Polytechnic University of the Philippines

Federation of Junior Philippine Institute of Accountants

Federation Year 2022-2023

Finals Departmentals Examination Reviewer

A.Y. 2022-2023
Subject Code: ACCO 20133
Course Subject: Income Taxation

1) Generally, what determines the nationality of a corporation for income tax

purposes?
a) Place of Incorporation
b) Functional currency used in the financial statements
c) Composition of the Board of Directors
d) Composition of Stockholders
2) In order for the reduced rate of 20% corporate income tax to apply, a
domestic corporation must have a taxable income:
a) Less than P100,000,000
b) Not exceeding P100,000,000
c) Less than P5,000,000
d) Not exceeding P5,000,000
3) What is the tax rate of Branch Profit Remittance Tax?
a) 10%
b) 5%
c) 15%
d) 20%
4) Which taxable corporations is disqualified from claiming deductions from
its gross income?
a) Domestic corporation
b) Resident foreign corporation
c) Nonresident foreign corporation
d) None of the above
5) A domestic market enterprise with a capitalization of P1 billion located in a
rural area:
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

a) Cannot avail of special corporate income tax.

b) Can enjoy special corporate income tax for three (3) years.
c) Can enjoy special corporate income tax for five (5) years.
d) Can enjoy special corporate income tax for ten (10) years.
6) The Strategic Investments Priority Plan shall be valid for:
a) Two years
b) Three years
c) Five years
d) Seven years
7) The Special Corporate Income Tax is
a) 5% based on gross income
b) 5% based on taxable income
c) 10% based on gross income
d) 10% based on taxable income
8) Who shall have the main authority to grant tax incentives under CREATE
Act?
a) President of the Philippines
b) Fiscal Incentives Review Board
c) Board of Investments
d) National Economic Development Authority
9) Statement 1: For a resident alien, foreign taxes paid may be claimed only
as a Philippine income tax credit but never as a deduction from gross
income for Philippine income tax purposes.
Statement 2: For a resident citizen, foreign taxes paid may be claimed
either as a Philippine income tax credit or as a deduction from gross
income for Philippine income tax purposes
a) Only Statement 1 is true.
b) Only Statement 2 is true.
c) Both statements are true.
d) Both statements are not true.
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

10) In case of charitable donations subject to limitations, up to what extent

may an individual claim deductions?
a) 10% of the taxpayer’s taxable income derived from trade, business or
profession as computed without the benefit the charitable donations.
b) 15% of the taxpayer’s taxable income derived from trade, business or
profession as computed with the benefit the charitable donations.
c) 5% of the taxpayer’s taxable income derived from trade, business or
profession as computed without the benefit the charitable donations.
d) 20% of the taxpayer’s taxable income derived from trade, business or
profession as computed with the benefit the charitable donations.
11) For how many years may the net operating carry-over be claimed as
deduction from gross income from the date it is reported?
a) For the next two (2) consecutive taxable years immediately following the
year of such loss.
b) For the next three (3) consecutive taxable years immediately following the
year of such loss.
c) For the next four (4) consecutive taxable years immediately following the
year of such loss.
d) For the next five (5) consecutive taxable years immediately following the
year of such loss.
12) Which of the following taxes is not allowed to be claimed as allowable
deductions from gross income?
a) Capital Gains Tax
b) Documentary Stamp Tax
c) Other Percentage Tax
d) Local Business Tax
13) Which of the following is an exempt joint venture?
a) A joint venture formed between Ayala Corporation and the government for
the purpose of constructing an expressway.
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

b) A joint venture formed between Chris Corporation and Kenneth

Corporation for the purpose of setting up a non-profit review school.
c) A joint venture formed between St. Mary’s Corporation and St. Peter
Corporation, both non-stock religious corporations for the selling of
religious-themed cupcakes.
d) A joint venture formed between Vosnia Corporation and Herzegovina
Corporation, both resident foreign corporations, for the purpose of
engaging in petroleum operations 50 miles from shores of Palawan.
14) Statement 1: A non-resident citizen who is a partner in a commercial
partnership is subject to the regular income tax at the graduated rates of
20% to 35% on his share in the profits.
Statement 2: A non-resident alien engaged in trade or business who is a
partner in a commercial partnership is subject to the final tax on dividends
at the rate of 20% on his share in the profits.
a) Only statement 1 is true.
b) Only statement 2 is true.
c) Both statements are true.
d) Both statements are not true.
15) Who shall pay the income tax on the taxable income of general
professional partnership?
a) General professional partnership
b) Clients of general professional partnership
c) Partners of general professional partnership in their separate income tax
returns
d) None of the above
16) Union of United Workers of Bagong Silang is a labor organization
registered with the Department of Labor and Employment. It collected
union dues from its members amounting to P400,000, and it likewise
operated a memorabilia shop in which it earned an income of P350,000. The
said labor organization used P600,000 of the proceeds for the professional
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

