Chapter 5 - tax PDF

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CHAPTER 5 – FINAL INCOME TAXATION TRUE OR FALSE 1 TRUE 1. Generally, interest income from non-bank sources is subject to regular income tax. FALSE 2. Foreign income is subjected to final tax if the taxpayer is taxable on global income. FALSE 3. Items of passive income from abroad is subject to final tax. TRUE 4. Interest income on government securities are subject to final tax. FALSE 5. All items of passive income are generally subject to final tax. TRUE 6. Final tax is collected at source; hence, there is no need to file an income tax return. FALSE 7. Corporations are tax-exempt on inter-corporate dividends from any corporations. FALSE 8. Individuals and corporations are tax-exempt on interest income on long-term deposits. TRUE 9. Dividends from resident corporations are subject to regular tax. FALSE 10. Dividends from Real Estate Investment Trusts are exempt from final tax. FALSE 11. Stock dividends are always exempt from final tax. FALSE 12. Corporations are subject to final tax on prizes. FALSE 13. The share in the net income of a business partnership is subject to a creditable withholding tax, not to final tax. FALSE 14. General professional partnerships are subject to final tax but not to regular tax. TRUE 15. All non-residents are exempt from final tax on foreign currency deposits. FALSE 16. Royalties, active or passive, are subject to regular income tax. FALSE 17. The tax sparing rule is applicable to resident and nonresident foreign corporations. TRUE OR FALSE 2 FALSE 1. A government employee may claim the tax informer’s reward.

FALSE 2. The final tax on winnings applies to corporations. FALSE 3. Individuals, except corporations, are subject to final tax on winnings abroad. FALSE 4. Winnings which are not more than P10,000 in amount are subject to regular income tax. FALSE 5. PCSO or lotto winnings exempt from all types of income tax. TRUE 6. Special aliens do not file a regular income tax return on their compensation income. FALSE 7. The final tax on interest on tax-free corporate covenant bonds applies only to resident individual or corporate taxpayer. FALSE 8. NRA-NETB and NFRC are subject to final tax only to passive income from sources in the Philippines. TRUE 9. NRA-NETB and NFRCs are not required to file the regular income tax return. TRUE 10. Residents shall withhold 10% final tax upon interest on foreign currency loans of FCDU banks and OBUs under the expanded foreign currency deposit system. TRUE 11. A qualified employee trust fund is not subject to final tax. FALSE 12. The income of FCDU banks from fellow depositary banks under the expanded foreign currency deposit system is subject to 10% final tax. TRUE 13. Petroleum service subcontractors are subject to 8% final tax on their income from petroleum service contractors. FALSE 14. The final withholding tax return shall be filed by withholding agent on or before the 15th day of the month the final taxes were withheld. TRUE 15. Foreign governments and foreign government-owned and controlled corporations are exempt from final tax.

MULTIPLE CHOICES - THEORY 1 1. Which is correct with regard to final income taxation? A. Taxpayers need not file an income tax return 2. Which statement is correct regarding final income tax? B. Final tax applies only on certain passive income earned within the Philippines 3. Interest income from which of the following sources is subject to final income tax? D. Money market placements

4. The final tax does not apply to interest on D. Promissory notes 5. The exemption on final tax on interest from long-term deposit is not applicable to B. Corporations 6. Which interest income is not subject to any income tax? C. Imputed interest 7. The final tax rates on pre-termination of long-term deposits is not relevant to A. Any corporations 8. Which of the following is subject to 15% final tax on interest from foreign currency deposits made with Philippine banks? D. Resident alien 9. The following are subject to final tax on all income from sources within the Philippines. Which is the exception? C. Non-resident alien engaged in trade or business 10. The interest income from long-term peso deposits made within foreign banks is C. Subject to regular tax 11. What is the final tax on interest income on 6-year deposit preterminated less than 2 years before maturity? A. 20% 12. Which of the following recipients is exempt from final tax on dividends? C. Resident corporation 13. A dividend declaration in 2019 is subject to final tax of C. 10% 14. Dividends declared by a resident corporation is A. exempt from any tax 15. Between the date of declaration and the date of record, BCD Inc. sold an investment representing stock of ABC, Inc., a domestic corporation. Which statement is correct? A. ABC Inc. shall withhold 10% dividend tax if the buyer of the sale is an individual. MULTIPLE CHOICES – THEORY 2 Mm1. Which is covered by final tax? B. Share in the net income of a joint venture 2. Which is not subject to 20% final tax? B. Royalties from musical compositions 3. Which is not subject to 10% final tax? D. Royalties from business trademark 4. Which of the following is taxable? B. Prize from dance competition abroad 5. Which winning is taxable to a final tax? D. All of these

