P1,600,000 mortgaged for P50,000 assumed by the done
e) To Allan, land in Davao worth P300,000
f) To Trillanes, P300,000 cash, PNB New York
g) P200,000 receivable to Joy, 50% condoned by Rody
Rody also transferred the following properties:
Selling Price Fair Market Value

Car, Makati P200,000 P300,000

Car, Malaysia P300,000 P200,000
Rest house, Tagaytay P1,000,000 P2,000,000
Rest house, Malaysia P1,500,000 P2,500,000
27. How much is the Gross gift?
a. P5,200,000 c. P4,100,000
b. P4,200,000 d. P3,200,000
28. If he is a non-resident Alien, his gross gift is:
a. P3,200,000 c. P1,100,000
b. P1,200,000 d. P850,000
29. If he is a non-resident Alien, and there is a reciprocity law, his gross gift is:
a. P850,000 c. P1,050,000
b. P950,000 d. P700,000
30. Who of the following cannot claim P10,000 exemption on gross gifts made before 2018
given on account of marriage?
a. Resident citizen c. Nonresident citizen
b. Resident alien d. Nonresident alien

5|TAXATION
The next eight questions are based in the following data:
On February 25,2017, Mr. and Mrs. Salomon donated their conjugal land worth P500,000 to
their three sons, on account of marriage to one of them who got married 5 months ago.
On June 9, 2017, they also donated to the child of Mrs. Salomon by first marriage, jewelry
worth P75,000 on account of marriage more than a month after the donation.
Finally, on December 25,2017, they donated to the nephew of Mr. Salomon a building worth
P750,000, 40% of which was co-owned by their Kumpare who agreed to the donation and
executed the necessary documents donating his share.
31. The donor’s tax due on the February 25, 2017 donation should be:
a. P14,000 for Mr. and Mrs.
b. P3,600 each for Mr. and Mrs.
c. P4,000 each for Mr. and Mrs.
d. P5,750 each for Mr. and Mrs.
32. The donor’s tax due on the February 25, 2017 assuming the calendar year is 2018:
a. P14,000 for Mr. and Mrs.
b. P3,600 each for Mr. and Mrs.
c. P4,000 each for Mr. and Mrs.
d. P0 for each spouse
33. The donor’s tax due on June 9, 2017 donation should be:
a. Mr. P0; Mrs. P1,875
b. Mr. P11,250; Mrs. P4,700
c. Mr. P11,250; Mrs. P1,100
d. Mr. P11,250; Mrs. P1,875
34. The donor’s tax due on June 9, 2017 assuming the calendar year is 2018:
a. Mr. P2,250 for each spouse
b. Mr. P11,250; Mrs. P4,700
c. Mr. P11,250; Mrs. P1,100
d. Mr. P11,250; Mrs. P1,875
35. The donor’s tax due on the December 25, 2017 for Mr. and Mrs. Are:
a. Mr. P9,875; Mrs. P13,500
b. Mr. P67,500; Mrs. P67,500
c. Mr. P9,000; Mrs. P13,500
d. Mr. P9,000; Mrs. P67,500
36. The donor’s tax due on the December 25, 2017 assuming the calendar year is 2018:
a. Mr. P9,875; Mrs. P13,500
b. Mr. P67,500; Mrs. P67,500
c. Mr. P9,000; Mrs. P13,500
d. Mr. P9,000; Mrs. P67,500
37. The donor’s tax due for their Kumpare on December 25, 2017 is:
a. P90,000 c. P0
b. P6,000 d. P30,000