development of its union members. How much of the above amount is

subject to the regular corporate income tax of 30%?
a) P350,000
b) P150,000
c) P600,000
d) P750,000
17) Before the passage of the CREATE Act, what is the tax rate of improperly
accumulated earnings tax?
a) 30%
b) 20%
c) 15%
d) 10%
18)Statement 1: Taxes cannot be subject to set-off or compensation as claim
for taxes is not a debt or contract.
Statement 2: The authority of the LGUs to tax is merely a delegated power,
the Congress may, under the 1987 Constitution, abolish the power of the
former to tax.
a) Only statement 1 is true.
b) Only statement 2 is true.
c) Both statements are true.
d) Both statements are not true.
19) What kind of means of avoiding or minimizing the burden of taxation is the
transfer of the burden of a tax by the original payer or the one on whom the
tax was assessed or imposed to someone else?
a) Transformation
b) Tax avoidance
c) Shifting
d) Evasion
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

20) Government-owned controlled corporations (GOCCs) performing

proprietary functions are subject to tax, however the following were
granted tax exemptions except;
a) Government Service Insurance System (GSIS)
b) Social Security System (SSS)
c) Local Water District
d) None of the above
21) Mr. Sebastian is the owner of a 10,000 sq. m. parcel of land located in the
city limits of the gig city he leased the property for 50,000 a year to a
religious congregation for a period of 15 years. The religious congregation
built on a 6000 sq. m. portion of a seminary and the Chapel that it used in
connection with its religious activities it constructed A-10 story building on
the remaining 4,000 sq. m. which it rented out to various commercial
establishments, the proceeds of which go to the support of its various
seminaries located throughout the Philippines. This this seminaries are
organized as nonprofit and non-stock educational institutions. Is Mr.
Sebastian exempt from the payment of real property taxes?
a) Yes, Mr. Sebastian is exempted from the payment of real property tax
except on the 4000 sq. m. lot that is rented out to other establishments.
b) Yes, Mr. Sebastian is exempted from the payment of real property tax
except on the 6000 sq. m. lot that is rented to the religious congregation.
c) Yes, Mr. Sebastian is exempt from the payment of real property taxes on
the 6000 sq. m. portion of his 10,000 sq. m. lot, as well as on the
remaining 4000 sq. m.
d) No, Mr. Sebastian is not exempted from the payment of real property tax
and has to pay taxes on his 10,000 sq. m. lot.
22) It is the general or intentional overlooking by the state of its authority to
impose penalties on persons otherwise guilty of evasion or violation of a
revenue or tax law.
a) Evasion
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

b) Amnesty
c) Avoidance
d) Capitalization
23) Upon the effectivity of this Republic act regular income of SEP amounting
to more than Php250,000 in a taxable year but with the gross sales slash
receipts and other non-operating income not exceeding the revised VAT
threshold of Php3,000,000 pesos shall have the option to avail of 8% tax on
gross sales slash receipts and other non-operating income in excess of
Php250,000 in lieu of the graduated income tax rate and business tax under
section 116 of the tax code.
a) RA 10963
b) RA 10693
c) RA 11534
d) RA 11543
24) This is exempted from the income tax of minimum wage earners. It forms
part of the new wage rates or statutory minimum wage.
a) Bad debt recovery
b) Retirement benefits, separation pay, and pension
c) Vacation and sick leave
d) Cost of living allowance
25) If the amount of PCSO/Philippine lotto winnings received exceed P10,000,
what type of income tax will apply?
a) Capital gains tax
b) Final withholding tax
c) Basic Income tax
d) Exempt
26) Which theory in taxation states that without taxes, a government
would be paralyzed for lack of power to activate and operate it,
resulting in its destruction?
a) Power to destroy theory
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