6. Prizes from sources abroad is subject to final tax D. Under no circumstances 7. The following winnings are exempt from tax, except one. Which is the exception? A. Jueteng winning 8. Which of the following is exempt from final tax? C. Interest income earned by a bank from lending activities 9. Dividend income from domestic corporations is subject to final tax effective C. 1998 10. Prizes arising from sources within the Philippines may be D. exempt or subject to final tax or regular income tax 11. Any royalties earned abroad by a non-resident corporation is A. Not subject to Philippine income tax 12. The winnings of a resident alien from abroad is D. not subject to Philippine income tax 13. Royalty income of a domestic corporation from abroad is A. Subject to regular tax 14. Winnings from PCSO are generally A. Exempt from any tax 15. The final tax rates on passive income are generally similar to the following taxpayers, except one. Select the exception. D. Non-resident corporation 16. The tax informer’s reward may be granted to D. Relatives of government employees beyond the 6th degree of consanguinity 17. Which is not subject to final tax? D. Fringe benefits of rank and file employees 18. Which of the following is exempt to final tax? C. Dividends from a foreign corporation MULTIPLE CHOICE – PROBLEM 1 1. Winnie, a resident citizen, deposited P2,000,000 in the 180-day time deposit of Banco de Oro. The deposit pays 8% interest. Compute the final tax on maturity of the deposit. D. P16,000 2. Assume that Winnie is a non-resident alien not engaged in trade or business, compute the final tax on maturity of the deposit. C. P20,000 3. Renz received P42,000 interest from short-term deposits. Compute the final tax withheld on the interest. A. P10,500 4. On January 1, 2014, Mr. Albuera invested P2,000,000 in the six-year time deposit of Sulu Unibank which pays 10% annual interest. Compute the final tax to be withheld by Sulu Unibank on December 31, 2014. A. P0

5. Assume Mr. Albuera pre-terminated the time deposit on July 1, 2018; compute the final tax to be withheld on pre-termination. C. P45,000 6. Boy, a resident citizen, received the following interest income: * P80,000 from short-term peso time deposit * P16,000 from a five-year bond issued by a commercial bank * P24,000 from 5/6 lending to market vendors C. P20,000 7. Jake corporation, a domestic corporation, deposited P1,000,000 in the five-year time deposit of Banco Pilipino which pays 10% annual interest. Compute Jake Corporation’s net interest income in the first year of the deposit. C. P80,000 8. Assume Jake corporation is a non-resident corporation; compute the final tax on interest income. D. P30,000 9. On January 2, 2011. Quezon, Inc. placed P1,000,000 in the 5-year time deposit of bank of laguna. The placement earns 10% annual interest. Quezon Inc. pre-terminated the deposit on June 30, 2014. Compute the final tax withheld on pre-termination B. P10,000 10. Francis, a resident citizen, invested P1,000,000 in a dept instruments (deposit substitute) issued by Unibank. The dept instruments pay 10% annual interest payable every quarter. How much final tax should Unibank withhold in the first quarter of issue? B. P5,000 11. Cyndrell, a resident citizen, deposited P5,000,000 in a nonresident foreign depositary bank which pays 12% annual interest. How much final tax shall be withheld in the first year? A. P0 12. Rodrigo, a non-resident citizen, deposited his $2,000,000 savings in a two-year time deposit in Blue Bank, a depositary bank under the expanded foreign currency deposit system. The deposit pays 8% annual interest. Compute the final tax to be withheld in dollars in the first year. A. $0 13. Vernon is a non-resident citizen working abroad. He invested his $1,000,000 personal savings in a FCDU bank under a joint account with his resident wife. The bank pays 8% annual interest. Compute the final tax to be withheld in one year. B.$ 6,000 14. Yvonne, a non-resident alien not engaged in trade or business, made a $5,000,000 deposit to a FCDU bank. The deposit pays 8% annual interest. Compute Yvonne’s final tax in the first year. A. $0 15. Gerry, a resident alien, deposited $1,000,000 in a depositary bank under the expanded foreign currency deposit system. The five-year

savings deposit pays 10% annual interest. Assuming a P45:$1 exchange rate, how much final tax on interest would be withheld in the first year? D. P675,000 MULTIPLE CHOICE – PROBLEM 2 1. Kendrick Inc, a domestic corporation was credited $46,250 interest income on its depositary account in an FCDU bank. How much final tax was withheld? C. $6,937.50 2. Assuming Kendrick Inc, is a resident foreign corporation, how much final tax was withheld? B. $6937.50 3. Tuzan corporation declared P1,000,000 divided in 2014. 40% of its outstanding shares is held by its only corporate investor, abdul, inc. compute the amount of dividend tax to be withheld on declaration? C. $60,000 4. Mr. neis a resident alien owns 40% of the shares of coco corporation, a resident corporation. Coco declared P200,000 dividends in 2014. How much final tax should be withheld from Mr. neis’ dividends? D. P0 5. Carrots, inc owns 20% of the stocks of cabbage declared P120,000 dividends in 2014. Carrot and Cabbage are both domestic corporations. Cabbage declared P120,000 dividends in 2014. How much dividend income after any applicable tax will carrots receive? A. P24,000 6. Mr. Siegfried, a resident citizen, received P100,000 dividend income from vodka, inc, a domestic corporation. How much final tax must have been withheld by vodka inc.? B.P11,111 7. Ms. Gina owns 40% of the capital and profits of cebu ventures, a business partnership engaged in the trade of tourist souvenirs. Cebu ventures reported P200,000 net income in 2014. Compute the total final tax to be withheld by the partnership on Gina’s profit sharing. B. P8,000 8. Raymond owns 20% of the capital and profits of a general professional partnership. The partnership reported P500,000 profits in 2014. How much final tax will be withheld from reymond? D. P0 9. Teddy is a venture sharing 50% in the profits of wise ventures, an unincorporated joint venture, engaged in the trading of home appliances. Wise ventures reported P200,000 profits for 2014. How much final tax will be withheld by wise ventures? C. P20,000 10. Zamboanga corporation, a resident corporation, is a venture in southern Philippine ventures (SPV), an incorporated joint venture formed under Philippine laws. Zamboanga owns 30% interest in SPV. During 2014, SPV reported P3,000,000 profit and declared P1,000,000 in