6|TAXATION
38. The donor’s tax due for their Kumpare on December 25, 2017 assuming the taxable year
is 2018
a. P90,000 c. P0
b. P18,000 d. P3,000
39. When a donor with several donations during the year fails to file the donor’s tax return
for each of the dates the donations were made (select the wrong statement) :
a. Such failure shall be cured by filing a donor’s tax return at the end of the year
reflecting all donations made within the year and paying the taxes shown in that
one return.
b. Each failure is subject to penalties for non-filing of return and nonpayment of tax on
time.
c. He can voluntarily file late the donor’s tax return for each date that donations were
made and make payments on the tax due shown on each return, with penalties.
d. None of the above.
40. Statement 1: A donation can be both part of the gross gift of the donor and a taxable
income of the donee.
Statement 2: A donation may be exempt from donor’s tax but not necessarily a deduction
from the donor’s gross income.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false.
Use the following data for the next four questions:
41. During the current year, Mr. and Mrs. Cabarles, non-resident citizens, donated the
following:
September 25: To Leona, a legitimate child, on account of marriage last month a conjugal
property located in the Philippines, FMV, P620,000.
To Leo, nephew of Mr. Cabarles, on account of marriage, a property located
in USA exclusively owned by him with FMV of P150,000 (gift tax in USA,
P5,500).
October 9: To Leonor, a legitimate child, conjugal property in the Philippines with
FMV P100,000.
The tax gift payable on the September 25 gifts of the husband assuming 2017 taxable year
is:
a. P8,000 c. P3,375
b. P6,500 d. P12,000
42. Using the preceding number, the tax gift payable on the October 9 gift of the husband is:
a. P14,000 c. P500
b. 1,800 d. P4,200
43. The tax gift payable on the September 25 gifts of the husband assuming 2018 taxable year
is:
a. P5,000 c. P7,200
b. P3,000 d. P12,600
7|TAXATION
44. Using the preceding number, the tax gift payable on the October 9, 2018 gift of the
husband is:
a. P8,000 c. P7,100
b. P3,000 d. P12,600
45. Statement 1: The commissioner of Internal Revenue shall have authority to grant under
meritorious cases, a reasonable extension of not more than 30 days filing the donor’s tax
return.
Statement 2: In case of gifts made by nonresidents, the return may be filed with
Philippines Embassy or Consulate in the country where he is domiciled at the time of the
transfer, or directly with the Office of the Commissioner.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

46. Mr. Medina, not a VAT – registered person, has the following data for the year 2018:
Sale of fresh fruits ……………..500,000
Sale of fresh vegetables …….500,000
Sale of dried fish ………………..500,000
Sale of refined sugar ………….1,000,000
Sale of cooking oil ………………1,000,000
Only 50% of the above sales were collected.

How much is the VAT or percentage tax for the year 2018?
a. 30,000 c. 75,000
b. 45,000 d. 210,000

47. Ms. Miranda, not a VAT – registered, has the following data for the taxable year 2018:

Accounts Receivable, 12/31/2017 ………..500,000

Accounts Receivable, 12/31/2018 ………..300,000
Sales …………………………………… 1,300,000

If Ms. Miranda isa seller of goods, how much is the percentage tax during the year?
a. 45,000 c. 51,000
b. 39,000 d. nil
48. If Ms. Miranda is a seller services, how much is the percentage tax during the year?
a. 45,000 c. 51,000
b. 39,000 d. nil
49. If Ms. Miranda is a self-employed and she opted to be taxed at 8% income tax rate, how
much is the percentage during the year?
a. 45,000 c. 51,000
b. 39,000 d. nil

8|TAXATION
50. Peter Parker is a CPA practitioner. His gross receipts, expenses, and other data for 2018
taaxble year are provided below:

Gross receipts ………………………..2,800,000

Cost of direct services ……………….1,200,000
Operating expenses ……………………900,000
Rental Income ………………………....575,000

Which of the ff. statements is correct?