b) Symbiotic Theory
c) Sumptuary Theory
d) Lifeblood Theory
27) Cy is an American information technology expert. She was signed by
PandaTel from January to March 2023 to improve its internet services. Due
to the anticipated entry of competitors from other countries, PandaTel
decided to extend indefinitely the services of Cy. In what classification of
taxpayer does Cy falls into?
a) Resident alien
b) Non-resident alien
c) Non-resident Citizen
d) Resident citizen
28) This refers to a certificate in the form of savings, common or individual
trust funds, deposit substitutes, investment management accounts and
other investments with a maturity period of not less than five (5) years.
a) Deposit substitutes
b) Long-term deposit or investment certificate
c) Short-term deposit
d) Informer’s reward
29)The following shall not be treated as taxable fringe benefits:
a) Non-taxable housing benefits
b) Benefits given to rank and file employees
c) Contributions of the employer for the benefit of the employee to
retirement, insurance and hospitalization benefit plans
d) Traveling expenses of family members of employees paid for by
employer
30) For purely compensation income earners, the filing of income tax returns
is once a year only on or before:
a) April 15 of the same year
b) April 15 of the following year
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

c) May 15 of the same year

d) May 15 of the following year
31) Which shall be considered de minimis benefits not subject to income tax
as well as withholding tax on compensation income of both managerial and
rank and file employees:
a) Monetized value of used vacation and sick leave credits paid to
government officials and employees
b) Laundry allowance exceeding P300 per month.
c) Monetized unused vacation leave credits of private employees not
exceeding 10 days during the year.
d) Gifts given during Christmas and major anniversary celebrations
exceeding P5,000 per employee per annum.
32) No tax law may be enacted for the purpose of raising revenue for private
purposes is under of what taxation principle?
a) Elements of sound tax system
b) Limitation on the state’s power to tax
c) Situs of taxation
d) Characteristics of the State’s power to tax
33) Senior citizens and/or PWDs, as the case maybe, under the law are entitled
to the following benefits except:
a) 20% discount and exemption from VAT on their purchase of specified
goods and services
b) 5% discount on basic and prime commodities
c) Death benefit assistance
d) None of the above
34)In the classification of income, these are all identified as income as to
source except:
a) Compensation income
b) Professional income
c) Business income
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

d) None of the above

35) Under kinds of partnership for tax purposes, this is formed by persons for
the purpose of exercising their common profession, no part of income of
which is derived from engaging in trade or business.
a) General Partnership
b) General Professional Partnership
c) General Commercial Partnership
d) None of the above

36) Andromeda Corporation, a dealer of sugar under the brand Spark My

Sugar Baby, has gross sales of P1,400,000,000 with cost of sales of
P560,000,000 and allowable deductions of P150,000,000 for fiscal year
starting March 1, 2020 and ending February 28, 2021. They began operating
in 1989.

Andromeda Corporation’s total assets of P180,000,000 includes the land

and building in which the business is situated, amounting to P50,000,000
and P25,000,000, respectively.

How much is Andromeda Corporation’s income tax due?

a) 161,000,000
b) 184,000,000
c) 189,750,000
d) 207,000,000
37) Celeste Co. was incorporated on June 12, 1898. It uses the fiscal year
which begins from May 1 and ends on April 30 of the next year. For the
years ending April 30, 2022, and April 30, 2023, the following are the results
of operations:

2022 2023
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Sales 14,000,000 16,000,000

Less: Cost of sales (8,000,000) (9,000,000)

Gross Profit 6,000,000 7,000,000

Less: Expenses (5,930,000) (3,500,000)

Net income 70,000 3,500,000

Celeste Co. has assets amounting to P240,000,000, which includes a parcel of

land amounting to P50,000,000. How much is the income tax payable in 2022 and
2023?

a) 2022 - 60,000 ; 2023 - 832,500

b) 2022 - 17,500 ; 2023 - 875,000
c) 2022 - 60,000 ; 2023 - 70,000
d) 2022 - 60,000 ; 2023 - 875,000

For Questions no. 38 to 40.

