Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

TAXATION
FINAL EXAM
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 50 items
only. The exam is good for three (2) hours. Believe on what you can do, always bear on your mind that you
can answer everything to the best that you can. Always observe HONESTY. GOOD LUCK!

Use the tax tables, if necessary:

REVISED WITHHOLDING TAX TABLE FOR COMPENSATION
DAILY 1 2 3 4 5 6
Compensation 685 and 685-1,095 1,096- 2,192-5,478 5,479- 21,918 and
Range below 2,191 21,917 above
Prescribed 0 0 82.19 356.16 1,342.47 6,602.74
Withholding Tax + 20% + 25% + 30% over + 32% over + 35% over
over 685 over 1,096 2,192 5,479 21,918
WEEKLY 1 2 3 4 5 6
Compensation 4,808 and 4,808- 7,692- 15,385- 38-462- 153,846 and
Range below 7691 15,384 38,461 153,845 above
Prescribed 0 0 576.92 2,500 9,423.08 46,346.15
Withholding Tax + 20% + 25% +30% over + 32% over + 35% over
over 4,808 over 7,692 15,385 38,462 153,846
SEMI- 1 2 3 4 5 6
MONTHLY
Compensation 10,417 10,417- 16,667- 33,333- 83,333- 333,333 and
Range and below 16,666 33,332 83,332 333,332 above
Prescribed 0 0 1,250 5,416.67 20,416.67 100,416.67
Withholding Tax + 20% + 25% + 30% over + 32% over + 35% over
over over 33,333 83,333 333,333
10,417 16,667
MONTHLY 1 2 3 4 5 6
Compensation 20,833 20,833- 33,333- 66,667- 166,667- 666,667 and
Range and below 33,332 66,666 166,666 666,666 above
Prescribed 0 0 2,500 10,833.33 40,833.33 200,833.33
Withholding Tax + 20% + 25% + 30% over + 32% over + 35% over
over over 66,667 166,667 666,667
20,833 33,333

SCHEDULE OF EXPANDED WITHHOLDING TAX (EWT)

Income Payment EWT Income Payment EWT
Professional/Management/Consultancy fees Gross receipts Purchase of goods or 1% - goods
(Individual) 3M or below - properties by Top 2% -
5% Withholding Agents service
Gross receipts (TWA) -
over 3M or
VAT-reg – 10%
Professional/Management/Consultancy fees Gross receipts Partners in general 720,000 or
(Non-Individual) 720,000 or professional less -10%
below - 10% partnerships Above
Gross receipts (drawings, advances, 720,000 –
over 720,000 – sharings, allowances, 15%
15% etc.)
Contractors/subcontractors (security, 2% Commission (if not 10%
janitorial, etc.) employee)
Director’s fees (if not employee) 10% or 15% Income distributed to 15%
(720,000 beneficiaries of
threshold) estates/trusts
Rental 5%

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GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2018 to December 31, 2022)
Over But not over The tax shall Plus Of excess over
be
250,000 0 0 -
P 250,000 400,000 0 20% P 250,000
400,000 800,000 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,410,000 35% 8,000,000

1. Statement 1:The Commissioner can force a taxpayer to produce its accounting records if the taxpayer
refuses to provide the same during audit.
Statement 2: The BIR can issue an assessment even without the benefit of a notice of audit.
a. Only statement 1 is true.
b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are false.

2. S1:Bayanihan to Recover as One Act was enacted into law exempting the frontliners on their additional
allowance/compensation related to their function. In case of doubt in application, the interpretation will
be most likely in favor of the frontliner.

S2:CREATE Law was enacted by the congress taxing the proprietary educational institution as a domestic
corporation. When it was enacted, confusion arises among the practitioners because the law is contrary to
the previous laws (Train Law and NIRC) and the constitution. Since there is doubt about the law, the
interpretation will be most likely in favor of the practitioners.