a. Peter Parker is subject to 3% OPT under section 116 of Tax Code, as amended
b. Peter Parker may choose to be taxed at 8% income tax rate in lieu of the graduated
income tax table and section 116 of the Tax Code, as amended
c. Peter Parker is subject to value added tax
d. None of the above
51. All of the following, except one, are not subject to common carrier’s tax
a. owner of a parking lot/building
b. rent-a-car companies
c. common carriers engaged in carrier of goods or cargo
d. domestic airline companies
52. Bictory Liner Co. is a common carrier with passenger buses and cargo trucks. For the
month, it had the ff. data on receipts, taxes not included:
From transport of passengers ………………….800,000
From transport of cargoes ……………………..200,000
From busrentals for school field trips …………400,000

Common carriers tax is:

a. 36,000 c. 24,000
b. 12,000 d. nil
53. Bangsamoro Lines, a VAT – registered person, has the ff. gross receipts in February:

Bus 1 (carriage of goods, 18,000) ……………100,000

Bus 2 (carriage of goods, 13,500) ……………165,000
Taxi ……………………………………………90,000
Jeepney ………………………………………...35,500
Cargo Truck ……………………………………45,000
Sea Vessel …………………………………….250,000
Additional Information:
Salaries of drivers and conductor ……………..125,000
Cost of oil and gasoline ……………………….175,000

During the month, Bus 1 was bumped by another bus owned by Abusayaf lines and paid
Bangsamoro Lines 120,000 for the damage.
The percentage tax due on Bangsamoro Line in February is:
a. 10,770 c. 11,715
b. 14,370 d. nil
9|TAXATION
54. Damian Transport Company had the ff. gross receipts for the month:
From transport of passengers ………………485,000
From transport of cargo ……………………220,000
From rental of cargo trucks ………………….33,000
From “rent-a-car” to balikbayans ……………30,000

Payments to VAT registered persons during the month amounted to 99,000.

The percentage tax due is:
a. 22,740 c. 7,590
b. 21,150 d. 15,450

55. Japan Airlines Inc., a resident foreign corp. has the ff. Collections for the month of May
2014:
Passengers airfare from Japan to Philippines …………..1,800,000
Passengers airfare from Philippines to Japan …………..1,500,000
Airfare for cargoes from Japan to Philippines ……………700,000
Airfare for cargoes from Philippines to Japan …………..1,300,000
How much is the common carriers tax payable for the month?
a. 60,000 c. 84,000
b. 39,000 d. 159,000
56. One of the ff. is subject to three percent (3%) percentage tax
a. Establishments whose annual gross sales or receipts exceed 3,000,000 and who are VAT
registered.
b. Businesses whose annual gross sales or receipts exceed 3,000,000 and who are not VAT
registered.
c. VAT registered establishments whose annual gross sales or receipts do not exceed
3,000,000.
d. Establishments whose annual gross sales or receipts do not exceed 3,000,000 and who
are not VAT registered.

57. GasGas Company operates a gas and radio/television broadcasting franchise. It has the
ff. data for the year 2013:
Gross receipts:
Gas franchise ………………………..2,000,000
Radio franchise ……………………..10,000,000
Operating expenses ………………...(5,000,000)
Net income ………………………..…7,000,000

The total franchise tax:

a. 340,000 c. 40,000
b. 300,000 d. 190,000
58. GMRC Broadcasting Company, non-vat holder of a franchise to operate a readio and
television network reported the ff. gross receipts:

10 | T A X A T I O N
 Year Gross Receipts
2014 9,000,000
2015 12,000,000
The business tax liability is:
2014 2015
a. 270,000 360,000
b. 1,080,000 1,440,000
c. 270,000 1,440,000
d. 1,080,000 360,000
59. Neralco is a holder of franchise to sell electricity. It also leases its first class auditorium
and theatre. In a particular month, its gross receipts from sale of electricity amounted to
10,000,000. The gross receipts from the lease of its auditorium and theatre amounted to
2,000,000. How much is the franchise tax due for the month?

a. 1,440,000 c. 300,000
b. 1,200,000 d. nil
60. Which of the following is subject to 3% percentage tax under Section 116 of the Tax Cose,
as amended?
I. Fruit dealer whose gross receipts for the year amounted to 2,500,000 only.
II. An individual taxpayer whose gross sales for the year amounted to 100,000.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
61. Which of the following statement is false? Transfer tax is
a. Imposed upon gratuitous transfer of property
b. Of two kinds: estate and donor’s tax
c. Classified as national tax
d. None of the above