Nebula Corporation, a corporation engaged in the selling of alcoholic beverages,
obtained information that you are studying Taxation. Upon knowing such, the
Chief Executive Officer of Nebula Corporation contacted you and sought your
help for the computation of their income tax due. She presented to you their
income statement for the fiscal year ending February 28, 2022:

Sales 25,000,000

Cost of sales (15,000,000)

Gross income 10,000,000

Interest income 200,000

Rental income 1,800,000

Total 12,000,000
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Expenses:

Advertising expense 400,000

Entertainment expense 500,000

Interest expense 170,000

Salaries expense 600,000

Charitable contributions 800,000

Training expense 330,000

Utilities expense 550,000

Repairs expense 850,000 (4,200,000)

Net income 7,800,000

The charitable contributions were made to athletes. The training expenses were
spent for chemists who enrolled in public universities under an apprenticeship
agreement in accordance with the Labor Code. The interest income is gross of
the 20% final withholding tax, which have been duly withheld and remitted by the
bank. The rental income is gross of the 5% creditable withholding tax, which have
been duly withheld and remitted by the lessees. Prior quarter’s income tax
payments amounted to P440,000.

38)How much is the deductible entertainment, amusement, and recreational

expense of Nebula Corporation?
a) 125,000
b) 143,000
c) 259,000
d) 500,000
39)How much is the deductible charitable contributions of Nebula
Corporation?
a) 431,600
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

b) 432,900
c) 439,850
d) 800,000
40)How much is the income tax due and income tax payable of Nebula
Corporation, respectively?
a) 2,093,788 and 1,484,600
b) 1,962,500 and 1,432,500
c) 1,643,680 and 1,113,680
d) 2,054,600 and 1,524,600
41)An offshore banking unit had the following offshore banking transactions
within the Philippines during the taxable quarter ending September 30,
2021:

Income

With local commercial banks 1,200,000

With domestic corporations 3,400,000

With other offshore banking units 4,700,000

With non-residents 2,650,000

Total 11,950,000

If the offshore banking unit can claim allowable deduction of P2,830,000,

how much is the offshore banking unit’s income tax due?
a) 2,736,000
b) 2,280,000
c) 1,950,000
d) 912,000

For Question no. 42 to 43:

Orion Partnership is a domestic partnership duly registered with the SEC. Its total
liabilities amounted to P2,000,000, and its total partners’ equity amounted to
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

P3,300,000. Its primary purpose, as stated in its Articled of Co-Partnership, is the

selling of cat food. The partners, Selene (resident alien) and Sol (nonresident
alien), share equally in the profits. For the year ended December 31, 2021, the
income statement of Orion Partnership showed the following:

Sales 1,480,000

Less: Cost of sales (650,000)

Gross income 830,000

Operating expenses (360,000)

Earnings before taxes 470,000

42)What is the income tax due of Orion Partnership?

a) 0
b) 94,000
c) 117,500
d) 141,000
43)Net of any applicable withholding taxes, how much will Selene receive from
the partnership profit?
a) 148,050
b) 188,000
c) 131,600
d) 169,200
44)Assume the following:
Gain on sale of personal property purchased in the
Philippines and sold in Hongkong P400,000
Compensation received for personal services in the
Philippines 227,000
Rent Income from real property in Thailand 350,000
Gain from sale in the Philippines of shares of a foreign
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Corporation 116,000
Deductions identified with:
Philippine income 100,000
Foreign income 90,000
Deductions unidentified with any particular income 30,000

What is the Philippine net income?

a) 993,000
b) 643,000
c) 243,000
d) 143,000
45) A mixed earner whose gross sales/receipts and other non-operating
income does not exceed the VAT threshold of P3,000,000.
Assume the following data the year:
Compensation income P950,000
Gross sales 3,000,000
Cost of sales (1,600,000)
Operating expenses (650,000)
Total taxable net income P1,700,000
Determine the income tax due:
a) 225,000
b) 327,500
c) 270,000
d) 400,000
46) Mina received the following prizes and winning in Inkigayo:
Cash Prize – Inkigayo Philippines P5,000,000
House and lot won as the winner 10,000,000
Philippines lotto winnings 3,000,000
How much winnings and prizes are subject to tax?
a) 5,000,000
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

