Business Tax Answer Key by Banggawan PDF

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CHAPTER False 1. The Vat on importation is a business tax. False 2. The final withholding VAT is a business tax. False 3. The VAT on importation is 12% of the value added on importation. False 4. The VAT on importation is 12% of the receipts from the sale of services abroad. False 5. Importation is ...

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CHAPTER 2

False False False False False False False False True False True False False False True

False True True True True True True True False True False True True False True

1. The Vat on importation is a business tax. 2. The final withholding VAT is a business tax. 3. The VAT on importation is 12% of the value added on importation. 4. The VAT on importation is 12% of the receipts from the sale of services abroad. 5. Importation is subject to either VAT or percentage tax. 6. The final withholding VAT is 12% of the contract price of purchased services from within the Philippines. 7. The sale of services abroad is subject to 12% final withholding VAT. 8. The VAT on importation is paid to the BIR. 9. The final withholding VAT on services is paid to the BIR. 10. The importation of any agricultural or marine products is VAT exempt. 11. The importation of professional instruments and implements is exempt from VAT. 12. The importation of any product intended for human consumption is VAT exempt. 13. Importation is subject to either VAT or percentage tax. 14. The importation of professional instruments and implements in commercial quantities is VAT-exempt. 15. The importation of equipment, machinery and spare parts for marine vessels is VATexempt.

1. Resident foreigners are not subject to the VAT on importation. 2. All agricultural or aquaculture inputs are VAT exempt. 3. The sale of processed agricultural products is vatable. 4. The importation of books and newspapers is VAT-exempt. 5. The importation of life-saving equipment is VAT-exempt. 6. The lease of aircrafts or vessels from non-residents is exempt from final withholding VAT. 7. The purchase of services from foreign consultants is exempt from final withholding VAT. 8. The importation of fuel, goods, and supplies by international carriers is VAT-exempt. 9. The importation of agricultural machineries by farmers is VAT-exempt. 10. The importation of agricultural machineries by agricultural cooperatives is VAT-exempt. 11. The VAT on importation is payable only by those engaged in business. 12. The final withholding VAT on importation of services is payable even by those not engaged in business. 13. The VAT on importation and final withholding VAT can be claimed as Input VAT creditable against Output VAT. 14. In economic reality, the VAT on importation and final withholding VAT are taxes to be paid by non-resident sellers. 15. Qualified exempt importation is exempt from VAT only if made by an exempt person.

1. Which is subject to VAT? -

Sheep, Sheep Wool, Cut sheep meat

2. Which agricultural products is VAT-exempt on importation? -

Wood

3. Which importation is subject to VAT? -NEITHER importation from abroad, Purchase of goods from economic zones in the Phil 4. Which is not subject to VAT on importation? - Importation of goods for business use. 5. Which of the following is subject to the VAT on importation when imported? - Books 6. Which non-food agricultural products is exempt from VAT on importation? - Live hogs 7. Which of the following is not exempt from VAT? - Orchids 8. Which seedling is vatable? - Narra seedlings 9. Which agricultural produce is exempt from VAT? - Firewood 10. Which is vatable? - Bamboo poles 11. Which is VAT-exempt? - Cotton seeds 12. Which is VAT-exempt? - Coconut lumber

13. Which is subject to VAT on importation? - Cocoa 14. Which agricultural product is subject to VAT? - Rattan Cane 15. Which is subject to VAT on importation? - Cocoon silk, Pineapple Silk, Furniture 16. Seedlings of this tree are exempt from VAT on importation. - Palm oil tree 17. Which of the following when imported is subject to VAT? - Rubber 18. Which of these seeds is not VAT-exempt? - Flower seeds 19. Which of the following feed is subject to VAT on importation? - Swine feeds 20. Feeds of the following animals are considered as specialty feeds, except for, - Zoo animals

1. Which is VAT-exempt? -Eggs 2. Which is vatable on importation? - Tobacco leaves 3. Which of these is VAT-exempt on importation? - Almonds, Blueberries, Ginseng roots 4. Which is not exempt from VAT? - Beeswax 5. Which is not generally considered as pet under the regulation? - Rabbits 6. Which is these is non-vatable? - Milkfish 7. Which is not a VAT-exempt poultry? - Game fowl roosters 8. Which of these animals is vatable when imported? - Race horses 9. Which is a vatable agricultural input? - Pesticides 10. The following are generally considered as pets which are vatable when imported except for? - Catfish 11. Which of these is taxable with VAT on importation? - Butterfly fish 12. Which of the following seafood is considered as vegetable and therefore VAT-exempt? - Kelp, Sea lettuce (green nori), Squids