62. I – A sale is a form of transfer transaction that requires payment of transfer tax
II – Transfer tax accrues at the time of transfer of the decedent’s property or rights to the
heir
a. Only I is correct
b. Only II is correct
c. Both statements are correct
d. Both statements are incorrect
63. Mortis causa transfer of property is effected
a. When the property is received by heir
b. When court awarded the ownership of property to a particular heir
c. Upon death of the decedent
d. Upon payment of estate tax

11 | T A X A T I O N
64. The subject matter or object of transfer taxes is
a. Right to transmit
b. Decedent
c. Properties of decedent
d. Beneficiaries
65. Inheritance received is construed as unequal distribution of wealth resulting to the
imposition of estate tax describes:
a. Redistribution of wealth theory
b. Benefit-received theory
c. State partnership theory
d. Ability to pay theory
66. The tax imposed on the right to transmit property at death is known as:
a. Donor’s tax c. Business tax
b. Estate tax d. Income tax
67. The tax imposed on the transfer of property without consideration between two or more
persons who are living at the time the transfer is made
a. Donor’s tax c. Business tax
b. Estate tax d. Income tax
68. Which among the following statement is correct?
a. Estate taxation is governed by the statute in force at the time of death of the decedent
b. Estate tax accrues as of the death of the decedent
c. Succession takes place and the right of the State to tax the privilege to transmit the
estate vests instantly upon death
d. All of the above
69. The taxpayer in estate tax is:
a. Decedent c. Heirs or successor
b. Estate d. Administrator of executor
70. Estate tax accrues from:
a. Moment of death of the decedent
b. Moment of notice of death is filed
c. Moment of estate tax return is filed
d. Moment the properties are delivered to the heirs
71. Who has the personal liability to pay estate tax?
a. The decedent
b. Estate
c. Heirs or successors
d. Administrator or executor

12 | T A X A T I O N
72. It is a well settled rule that estate taxation is governed by the statute in force at the time
of:
a. Creation of the last will testament or death of the decedent in case of intestate
succession
b. Death of decedent
c. Filing of estate tax return
d. Either B or C whichever will result to higher estate tax liability
73. An executor administrator, after paying the estate tax and to escape a future liability for
a deficiency estate tax, must secure a written discharge from personal liability from:
a. The heirs
b. The CIR
c. The court
d. Need not to secure
74. An act whereby a person is permitted, with the formalities prescribed by law, to control
to a certain degree the disposition of his estate, to take effect after his death.
a. Contract
b. Trust
c. Will
d. Legacy
75. The persons prohibited by law to make a will are:
I. Those below 18 years of age
II. Those who are not of sound mind at the time of its execution
a. I only
b. II only
c. Both I and II
d. Neither I or II
76. The following are the elements of succession, except:
a. Decedent c. Heir
b. Estate d. Executor

77. The portion of the decedent’s estate which the law reserves to his compulsory heir is
called:
a. Legitime c. Legacy
b. Free Portion d. Bequest
78. A person who inherits specific personal property thru will:
a. Devisee c. Heir
b. Legatee d. Successor