b) 10,000,000
c) 15,000,000
d) 18,000,000
For numbers 47-48, refer to the following data:
Europe Air, an international air carrier provided the following data for the
current year:
Gross receipts – transport of passengers P16,000,000
Gross receipts – transport of cargoes 7,000,000
Operating expenses 3,000,000
47) Determine the income tax due:
a) 345,000
b) 500,000
c) 575,000
d) 600,000
48) Assuming the international carrier is subject to a preferential tax rate of
1.5% gross Philippine billings under an existing tax treaty or international
agreement, how much is the income tax due?
a) 180,000
b) 240,000
c) 300,000
d) 345,000
49) An individual taxpayer provided the following information:
Gross business income, Philippines 7,000,000
Gross business income, Korea 2,000,000
Gross business income, Madrid 11,000,000
Business expenses, Thailand 6,500,000
Business expenses, Spain 3,250,000
Business expenses, Philippines 3,000,000
If the individual taxpayer is a nonresident citizen, how much is the taxable
income?
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

a) 4,000,000
b) 7,000,000
c) 7,250,000
d) 20,000,000
50) Christian, a SEP, opted to avail the 8% tax under TRAIN Law, determine his
income tax due assuming the following data.
Assume the following data the year:
Compensation income P800,000
Gross sales 2,700,000
Cost of sales (600,000)
Operating expenses (50,000)
a) 64,000
b) 280,000
c) 318,500
d) 346,000
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Summary of Answers
1. A 26. D.
2. D 27. A.
3. C 28. B.
4. C 29. D.
5. A 30. B.
6. B 31. A.
7. A 32. B.
8. B 33. D.
9. B 34. D.
10. C 35. A.
11. B 36. B.
12. A 37. A.
13. A 38. B.
14. B 39. A.
15. C 40. D.
16. A 41. B.
17. D 42. B.
18. A. 43. D
19. C. 44. C.
20. D. 45. B.
21. C. 46. C.
22. B. 47. D.
23. A. 48. D.
24. D. 49. A.
25. B. 50. C.
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Summary of Answers - Explained

1. (A) Place of Incorporation
When a corporation is incorporated in a particular country, it becomes subject to
that country's tax laws. As a result, the corporation is typically considered a
resident or national of the country where it is incorporated and is liable for income
taxes there.
2. (D) Not exceeding P5,000,000

Beginning July 1, 2020, the effective rate shall be 25%, under the CREATE Law.

A reduced rate of 20% will apply to a domestic corporation with net taxable

income not exceeding P5,000,000 and total assets not exceeding P100,000,000.

3. (C) 15%

In general, profits remitted abroad by a branch office are subject to a 15% tax

rate, based on the total profits applied or earmarked for remittance, without any

deduction for the tax component thereof.

4. (C) Nonresident foreign corporation.

These are foreign corporation not engaged in trade or business within the

Philippines therefore claiming deductions from its gross income is, generally, not

allowed.

5. (A) Cannot avail of special corporate income tax.

Under the CREATE Law, export-oriented enterprises and domestic enterprises
engaged in strategic activities defined in the Strategic Investment Priority Plan
(SIPP) are eligible for the following incentives:
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

1. They can avail an income tax holiday (ITH) lasting four (4) to seven (7)
years, depending on their location and industry priorities as determined in
the SIPP.
2. After the ITH period, they have the option to choose between a 10-year
5% Special Corporate Income Tax (SCIT) on gross income in lieu of all
national and local taxes or enhanced deductions (ED) for qualified
exporters.
3. Qualified domestic market enterprises can enjoy a five-year period of
enhanced deductions (ED).
These incentives aim to support and promote the growth of export-oriented and
strategic domestic enterprises by providing them with tax benefits and incentives.
6. (B) Three years

The Strategic Investment Priority Plan shall be valid for a period of three (3)

years, subject to review and amendment every three (3) years thereafter unless

there would be a supervening event that would necessitate its review.

7. (A) 5% based on gross income

Same explanation in the item #5.

8. (B) Fiscal Incentives Review Board

The Philippine law designates the Fiscal Incentives Review Board (FIRB) as the

government body responsible for granting tax incentives to registered business

enterprises. This interagency board has the authority to provide tax incentives

according to the provisions outlined in the law.

9. (B) Only Statement 2 is true.

When a resident citizen of the Philippines pays taxes to a foreign country, they

have the option to claim those foreign taxes paid in two ways for the purpose of

Philippine income tax calculation.

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

10. (C)- 5% of the taxpayer’s taxableincome derived from trade, business or

profession as computed without the benefit the charitable donations.
Normally, the maximum deduction for charitable contributions is limited to 5% of
taxable income. However, there are specific institutions for which contributions
can be fully deductible up to 100%, provided that certain conditions are met.
11. (B) For the next three (3) consecutive taxable years immediately following the

year of such loss.