13. Which of these is vatable? - Sea shells 14. Examples of mollusk and shellfish: Crabs, Oysters, Lobsters, Clams - None of these 15. Which of these agricultural products is not considered as being in this original state? - Refined sugar 16. By revenue regulation, which of the items below is not considered in original state? - Marinated Fish 17. Which product is non-taxable with VAT on importation? - Fresh cow’s milk 18. Which of the items below is taxable with VAT? - Canned fruits 19. Which is not considered as simple processing? - Marinating 20. The following advanced technological means of packaging are deemed not to alter the nature of agricultural marine food products thereby retaining their original state. Which is exemption? - Canning

1. Which is not exempt from VAT on importation? - Importation of school supplies 2. Which importation is not VAT-exempt? - Importation of personal household effect which are subject to custom duties. 3. The importation of professional instruments and implements may be subject to VAT when the - Importation involves vehicles and machineries 4. Which importation is exempt from VAT? - Importation of books by school, student and a bookstore. 5. The importation of which transport medium is exempt from VAT? - None 6. Examples of transport vehicles: bus, cars, vessels, aircraft: which is not exempt from VAT when imported? - Bus and Cars 7. Which importer is exempt from VAT on importation of fuel, goods and supplies? - EITHER international carriers, domestic carriers on their international operations 8. Which of the following items is subject to VAT on importation to an individual who is intending to sttle in the Phil? - Vehicles 9. The importation of fuel, goods and supplies is not exempt from VAT when used in - Domestic operation 10. Which is VAtable? - None of these 11. The importation of vessel or aircraft for domestic operations is - VAT exempt if the importer complies with maximum service life set by law 12.The importation of fuels, goods for domestic shipping or air transport operations is: - VATABLE

13. The importation of farm machineries and equipment is exempt when iported by - an agricultural cooperative 14. Who has the burden of proving exemption fromVAT on importation? - The importer-buyer 15. Which is qualified exempt importation? - importation by cooperative farm equipment 16. Which is not qualified exempt importation? - importation of fuels or supplies by a person engaged in domestics transport operations 17. Which of these is non-vatable? - None of these 18. Who shall pay VAT on imporatation when a VAT-exempt entity subsequently sells an imported article of goods to a non-exempt entity? - The non-exempt buyer 19. Importation is not subject to VAT when - it involves exempt goods 20. Which is not included in landed cost? - VAT 21. Which is not included in landed cost? - Cost of transporting the goods from the customs warehouse to the importer’s warehouse or residence

MC PROBLEMS 1 1. Oceaners, Inc. Purchased the following from abroad: Sea Shells Tuna and Salmon Total

320,000 120,000 440,000

What is the amount of taxable importation? a. 0

c. 200,000

b. 120,000

d. 320,000

2. Mr. A imported various personal and household effects with effects with a value aggregating 400,000. 320,000 of these was subjected to a 8% ustoms duty by the BOC. What is the the VAT on importation? a. 0 b. 41,472 3.A bookstore company imported th follwing items:

b.42,240 c. 48,000 Landed Cost

Books

350,000

Professional Instruments School supplies Total

200,000 350,000 900,000

What is the total VAT on importation? a.0 b. 66,000

c. 72,000 d. 108,000

4. Mr. C, a VAT- registered foof retailer, imported the following from China: Landed Cost Fruits 250,000 Vegetables 180,000 Frozen Meat 50,000 Marinated milkfish 100,000 Total 580,000 Compute the VAT on importation. a.0 b. 66,000

c. 51,600 d. 108,000

5. Alexis Furnitures, a percentage taxpayer, imported the following household equipment: Landed Cost Machineries, for bus. Use 1,150,000 Heating System, for home use 250,000 Total 1,400,000

