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7.3 topic test questions Answers Which is correct regarding consumption tax? It may help in the redistribution of wealth in the society An owner of mango plantation approached you to inquire whether or not he is subject to VAT to inquire whether or not he is subject to VAT. In the course of your con...

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7.3.1 topic test questions Which is correct regarding consumption tax?

An owner of mango plantation approached you to inquire whether or not he is subject to VAT to inquire whether or not he is subject to VAT. In the course of your conversation, he also tells you that he has fruit canning factory where some of the harvest are manufactured into canned mango. He gives you the following information for the previous year: Gross Sales of fresh mango P3,500,000 and Gross Sales of canned fruits P2,000,000. Based on the information given to you, what will be your answer to the inquiry of the mango plantation owner? Ms. ABC, not-VAT registered, was sent a package of goods by her sister who was abroad. The package was claimed by XXX. The Bureau of Customs required her to pay VAT on importation. XXX refused to pay the tax on the ground that she was not VAT-registered and therefore not in importer. Was XXX’s ground in refusing to pay VAT correct? Which of the following activities by any carrier is a foreign consumption exempt from Philippine business tax for being rendered outside the Philippines? Given the following establishments: I. ABS CBN Broadcasting Company II. Itsowan Cockpit Arena

Answers It may help in the redistribution of wealth in the society He is not subject to VAT on sale of fresh mango but subject to the 3% percentage tax on VAT-exempt persons on sales of canned fruits. No, because importations, unless exempted, should be subject to VAT. Inbound transport of passengers and baggage to the Philippines I and IV are subject to VAT, while III is subject to Gross Receipts Tax

III. Metropolitan Bank and Trust Company IV. WG & A Superferry Which of the following items is the best option? S1. A percentage tax is a national tax. S2. Services specifically subject to percentage tax rates apply to both VAT-registered and NonVAT registered taxpayers. Both true Goods and services are taxed only in the country where these are consumed.

Destination principle

The formula: Output taxes less Input taxes equals Value added tax payable means that:

All the above statements are correct

Which of the following is specifically subject to percentage tax?

International carriers

Which is part of gross receipts?

Receipt of notice from a debtor to offset the consideration of the service for the debt of the service provider

Which statement is conceptually incorrect?

The buyer pays the consumption tax to the government 12% VAT

Sale of silver and other metallic minerals by a VAT-registered taxpayer to the BSP is subject to A resident citizen who works with TV patrol makes an overseas call to his parents who live in the United State of America. There are times when it is his parent’s turn to call him from the USA. The calls are paid for by his parent in USA. He asked you whether or not he is subject to the 10% overseas communication tax. What will you tell him? A VAT-registered hotel owner contends that the sale of fresh fruits and other agricultural food products to the hotel guests is not

He is subject to the 10% overseas communication tax on his call to his parents. No. His contention is

and other agricultural food products to the hotel guests is not subject to VAT. Is his contention correct?

incorrect because the sale of the agricultural product is incidental to the sale of services of the hotel which is,

therefore, VATsubject. S1. Specific OPT payers are subject to OPT only if their Gross Both False Sales/receipts do not exceed the VAT threshold S2. The sale of stocks by a dealer through the PSE is subject to percentage tax. Once a doctor of Which statement is FALSE under the VAT law? medicine exercises his profession during the year, he needs to register as a VAT person and to issue VAT receipts for professional fees received It is a business tax imposed on persons or entities/transactions who sell or lease goods, properties or services in the course of trade or business and are exempt from value-added tax (VAT) under Section 109 (w) of the National Internal Revenue Code, as amended, whose gross annual sales and/or receipts do not exceed Php 3,000,000 and who are not VAT-registered. ABC owns two passenger buses. Each bus has a seating capacity of 45 passengers. The buses have the route Naga City to Legaspi City, and vice-versa. During the month, he decided to stop the operation of one unit to undergo two weeks’ engine overhaul. Thus, his total gross receipts during the month amounted to P110,000 only. ABC is Which is not a business tax? Which of the following goods when sold or imported shall not be exempt from VAT?

Which of the following entities is not considered as a business?