dividends. How much final tax will be withheld from the dividend distribution to Zamboanga corporation? D. P0 11. Petrodrill ventures is a joint venture which operates under a service contract the government. Petrodrill is 30% owned by individual investors. The rest owned by corporate oil exploration companies. Petrodrill reported P2,000,000 profit which was to be distributed. How much final tax will petrodrill withhold? D. P0 12. Mr. bayugan published his book abroad for the international market. During the first quarter, he earned a gross royalty of P1,000,000. How much final tax will be withheld by the foreign publisher? D. P0 13. Sison inc. is the only corporate shareholder of surigao inc. owning 60% of the outstanding voting shares. During the year, surigao inc. declared a P1,000,000 divided. Compute the final income tax to be withheld by surigao? C. P40,000 14. Mr. tuao won an P800,000 prize in a national dancing competition. The organizer og the event declared that P800,000 grand prize was “tax free” how much final tax must be remitted by the organizer to the BIR? A. P200,000 15. Mr. crocodile owns a mining property in prosperidad. He allowed a mining company to operate under a condition that he will be paid 10% royalty on the gold production, the mining company produced P8,000,000 worth of gold during the year. How much net royalties will be paid to Mr. crocodile? B. P640,000 MULTIPLE CHOICE – PROBLEM 3 1. Mr. aguak earned the following prizes from two different competitions: Date

event

gross prize

January 4, 2017

singing competition

P12,000

Febrary 14, 2017

painting competition

P10,100

Compute the total final tax that should have been withheld from the above prizes. B. P4,420 2. Mr. rems orayt participated in two different events on january4, 2020: Date

organizer

competition

gross prize

January 4,2020

ang mahiwagang boses

singning

P10,000

January 4,2020

sexy body foundation

dancing

11,000

Compute the total final tax that should have been withheld from the above prizes? A. P0 3. Mr. conrado won the P50,000,000 6/49 super lotto jackpot of the Philippine charity sweepstakes office. How much final tax will be withheld? D. P0 4. Ms. Matti won a gold medal and P50,000 cash prize for chess competition in the palarong pambansa. How much tax should be withheld from the prize? D. P0 5. Tiong sang department store conducted a sales promotion where customer purchases exceeding P1,000 in one transaction shall be entitled to a ticket for a chance to win P500,000 raffle prize. Mr. shing won the prize? B. P100,000 6. Tacurong, a resident citizen, won $1,000,000 from the US lottery. The lottery winning is? D. subject to regular tax 7. Mr. curandang submitted a sworm statement regarding the alleged tax evasion practices of chitie corporation. This led the BIR to recover P20,000,000 unpaid taxes. How much net tax informer’s reward shall be paid to Mr. curandang? D. P900,000 8. A concerned government employee furnished the BIR a statement detailing the improper tax practices of a corporate taxpayer. The information was instrumental to the collectio0n of P500,000 tax. How much informer’s tax reward after tax shall be released to the informant? A. P0 9. Roy invest P1,000,000 in the “tax-free” corporate bonds of RBC corporation the bond pays 8.75% interest annually net of any taxes. How much final tax must RBC corporation withhold from the annual interest payment to roy? C. P37,500 10. A tax payer wants to manually file his monthly remittance return of final income tax withheld for the month of February 2017. Wat is the deadline for the return? C. March 10, 2017 11. In reviewing its tax compliance, rang-ay Banco noted that it failed to remit the P90,000 final taxes it withheld for the month of February 2017. Compute the total amount of taxes due including the penalties of rang-ay banco settles the obligation on march 20, 2017? D. P128,000 12. Bangko illusrado failed to withhold the final tax on the P1,200,000 interest expense which was credited to various accounts of individual depositors in the month of April 2016. It wants to settle the unpaid final withholding tax on June 10, 2017. Compute the surcharge and interest penalty due? C. P64,000...