Compute the VAT on importation. a. 0 b. 27,000

c. 150,000 d. 168,000

6. Danes AgriCorp imported the following: Seeds Fetilizers Farming Equipment Herbicides and pesticides Total

Landed Cost 400,000 750,000 450,000 250,000 1,850,000

Compute the VAT on importation. a.0 b. 42,000

c. 72,000 d. 84,000

7. Home Appliance Compay imported the followin for personal use: Furniture 600,000 Rattan 250,000 Lumber 450,000 Compte the VAT on importation. a. 30,000 b. 72,000

c. 156,000 d. 204,000

8. Mr. Huligan imported rice from Vietnam. Details of his importation show the following: Corn grits 1,000,000 Freight and insurance in transit 50,000 BOC and other charges 20,000 Compute the VAT on importation; a. 0 b. 120,000

c. 126,000 d. 128,400

9. An Agricultural supply dealer imported the follwing: Corn grits Hog fees

200,000 350,000

Specialty feeds Compute the VAT on importation a. 0 b. 120,000

300,000 c. 156,000 d. 128,000

10. the following data relates to the importation of cigarretes by Mr. Shinto: Total Invoice value 1,000,000 BOC charges 300,000 Customs Duties 200,000 Excise taxes 300,00 Compute the VAT on importation. a. 120,000 b. 145,000

c. 180,000 d. 216,000

Multiple Choice Problems- Problems 2 1. Don Pepito imported a harvester frok the united states with a total cost of 1,100,000 before Customs duties. The importations is subject to 10% customs duties. What is the VAT on importation? a. 158,000 c. 129,600 b. 145, 200 d. 0 2. In he immediately preceeding problems, assuming that the importation made by an agricultural cooperative, what is the VAT on importation? a. 158,400 c. 129,600 b. . 144,000 d. 0 3. Mr. Smile, aprofessional practitioner, imported the following: Calculators and computers for his firm Books

900,000

CHAPTER 3

True or False – Part 1 False 1. Once employed, one cannot be considered engaged in business. False 2. All sales by a businessman are considered made in the course of business. True 3. A business involves habitual engagement in a commercial activity. True 4. “Commercial activity” means provision of goods or services to the public for a profit. False 5. To be construed as being engaged in business, one must be employed. True 6. A self-employed individual is engaged in business. True 7. An employee is not engaged in business. False 8. All casual sales of properties are considered not made in the course of the business. True 9. The sale of ordinary assets by a business is considered made in the course of business. False 10. The sale of capital assets by a business is also considered made in the course of business being incidental to business operations. False 11. A business which is not registered is exempt from business taxes. True 12. Government agencies and instrumentalities and non-profit organizations or associations may be considered as businesses on their unrelated operations; hence, these are subject to business tax. False 13. The absence of profit motive may preclude an activity from being considered as business. False 14. Government agencies and instrumentalities and non-profit organizations or associations are generally considered as businesses. False 15. A company director is considered to be engaged in business. True or False – Part 2 False 1. Marginal income earners are exempt from both business tax and income tax. False 2. An employed professional is engaged in business. True 3. Self-employed professionals rendering services to clients are engaged in business. False 4. Agents and brokers are considered as employees; hence, they are not considered engaged in business. True 5. Consultants and movie artists are considered engaged in business. False 6. Businesses for mere subsistence are not considered business because they are non-profit. True 7. Businesses for mere subsistence have gross receipts not exceeding P100,000 per year. True 8. The owner of a business for mere subsistence is called a marginal income earner. False 9. A professional, consultant, or artist can qualify as a marginal income earner as long as his receipts do not exceed P100,000 in any 12-month period. True 10. A sale made by a non-resident is presumed to be made in the course of business despite irregularity of sales transactions. False 11. A non-profit organization is subject to business tax on all of its receipts if it engages in activities subject to business tax. False 12. Exemption from income tax means exemption from business tax. False 13. A non-profit organization will be exempt from business tax if it uses the income generated from activities subject to business tax for non-profit purposes. True 14. An individual, trust, estate, partnership, corporation, joint venture, cooperative or association will pay business tax. True 15. Only sales outlets are required to pay the annual registration fee. True 16. The Certificate of Registration shall be exhibited in a conspicuous place in the principal place of business. False 17. The husband and the wife are taxable as a single person; hence, they pay under a

True False False

consolidated business tax return. Note: Spouses are separate business taxpayers. 18. Businesses are required to register in the revenue district office (RDO) which has jurisdiction over their principal place of business. 19. Businesses pay an annual registration fees of P1,000. 20. Every distinct establishment with or without sales operation shall pay the annual registration fee.