Section 34(D)(3) of the Tax Code provides that the net operating loss of a

business or enterprise for any taxable year immediately preceding the current

taxable year and not previously offset as a deduction from gross income can be

carried over as a deduction from gross income for the next three consecutive

taxable years immediately following the year of the loss. However, any net loss

incurred in a taxable year during which the taxpayer was exempt from income tax

will not be allowed as a Nolco deduction.

12. (A) Capital Gains Tax

Allowable deductions from gross income relates to business expenses – those

expenses which are ordinary and necessary for the conduct of trade or business

or profession. Expenses which are personal to the business owners or

entrepreneurs and does not contribute to earning the income are not allowed

deductions.

13. (A) A joint venture formed between Ayala Corporation and the government for

the purpose of constructing an expressway.

Under Section 22 (B) of the Tax Code, a taxable corporation is defined as;

“The term 'corporation' shall include one person corporations [10], partnerships,

no matter how created or organized, joint-stock companies, joint accounts

(cuentas en participacion), associations, or insurance companies, but does not

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

include general professional partnerships and a joint venture or

consortium formed for the purpose of undertaking construction projects or

engaging in petroleum, coal, geothermal and other energy operations

pursuant to an operating consortium agreement under a service contract

with the Government.”

14. (B) Only statement 2 is true.

Section 25 (A)(2) of Tax Code stated that “...or the share of a nonresident alien

individual in the distributable net income after tax of a partnership (except a

general professional partnership) of which he is a partner … shall be subject to

an income tax of twenty percent (20%) on the total amount…”

15. (C) Partners of general professional partnership in their separate income tax
returns
General professional partnerships is clearly defined in Tax Code as “partnerships
formed by persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade or
business.” Therefore, the partners of general professional partnership shall pay
their taxes in their separate income tax returns.
16. (A) P350,000

Only the income earned from trade, business, or profession is subject to the

regular corporate income tax.

17. (D) 10%

Before the implementation of the CREATE Law, a corporation's improperly
accumulated taxable income was subject to a 10% Improperly Accumulated
Earnings Tax (IAET). This tax was imposed on corporations that were created
with the intention of avoiding income tax for its shareholders. These corporations
achieved this by accumulating earnings and profits instead of distributing them to
the shareholders as dividends.
18. (A.) Only statement 1 is true.
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Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

1) If taxes could be a subject of compensation or set off, it can easily give rise to
confusion and abuse, depriving the government of authority over the manner by
which taxpayers can credit and offset their liabilities.
2) The Congress cannot abolish what is expressly granted by the fundamental
law. The only authority conferred to Congress is to provide the guidelines and
limitations on the local government’s exercise of the power to tax.
19. (C.) Shifting
Shifting is the transfer of the burden of attacks by the original payer or the one on
whom the tax was assessed or imposed to someone else's transferred is not the
payment of the tax but the burden of the tax only indirect taxes may be shifted
direct access cannot be shifted. The taxes that may be shifted are VAT,
percentage taxes, excise taxes on excisable articles, end ad-valorem taxes that
oil companies pay to BIR upon removal of petroleum products from its refinery.
20. (D.)
Government Service Insurance System (GSIS), Social Security System (SSS),
Philippine Health Insurance Corporation (PHIC), Philippine Charity Sweepstakes
Office (PCSO), And Local Water Districts under RA 10026 are the are the only
GOC's that were granted tax exemptions.
21. (C.) Yes, Mr. Sebastian is exempt from the payment of real property taxes on the
6000 sq. m. portion of his 10,000 sq. m. lot, as well as on the remaining 4000 sq.
m.
Charitable institutions, churches and parsonages or convince appurtenant
thereto, mosques, nonprofit cemeteries, and all lands, building and
improvements, actually, directly, and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation. This is an exemption from
real property tax only. The exemption in favor of property used exclusively for
charitable or educational purposes is not limited to property actually
indispensable therefore but extends to facilities which are incidental to and
reasonably necessary for the accomplishment of the said purposes. The test of
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