S3: CREATE Law was enacted by the congress taxing the proprietary educational institution as a domestic
corporation. When it was enacted, confusion arises among the practitioners because the law is contrary to
the previous laws (Train Law and NIRC) and the constitution. Since there is doubt about the law, the BIR
will be most likely to issue Revenue Regulations.
A. Only S1 is true
B. Only S2 is true
C. Only S3 is true
D. All is true

3. ABC finance and lending company earned P100,000 interest income. 40% of which came from non-resident
debtors. How much is the source of income from the within?
A. P 100,000 C. P 60,000
B. P 40,000 D. P 50,000

4. In 2021, Nicanor created two (2) trusts for his daughter, Julia. During the year, the two trusts earned net
income as follows:
Trust 1 P 4,000,000
Trust 2 P 6,000,000
Each of the trust filed their own income tax return and paid the corresponding income tax due as
computed in their separate returns.

How much is the consolidated tax due of the Trust?

A. P 3,110,000 C. P 210,000
B. P 114,000 D. P 96,000

5. S1: The power of taxation is absolute.

S2: The power of taxation is subject to limitations
A. Only S1 is true
B. Only S2 is true
C. Both are true
D. Both are false

6. Royalty fee received by Jallibae Foods Corp. (DC) from ABC Corp. (NRFC) for use of its brand – Php 1
Million,is subject to final withholding tax of:
A. P 100,000
B. P 150,000
C. P 200,000
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D. P 0
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Consider the following in answering a set of questions:

Nicanor is a resident doctor of ABC Hospital. At the same time, he operates his own clinic. ABC Hospital and
Nicanor’s clinic are both accredited by PhilHealth. The following were disclosed to you by Nicanor:

Income from ABC Hospital:

Gross Compensation – Php 2,800,000
13th month pay and other benefits – Php 200,000
SSS, Philhealth and other mandatory contributions – Php 50,000

Income from Clinic:

Gross receipts:
From Walk-in patients with issued receipts - Php 1,000,000
From patients paid for by Philhealth – Php 1,000,000
Expenses:
Office Rental – Php 250,000
Representation expense – Php 100,000
Salary of staff nurse – Php 250,000
Salary of family driver – Php 120,000
Salary of kasambahay – 60,000
Gas and oil – Php 50,000
Utilities expense (office) – Php 100,000
Utilities expense (house) – Php 250,000

Other information:
Receipts from patients with no issued official receipts – Php 2,000,000
Under-the-table (not reported) Commissions from pharmaceutical companies due to
referrals/prescriptions of medicines – Php 500,000
Quarterly Income tax payments – Php 30,000
Tax withheld by PhilHealth (with BIR Form 2307) – Php 100,000
Tax withheld by ABC Hospital (with BIR Form 2316) – Php 300,000

7. If you are the Accountant of ABC Hospital, how much withholding tax should be withheld on Nicanor’s
compensation for the year?
A. Php 0
B. Php 300,000
C. Php 666,000
D. Php 701,200

8. How much is the total taxable gross receipts?

A. Php 2,000,000
B. Php 3,500,000
C. Php 7,300,000
D. Php 4,500,000

9. How much is the expanded withholding tax required to be withheld by Nicanor?

A. Php 12,500
B. Php 0
C. Php 16,500
D. Php 22,500

10. Statement 1: Fringe benefits tax is computed by dividing thegross- up monetary value of the fringe
benefits by 65% or 75% and then multiplying by 35% or 25% the result thereof. False (monetary value)
Statement 2: Net capital loss can be carried over in the following year ONLY.
A. Both statements are false.
B. Both statements are true
C. Statement 1 is true but statement 2 is false
D. Statement 1 is false but statement 2 is true

Use the following information for the next four (4) questions:
A taxpayer made available the following financial information:
Gross receipts - Php 10,000,000
Cost of service – Php 6,000,000
Expenses: 0 0
Salaries and wages – Php 1,000,000
Transportation and travel – Php 20,000
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Rental - Php 240,000

Representation expense – Php 100,000
Depreciation expense – Php 200,000
Office supplies – Php 20,000
Miscellaneous expenses – Php 10,000

11. How much is the total allowable deduction if the taxpayer is a resident citizen?
A. P1,500,000 C. P1,590,000
B. P1,400,000 D. P1,490,000

12. How much is the total allowable deduction if the taxpayer is a domestic corporation?
A. P1,500,000 C. P1,590,000
B. P1,400,000 D. P1,490,000