True or False – Part 3 True 1. The term “goods or properties” includes real properties held primarily for sale, lease or use in the ordinary course of business. True 2. The term “goods or properties” includes the right or privilege to use patent, copyright, design, secret formula, trademark and other property or right. True 3. Businesses are classified as sellers of goods or sellers of services or purposes of business taxes. False 4. Sellers of goods are taxable on gross receipts while sellers of services are taxable on gross selling price. False 5. The sale of radio, television, satellite transmission and cable television time is a sale of service not a sale of goods or properties. False 6. Real estate brokerage is considered a sale of goods or properties rather than sale of services. Note: Brokers are sellers of services. False 7. A contractor is a seller of goods or property not a seller of services. True 8. Leasing or distribution of cinematographic films is a sale of service. False 9. Dealers in securities and lending investors are sellers of goods rather than sellers of services. False 10. The sale of electricity by generation, transmission and distribution companies is considered sale of goods or properties. Note: Sales of service. True 11. The term gross selling price excludes taxes on the sale. True 12. Excise tax is part of the gross selling price. True 13. Sales returns and allowances are deductible against gross selling price. True 14. Gross selling price includes cash, accounts and installment sales. True 15. Constructive receipts are part of gross receipts. True 16. Constructive receipts are monies which are placed in the control of the seller of services without restrictions. True 17. Only discounts determinable at the point of sale are deductible against gross selling price. True 18. The term “gross receipts” includes client or customer advances for unperformed jobs. True 19. Gross receipts include only cash received and excludes uncollected income. False 20. Promissory notes and other evidences of indebtedness submitted by clients or customers are part of gross receipts. Note: As a rule, except to life insurers.

True or False – Part 4 False 1. Non-VAT taxpayers pay their quarterly tax in three monthly payments.

False True True True True True False True True True False

False True True

2. Loans or agency monies received by the business are part of gross receipts. 3. Receipts that do not redound to the benefit of the taxpayer are not included in gross receipts. 4. There are three types of business taxes: VAT, percentage tax and excise tax. 5. There two types of business taxpayers: VAT and non-VAT taxpayers. 6. Normally, VAT and percentage tax are mutually exclusive. 7. Excise tax is an addition to either VAT or percentage tax for businesses manufacturing or importing excisable articles. 8. The accounting period for business tax is called the taxable year. Note: Taxable quarter. 9. VAT taxpayers pay their quarterly tax in two monthly and one quarterly payment. 10. The taxable quarters of an individual are patterned after that of the calendar quarter. 11. The taxable quarters of a corporation adopting a fiscal year for income tax purposes shall be synchronized with its fiscal year. 12. Corporations pay quarterly VAT while individuals pay VAT annually. Note: All VAT taxpayers whether individuals or corporations files monthly and quarterly VAT returns. 13. VAT taxpayers use BIR Form 2551 while non-VAT taxpayers use BIR Form 2550. Note: It is the other way around. 14. A few percentage taxpayers are required to pay their tax quarterly while most pay their taxes monthly. 15. Exempt sales will not be subject to VAT or percentage tax.

True or False – Part 5 False 1. Services specifically subject to percentage tax are subject to VAT if not subjected to percentage tax. Note: Always subject to percentage tax. True 2. Sales from goods or services, other than exempt sales and services subject to percentage tax, are vatable. False 3. The term “vatable sales” means sales automatically subject to VAT. False 4. All services specifically subject to percentage tax are taxed at a rate of 3%. Note: Rates vary from ½ of 1% to 30%. False 5. All taxpayers with vatable sales or receipts in the past 12-mpnths aggregating P1,919,500 from whatever type of sales are subject to VAT. Note: Not all, except those who derives only exempt sales or receipts from services specifically subject to percentage tax. False 6. A person who wishes to register as a VAT taxpayer despite not meeting the VAT threshold is called a “registrable person.” False 7. The VAT payable is computed as output VAT less 3% percentage tax. False 8. If the aggregate sales or receipts from all sources (exempt, specifically subject to percentage tax, and others) exceed P3,000,000, the person is subject to VAT. False 9. Franchise grantees of radio or television broadcasting companies which exceeded P1,000,000 in annual sales must register as VAT taxpayer. False 10. Persons who optionally register as VAT taxpayers can cancel their VAT registration within three years. True 11. Franchise grantees of television or radio broadcasting companies cannot cancel their VAT

False

registration. 12. Registrable persons shall be subject to VAT. They shall pay VAT with the benefit of an input VAT credit plus the percentage tax.

Multiple Choice – Theory: Part 1 1. Which of the following entities below is not considered as a business? a. A sari-sari store wi...