Mr. Andres, VAT registered real estate dealer, transferred a parcel of land held for sale to his son as gift on account of his graduation. For VAT purposes, the transfer is Sales of Inorganic fertilizer Which of the following is not an export sale? i.) Services of proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai and race tracks;

Percentage tax

Subject to common carrier’s tax of P3,300

VAT on importation Processed or manufactured agricultural and marine food products A cigarette vendor with sales not exceeding P 100,000 Subject to VAT because it is a deemed sale transaction Exempt Sale Sale of gold to the BSP i only

ii.) Receipts on sale, barter or exchange of shares of stock not listed and not traded through the local stock exchange iii.) Services rendered by domestic air/shipping carriers iv.) Services rendered by domestic common carriers by land, for the transport of passengers and cargoes, and keepers of garages Which item/s is/are subject to specific OPT? Transport of passengers and cargo by domestic air or sea vessels from Zero rated Sale the Philippines to a foreign country Except for one transaction, the rest are exempt from value added tax. Gross receipts of a CPA during the Which one is VAT taxable? year amounted to P1 Million; the CPA registered as a VAT person in January 2011, before practicing his profession 7% gross receipts IBP Bank extended loans to debtors during the year, with real

IBP Bank extended loans to debtors during the year, with real properties of the debtors being used as collateral to secure the loans. When the debtors failed to pay the unpaid principal and interests after several demand letters, the bank foreclosed the same and entered into contracts of lease with tenants. The bank is subject to the tax as follows: It means the sales to a non-resident of goods, except automobiles and non-essential goods, assembled or manufactured in the Philippines for

tax on the rental income, but exempt from VAT

Foreign currency denominated sale

delivery to a resident in the Philippines, paid for in acceptance foreign currency and accounted for in accordance with the rules and regulations of the BSP. Which of the following is not subject to business tax even if made by Sale of properties a registered business? considered as capital assets Both false S1: A seller is subject to percentage tax even if he registered as VAT taxpayer if his annual sales do not exceed the VAT threshold. S2: A non-VAT registered person who invoiced VAT on his sales shall be subject to 12% VAT without the benefit of input VAT. Services rendered to persons engaged in international shipping or Zero rated Sale international air transport operations The seller who Who is the statutory taxpayer of business taxes? must be engaged in trade or business As a rule, a radio and television broadcasting company with annual Percentage tax gross receipt of not exceeding P9,000,000 shall pay Race horses Which of the following shall not be considered livestock for VATexempt transactions purposes? None, because the Gaby, a Japanese residing in the Philippines, bought garments from sale is VATABC Corporation, a domestic corporation, and exported the same to Japan. Total value exempt of export is P100,000. VAT (output tax) due exempt on the transaction is: P 32,880 A Non-VAT taxpayer had the following income and expense data last year: Collections for services revenue rendered to VAT customers – P 896,000 Non-VAT customers – P 200,000 Payments for cost of services and operating expenses to: VAT suppliers – P 560,000 Non-VAT suppliers – P 150,000 How much would be the appropriate business tax to be paid? Cagayan Ferry Boats transport passengers and cargoes between the P 3,900; P 0 islands of Palaui and Sta. Ana. It earned a total of P 120,000 in March 2020 excluding P 10,000 freight for cargoes. What is the percentage tax if Cagayan Ferry Boats registered respectively as a non-VAT and VAT taxpayer? P 0 Mr. Dobbie has a pet shop. In April 2020, he made a sales of P 300,000 from sales of pets, P 120,000 for pet feeds, and P 20,000 for pet toys. Mr. Dobbie is also a practicing veterinarian. He derived additional P 80,000 professional fees. Compute the exempt sales. P 0 An electric cooperative sold the following during the month: Sale of electricity from renewable sources of energy – P 2,000,000 Sale of electricity from coal and natural gas – P 1,000,000 What is the zero rated sale of the electric company? P 3,100,000 A VAT-taxpayer made the following sales during the month: Domestic sales – P 2,100,000 Export sales – P 1,000,000 What is the amount subject to business tax? A VAT-registered building contractor who reports under the calendar year basis had the following billings and collections regarding its construction contracts in 2018: Billings

Collections

P 85,671.14; P 31,928.57

August September October

P258,000 345,000 364,000

P346,000 453,600 298,000

What is the output VAT respectively in September and October? P 800,000 Mariz Leasing Company leases residential houses with the following rentals for each unit per month: 10 units of Class A residences – P 20,000 20 units of Class B residences – P 15,000 50 units of Class C residences – P 10,000 Compute the exempt receipts of Mariz in one month. P 4,300,000 Bhutan Ding Inc., an international sea carrier had the following receipts during the month: Passenger fares – P 8,200,000 Cargoes, mails and excess baggage – P 4,300,000 What is the amount subject to business tax?