13 | T A X A T I O N
79. A person who inherits specific real property thru will
a. Devisee c. Heir
b. Legatee d. Successor
80. One of the following is subject to estate tax on properties situated within the Philippines
only
a. Resident citizen
b. Resident alien
c. Nonresident citizen
d. Nonresident alien
81. Which is not a test of situs
a. Residence of debtor in accounts receivable
b. Place of storage in case of shares of stock
c. Location of depositary bank
d. Place of exercise in case of copyright
82. Which property is valued using the book value?
a. Bonds being traded in the bond market
b. Annuity
c. Shares of stock not traded in stock market
d. Usufruct
83. To prevent undue avoidance of tax, inter-vivos disposition in contemplation of death is
subject to:
a. Donor’s tax c. Income tax
b. Estate tax d. Excise tax
84. Exclusive property of wife is called:
a. Income c. Paraphernal
b. Capital d. Equity
85. Exclusive property of husband is called:
a. Income c. Paraphernal
b. Capital d. Equity
86. Which of the following is not allowed with tax credit for payments of estate tax on foreign
countries?
a. Resident alien
b. Nonresident citizen
c. An alien who was a resident of his own country at the date of death
d. An American residing in the Philippines at the date of death

14 | T A X A T I O N
87. If the decedent died before 2018, the estate tax return should be filed:
a. At the time of death
b. Within 30 days after death
c. Within six month after death
d. Within 1 year after death
88. If the decedent died on or after Jan 1 2018, the estate tax return should be filed:
a. At the time of death
b. Within 30 days after death
c. Within six months after death
d. Within 1 year after death
89. An estate tax return is not necessary in the following instance
a. Donation of P50,000 cash
b. Transfer of motor vehicle valued at P130, 000
c. Both a and b
d. Neither a or b
90. Extension for the payment of the estate tax shall be allowed on the ground of:
a. Undue hardship upon the estate or any of the heirs
b. Negligence
c. Intentional disregard of rules and regulations
d. Fraud

91. Statement 1: For a person to be subjected to any business tax, it is necessary that he is
regularly engaged in the conduct or pursuit of an economic activity.
Statement 2: A non-resident foreign person performing isolated transaction in the
Philippines shall be liable to VAT.
a. Both statements are true
b. Statement 1 is true and Statement 2 is false
c. Statement 1 is false and Statement 2 is true
d. Both statements are false
92. Which is incorrect?
a. A taxpayer whose annual gross receipts or sales exceed P3,000,000 shall pay VAT even
if not VAT registered.
b. A taxpayer whose annual receipts or sales do not exceed P3,000,000 but who is VAT
registered shall pay VAT.
c. A non-resident lessor or foreign licensor who is not VAT registered is subject to VAT.
d. An individual taxpayer whose gross sales or receipts do not exceed P100,000 is exempt
from VAT provided he pays the 3% other percentage tax.
93. In 2018, Mr. Uro’s gross receipts from his practice of profession is P2,600,000 while her
wife has gross sales of P2,200,000 derived from her trading business. Assuming they are not
VAT registered, will they subject to VAT?
15 | T A X A T I O N
 a. Yes, because their aggregate gross receipts/sales exceeded the VAT threshold of
P3,000,000.
b. No, because for purposes of VAT threshold, husband and wife shall be considered as
separate tax payers.
c. Yes, because their gross receipts/sales are not specifically exempt from VAT as
provided in the Tax Code.
d. None of the above.
94. D’ Lion Transport Corporation has land, sea and air transport operations. To improve its
services, which of the following importation is subject to VAT?
I. 20 units of airconditioned buses
II. 12 units of life saving, safety and rescue equipment for shipping transport operation
III. 12 airplanes
IV. 8 ships
a. I only c. I and II only
b. II only d. All of the above
95. Which of the following shall be exempt from VAT?
a. Services of banks.
b. Services of money changers and pawnshops.
c. Services of credit cooperatives.
d. All of the above.
96. Which of the following transaction is exempt from VAT?
a. Sale by an art gallery of literary works, musical composition, work of art and similar
creations, or devices performed for the production of such works.
b. Medical, dental, hospital and veterinary professional services.
c. Sale of cotton and cotton seeds in their original state.
d. Sale of books and any newspaper, magazine, review of bulletin, which appears at
regular intervals with, fixed prices for subscription and sale which is not devoted
principally to the publication of paid advertisements.
97. A subdivision developer sold five (5) residential house and lots, each of different vendees,
for P3,000,000 per lot, or a total sales of P15,000,000 for 2017 taxable period. These sales shall
be classified as:
a. 12% VAT transaction
b. 0% VAT transaction
c. VAT exempt transaction
d. None of the foregoing
98. Assume the taxable period in the immediately preceding number was 2018, the sales shall
be subject to:
a. 12%
b. 0%
c. VAT exempt
d. None of the foregoing