13. How much is the taxable income if the taxpayer is an individual?

A. P2,410,000 C. P2,600,000
B. P2,500,000 D. P2,510,000

14. In relation to question no. 14, how much is the taxable income if the taxpayer is an individual and opted
for OSD?
A. P4,000,000 C. P2,410,000
B. P6,000,000 D. P2,600,000

ABC Corp. was trying to employ Nicanor as the Chief Executive Officer. To lure him in joining the Company, he
was offered a competitive compensation package. In addition, he is to be provided with the following benefits:

• Rented Condominium with monthly payments of Php 100,000

• Free use of company owned brand-new car with a cost of car is Php 3 Million.
• Other personal expenses he will incur.

Nicanor accepted the terms. He is to start on July 1, 2021. In addition, he incurred the following expenses
which he presented to the company for reimbursement:

• Salary of personal driver – Php 20,000 per month

• Salary of household help – Php 10,000 per month
• Condominium association dues – Php 5,000 per month
• Groceries – Php 10,000 per month
• Credit card payments – Php 15,000 per month
• Membership dues in gym – Php 10,000 per month

15. Compute the fringe benefits tax to be paid by ABC Corp.

a. Php 274,615
b. Php 355,385
c. Php 516,923
d. Php 234,231

Nicanor earned the following incomes (gross amounts) in 2020: (Assume source is Philippines unless stated)
From Business:
Gross sales – Php 1,000,000
Cost of sales – Php 200,000
Allowable deduction – Php 300,000
Other income:
Rental – Php 100,000
Interest income – Php 100,000

Compensation:
Gross compensation income – Php 120,000
Non-taxable compensation income – Php 20,000

Passive Income:
Dividends from ABC Corp. – Php 100,000
Cash Prizes – Php 10,000

Capital gains: 0 0
Sale of real property classified as capital asset:
− Selling price – Php 5 Million
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− Zonal value – Php 10 Million

− Assessed value – Php 4 Million
− Appraiser’s value – Php 20 Million

Sale of shares of stocks not listed in stock exchange:

− Selling price – Php 2,000,000
− Acquisition Cost – Php 1,000,000
− Fair market value of stocks – Php 3,000,000

16. Compute the total gross income.

A. Php 800,000
B. Php 810,000
C. Php 1,100,000
D. Php 1,110,000

17. Compute the total capital gains tax.

A. Php 900,000
B. Php 750,000
C. Php 1,350,000
D. Php 1,500,000

18. Compute the total final tax required to be withheld by a withholding agent.
A. Php 0
B. Php 10,000
C. Php 12,000
D. Php 32,000

19. Nicanor, a private employee, received the following benefits:

• Monetized vacation leave credits (20 days at Php 1,000 per day) – Php 20,000
• Uniform allowance – Php 10,000
• Christmas cash gift – Php 5,000
• Cash received due to renewal of collective bargaining agreement – Php 10,000
• 13th month pay – Php 50,000
• Other Benefits exempted – Php 10,000

How much is the taxable amount subject to withholding tax on compensation?

A. Php 0
B. Php 14,000
C. Php 30,000
D. Php 40,000

20. Statement 1: The Philippine government bought guns and ammunitions from the government of Russia.
The income received by government of Russia is taxable income as the sale of guns and ammunition is
within the Philippines and thus taxable here in the Philippines.

Statement 2: XYZ Corp. invested in ABC Corp. buying unlisted shares of stocks in the amount of Php 1
Million. XYZ Corp. received dividends in the amount of Php 50,000. The dividend income is exempted from
income tax.
a. Both statements are false.
b. Both statements are true
c. Statement 1 is true but statement 2 is false
d. Statement 1 is false but statement 2 is true

21. Statement 1: Kyle, a government employee, receives a bribe for assisting May in her Business Permit.
The income received by Kyle from bribe is considered as taxable income but is not considered as deductible
from his gross income.
Statement 2: Interest expenses are always deductible in full amount, so long as it is valid and proven in
accordance with existing rules.
a. Both statements are false.
b. Both statements are true
c. Statement 1 is true but statement 2 is false

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d. Statement 1 is false but statement 2 is true
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22. Statement 1: Individual taxpayers who opted OSD are not required to submit audited financial statements.
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