A realty trader sold the following properties:

P 800,000

Residential lot – P 1,200,000 Residential dwelling – P 2,000,000 Commercial lot – P 800,000 How much is the total vatable sales? P 9,000,000 Ms. ABC owns P11,000,000 shares representing 40% of the outstanding stocks of XYZ Corporation, a closely- held corporation, which is conducting an initial public offering. Ms. ABC sold 9,000,000 shares during the initial public offering for P50 per share. Compute the IPO tax due from Mr. ABC. P 426,000 ABC Bank, has the following data for the first month of the current year (2020). Interest, commissions and discounts from lending activities, exclusive of pre-terminated loan (remaining maturity of instrument is 5 years) – P 5,000,000 Income from financial leasing (remaining maturity of instrument is more than 5 years) – P 3,000,000 Dividends and equity shares in net income of subsidiaries – P 1,000,000 Rental of properties – P 500,000 Net trading gains within the taxable year on foreign currency – P 300,000 Monthly Interest on a Pre-terminated loan Dec. 1, 2017, (maturity of 10 years) – P 1,000,000 How much is the gross receipt tax? In 2018, a lessor rents 20 residential units for P14,500 per month, and rents another 5 residential units for P16,000 per month. How much will be his total business tax for the year? Betani Hospital reported P 20,000,000 gross receipts from patient service revenue, and additional P 10,000,000 from other auxiliary hospital services which includes P 5,000,000 sales of medicine. What is the amount subject to business tax?

P 28,800

P 5,000,000

3.3.1 Topic Test questions

answers Both False

S1: Once employed, one cannot be considered engaged in business. S2: All sales by a businessman are considered made in the course of business. Bangko Sentral ng Pilipinas

The gross receipts tax does not apply to

P 4,500 Geneva Corporation, a non-VAT taxpayer, leases commercial spaces to various businesses. During a month, it received P 142,500 rentals, net of 5% creditable withholding tax. Compute the percentage tax. Interest income on loans is specifically subject to percentage tax if Quasi-banking institution earned by a Both statements S1: The percentage of block sale in primary offering is determined using the outstanding shares before the IPO. S2: The percentage of stock sale in secondary offering is determined using the outstanding shares after the IPO. Which is incorrect? Mr. Magno owns 1,000,000 shares representing 40% of the outstanding stocks of Calatna Corporation, a closely-held corporation, which is conducting an initial public offering. Mr. Magno sold 700,000 shares during the initial public offering for P100 per share. Compute the IPO tax due from Mr. Magno. From which of the following sources is the gross receipt of an international carrier subject to percentage tax?

P 1,400,000

Outgoing transport cargoes P 4,000

Mr. Jun Kim, a security broker, effected the sales of several securities of Kim Jong-un. The following relates to the sales: Sales Sale of stocks Sale of bonds

Commissions P 120,000

P 1,200

280,000

2,800

Compute the amount of receipts or sales of Mr. Jun Kim subject to business tax. False, True S1: A seller is subject to percentage tax if he is non-VAT registered even if his sales or receipts exceed the VAT threshold. S2: The 3% general percentage tax applies to non-VAT registered taxpayers. P 30,000 Mang Indio has a sari-sari store with P 500,000 annual sales. He received cash from the following transactions: Sale of various merchandise P 30,000 Cash donated by his brother P 200,000 Cash from proceeds of bank loan P 300,000 Compute the amount subject to business tax. Both True S1: A tax on consumption will effectively cause all residents of the state to pay tax. S2: Consumption is the acquisition or utilization of goods and services.

Mr. Julio, employed, received the following from his employer:

P 0

Proceeds of property insurance P 200,000 Proceeds of bank loan P 300,000 Compensation income P 500,000

What is the amount subject to business tax? A non-VAT registered service provider shall pay

3% percentage tax on its gross receipts False, True

S1: Consumption tax is levied upon businesses. S2: A purchase is a form of consumption.