16 | T A X A T I O N
99. On January 5, 2016, Towell Co., VAT registered, sold on account goods for P112,000. The
term was: 2/10, n/30. Payment was made on January 10, 2016. The total amount due is:
a. P110,000 c. P112,000
b. P107,800 d. P109,760
100. Gensan Distribution Inc., a VAT taxpayer, had the following data in a month:

Cash Sales P200,000

Open account sales 500,000
Consignment:
0 to 30 days old (on which
there were remittances from
consignees of P200,000) 600,000
31 to 60 days old 700,000
61 days old and above 900,000
How much is the output tax?
a. P348,000 c. P264,000
b. P216,000 d. P108,000

101. Bryan, VAT registered person, imported machines from Australia as follows:
Machine Acquisition Cost Purposes
A P100,000 Personal use
B 200,000 Business use
C 300,000 For sale
The importations were subjected to 50% excise tax based on purchase price. Machine C
was sold for P1,000,000 exclusive of VAT. How much is the VAT paid to the BOC?

a. P108,000 c. P54,000
b. P90,000 d. P36,000
102. Using the preceding number, the amount of VAT to be remitted to the BIR should be
a. P12,000 c. P106,000
b. P30,000 d. P84,000
103. World Power Corp. imported an article from Japan. The invoice value of the imported
articles was $7,000 ($1=P50). The following are incurred in connection with the importation:
Insurance P15,000
Freight from Japan 10,000
Postage 5,000
Wharfage 7,000
Arrastre charges 8,000
Brokerage fee 25,000
Facilitation fee 3,000

17 | T A X A T I O N
 The imported article was imposed P50,000 customs duty and P30,000 excise tax.
The company spent P50,000 for trucking from the customs warehouse to its warehouse
in Quezon City. The carrier is not subject to VAT.

The VAT on importation is:

a. P60,000 c. P60,600
b. P42,000 d. P80,000
104. Based on the preceding number, if the imported articles were sold for P800,000, VAT
exclusive, the VAT payable is
a. P24,000 c. P36,000
b. P12,000 d. P11,040
105. A taxpayer registered under the VAT system on January 1, 2018. His records during the
month show:

Value of inventory as of December 31, 2017 purchased P112,000

from VAT registered persons
VAT paid on inventory as of December 31, 2017 12,000
Value of inventory as of December 31, 2017 purchased, 518,000
from non-VAT persons
Sales, net of VAT 240,000
Sales, gross of VAT 45,920
Purchases, net of VAT 70,000
Purchases of VAT exempt goods 50,000

VAT payable is
a. P23,080 c. P12,720
b. P25,320 d. P12,320
106. A VAT registered trader has the following transactions:

Sales of goods to private entities, net of VAT P2,500,000

Purchases of goods sold to private entities, gross of 12% 896,000
VAT
Sales to a government owned corporation (GOCC), net 1,000,000
of VAT
Purchases of goods sold to GOCC, net of 12% VAT 700,000
How much is the output tax?
a. P300,000 c. P420,000
b. P120,000 d. nil
107. How much is the standard input tax?
a. P20,000 c. P50,000
b. P70,000 d. nil

18 | T A X A T I O N
108. How much is the creditable input tax?
a. P166,000 c. P70,000
b. P96,000 d. P180,000
109. How much is the input tax closed to expense (income)?
a. P14,000 c. (P14,000)
b. P34,000 d. (P34,000)
110. How much is the VAT payable to BIR?
a. P404,000 c. P204,000
b. P390,000 d. nil

19 | T A X A T I O N