S1: The percentage of block sale in primary offering is determined using the outstanding shares after the IPO.

Neither

S2: The percentage of stock sale in secondary offering is determined using the outstanding shares before the IPO. Which is incorrect? True, False S1: Income tax is based on the taxpayers' capacity to sacrifice for the support of the government. S2: Consumption tax is more consistent with the ability to pay theory. Select those that are subject to specific percentage tax.

International carrier – cargoes, baggage or mails Common carrier by land – transport of passenger Both True

S1: A tax on consumption would support savings initiative. S2: Consumption taxes should not apply to basic necessities. Borneo Corporation, increase its public for P 10 per share. shares of Borneo to

a publicly listed company, is planning to ownership by issuing additional 1,000,000 shares The new shares will increase the outstanding 2,500,000. Compute for the IPO tax.

P 0

Both False S1: Excise tax is payable at the point of sale. S2: Imported excisable of sale.

goods are taxable to excise tax at the point

The following data pertain to a business taxpayer during a quarter: January Revenue Cash collections

February

January - P 0; February - P 0; March - P 640,000

March

P 200,000

P 240,000

P 230,000

180,000

240,000

220,000

Which of these properly reflect the reporting of a non-VAT service provider? Both True S1: A business involves habitual engagement in a commercial activity. S2: Commercial activity means provision of goods or services to the public for a profit. P 162,000 Mr. Magno owns 1,000,000 shares representing 40% of the outstanding stocks of Calatna Corporation, a closely-held corporation, which is conducting an initial public offering. Mr. Magno sold 700,000 shares during the initial public offering for P100 per share.

during the initial public offering for P100 per share. Mr. Magno further sold his remaining 300,000 shareholdings after the IPO for P 90 per share, compute for the IPO tax.

False, True S1: To be construed as being engaged in business, one must be employed. S2: A self-employed individual is engaged in business. False, True S1: All casual sales of properties are considered not made in the course of business. S2: The sale of ordinary assets by a business is considered made in the course of the business. Both False S1: A business which is not registered is exempt from business taxes. S2: The absence of a profit motive may preclude an activity from being considered as business. Select those that are subject to specific percentage tax.

Boy Manok is an operator of a cockpit. During the quarter, it collected P 200,000 from gate receipts, P 240,000 from "tongs", and P 300,000 from business concessionaires inside the cockpits. Total winnings on derby sets totaled P 2,400,000. What is the amusement tax? S1: To be subject to VAT, one has to be registered under the VAT system.

Operators of jaialai Places of exhibitions of professional boxing Places of exhibitions of professional basketballs Operators of cockpits P 133,200

Both False

S2: VAT-exempt sales are subject to percentage tax. Alemandras Corporation sells bread to various stores and makes P P 6,000 150,000 monthly sales on the average. During the month, it made total sales of P 200,000 out of which only P 160,000 was collected. Compute the percentage tax. Franchise Select those that are subject to specific percentage tax. grantees of water Franchisee grantees of telephone – outbound calls Franchise grantees of gas In a recently completed race, Sta. Ana Hippodrome following winning tickets:

noted the

P 4,584

Straight bets - P 40,000, 20 tickets at P 100 per ticket Combination bets - P 20,000, 2 tickets at P 200 per ticket Compute the percentage tax to be withheld on the winnings. Both False S1: A seller of service which is specifically subject to percentage tax is subject to VAT if its 12-month sales or receipts exceeded the VAT-threshold. S2: A seller is subject to percentage tax even if he registered as VAT taxpayer if his annual sales do not exceed the VAT threshold.

A quasi-bank receives the following from its short-term placement of excess funds: Dividend income

P 500,000

Bank interest income, net of final tax

P 800,000

P 50,000

Compute for the gross receipts tax. Both True S1: Common carries are vatable on their transport of cargoes or baggage. S2: Domestic sea or air carriers are vatable on their transport of passengers or cargoes.

A cellular company had the following receipts:

P 250,000

P 2,000,000 from domestic calls P 3,000,000

incoming calls to the Philippines

P 2,500,000 outgoing calls abroad What is the percentage tax? False, True S1: International carriers are vatable on their transport of cargoes ...