exemption refers to actual use, not ownership. The term exclusively should be
interpreted as primarily rather than solely.
22. (B.) Amnesty
Amnesty is the general or intentional overlooking by the state of its authority to
impose penalties on persons otherwise guilty of evasion or violation of a revenue
or tax law. It partakes of an absolute forgiveness or waiver of the government of
its right to collect. It is a way to give tax evaders, who wish to relent and are
willing to reform a chance to do so. Amnesty involves immunity from all crime,
civil and administrative liabilities from non-payment of taxes.
23. (A.) RA 10963
Beginning 2018 or upon the effectivity of RA 10963 or the Tax Reform for
Acceleration and Inclusion Law or TRAIN Law, regular income of self-employed
and professionals amounting to more than Php250,000 in a taxable year but with
the gross sales slash receipts and other non-operating income not exceeding the
revised VAT threshold of Php3,000,000 pesos shall have the option to avail of
8% tax on gross sales slash receipts and other non-operating income in excess
of Php250,000 in lieu of the graduated income tax rate and business tax under
section 116 of the tax code.
24. (D.) Cost of living allowance
COLA is covered by the income tax exemption of MWEs under RA 9504, as
implemented by Revenue Regulations No. 10-08, which covers the statutory
minimum wage (inclusive of COLA under NCR Wage Order No. NCR-16),
including holiday pay, overtime pay, night shift differential pay, and hazard pay.
25. (B.) Final Withholding Tax
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, a 20% tax on
PCSO lotto prizes over ₱10,000 is automatically deducted.
26. (D.) Lifeblood Theory
The lifeblood theory implies that paying taxes is not only a legal duty but also a
moral obligation for every citizen. It also means that the state has the right and
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

power to impose taxes on any person, property, or activity within its jurisdiction,
as long as it follows the law and due process.
27. (A.) Resident alien
An alien who comes to the Philippines for the purposes that requires extended
stay for its accomplishment, so she makes his home temporarily in the
Philippines, regardless of her intention to return to his residence abroad falls
under to resident alien classification.
28. (B.) Long-term deposit or investment certificate
Long-term deposit or investment certificate refers to certificate of time deposit or
investment in the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other investments with a
maturity period of not less than five (5) years, the form of which shall be
prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued by banks only to
individuals in denominations of P10,000 and other denominations as prescribed
by BSP.
29. (D.) Traveling expense of family members of employees paid for by employer
Expenses in connection with attending business meeting or convention such as
food, beverage and transportation during foreign travel at an average of $300 per
day are considered reasonable expenses and shall be not subject to Finch
benefit tax. However, traveling expense of family members of employees paid for
by employer shall be treated as taxable fringe benefit.
30. (B.) April 15 of the following year
BIR Form No. 1701 shall be filed by individuals who are engaged in
trade/business or the practice of profession including those with mixed income.
BIR 1701 form needs to be filed on or before April 15th annually, and it should
cover all those income from the previous tax year.
31. (A.) Monetized unused vacation and sick leave credits of private employees not
exceeding 10 days during the year.
Payment of monetized unused vacation leave exceeding 10 days as well as
payment of sick leave, regardless of number of days shall be added to other
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

benefits with a P90,000 ceiling. Any amount exceeding P90,000 ceiling shall be
subject to basic and creditable withholding tac on compensation income.
32. (B.) Limitations on the state’s power to tax
Under inherent limitations, it is mentioned in the purpose must be in public
nature, a tax must always be imposed for public purpose, otherwise, it will be
declared as invalid.
33. (D.) None of the above
Senior citizens and/or PWDs, as the case maybe, under the law are entitled to
the following benefits:
20% discount and exemption from VAT on their purchase of specified
goods and services
5% discount on basic and prime commodities
P500 monthly on social pension, for indigent senior citizen
Death benefit assistance
5% discount on utilities
Income tax exemption for minimum wage earners or for senior
citizens/PWDs whose annual taxable income is not more than P250,000.
34. (D.) None of the above
All of the given choices are identified as income as to source.
35. (A.) General Professional Partnership
General professional partnership is formed by persons for the purpose of
exercising their common profession, no part of income of which is derived from
engaging in trade or business. Under Section 26 of the Tax Code and pertinent
revenue regulations, a GPP in not subject to income tax and consequently to
creditable withholding tax.
36. (B) 184,000,000

Computation:

Sales 1,400,000,000

Less: Cost of Sales (560,000,000)

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Gross Profit 840,000,000

Less: Deductions (150,000,000

Taxable Income 690,000,000

Divided by 12 months 12

Taxable income per month 57,500,000

March - June (57,500,000 x 4 x 30%) 69,000,000

July - February (57,500,000 x 8 x 30%) 115,000,000

Income tax due 184,000,000

37. (A) 2022 - 60,000 ; 2023 - 832,500

Computation:

2022 2023

Taxable income 70,000 3,500,000

Tax rate 25% 25%

RCIT due 17,500 875,000

Gross income 6,000,000 7,000,000

Tax rate 1% 1%

MCIT due 60,000 70,000

Income tax due (higher) 60,000 875,000

Less: Excess MCIT carryover (42,500)

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Income tax payable 60,000 832,500

38. (B) 143,000

Computation:

Sale of goods 25,000,000

Rental income 1,800,000

Total sales/receipts 26,800,000

Goods Services/Lease

Sales/Receipts 25,000,000 1,800,000

Divided by total sales/ receipts 26,800,000 26,800,000

Ratio 93.28% 6.72%

x EAR expense 500,000 500,000

Apportioned EAR expense 466,418 33,582

vs. Limit 125,000 18,000

Lower amount 125,000 18,000

Deductible EAR (125,000+18,000) 143,000

39. (A) 431,600

Computation:

Sales 25,000,000

Less: Cost of sales (15,000,000)

Gross Profit 10,000,000

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Rental income 1,800,000

Gross income 11,800,000

Less: Allowable deductions

Advertising expense 400,000

Entertainment expense 143,000

Interest expense 130,000

(170,000 - (200,000 x 20%))

Salaries expense 600,000

Training expense 330,000

Additional training expense 165,000

(330,000 x 50%)

Utilities expense 550,000

Repairs expense 850,000 (3,168,000)

Taxable income before charitable 8,632,000

contributions

Taxable income before charitable 8,632,000

contributions

Percentage limit for corporations 5%

Limit on charitable contributions 431,600

Actual charitable contributions 800,000

Lower amount 431,600

40. (D) 2,054,600 and 1,524,600

Computation:
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Sales 25,000,000

Less: Cost of sales (15,000,000)

Gross Profit 10,000,000

Rental income 1,800,000

Gross income 11,800,00

Less: Allowable deductions

Advertising expense 400,000

Entertainment expense 125,000

Interest expense 130,000

(170,000 - (200,000 x 20%))

Salaries expense 600,000

Training expense 330,000

Additional training expense 165,000

(330,000 x 50%)

Utilities expense 550,000

Repairs expense 850,000

Charitable contributions 431,600 (3,581,600)

Taxable income 8,218,400

RCIT % 25%

Income tax due 2,054,600

Less: Income tax credit

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

CWTs (5% x 1,800,000) 90,000

Prior quarter’s payments 440,000 (530,000)

Income tax payable 1,524,600

41. (B) 2,280,000

Computation:

With local commercial banks 1,200,000

With domestic corporations 3,400,000

With other offshore banking units 4,700,000

With non-residents 2,650,000

Total 11,950,000

Less: Allowable deductions (2,830,000)

Taxable income 9,120,000

x Tax rate 25%

Income tax due 2,280,000

Effective 11 April 2021 (effectivity date of CREATE Act), offshore banking units

are now subject to regular corporate income tax.

42. (B) 94,000

Computation:

Earnings before taxes 470,000

RCIT % 20%

RCIT due 94,000

 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

Note that the rate to be used is 20% as amended by the CREATE Act as the

partnership is a domestic corporation the assets of which did not exceed

P100,000,000 and the taxable income of which did not exceed P5,000,000.

43. (D) 169,200

Computation:

Earnings before taxes 470,000

Less: Taxes (94,000)

Distributable income 376,000

Profit sharing ratio 50%

Selene’s share 188,000

Less: FWT on dividends (10%) (18,880)

Net amount to be received 169,200

Foreign income -
Philippine Net Income 243,000
45. (B.) 327,500
Computation:
First 800,000 income 102,500
In excess of 800,000 (1,700,000-800,000*25%) 225,000
Income tax due 327,500
46. (C.) 575,000
Computation:
Gross receipts – transport of passengers P16,000,000
Gross receipts – transport of cargoes 7,000,000
Total Gross receipts 23,000,000
Multiply by income tax rate 2.5%
Income tax due 575,000
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023

*International carries are subject to 2.5 income tax based on gross Philippine
billings unless it is subject to a preferential rate or exemption on the basis of an
applicable tax treaty/international agreement to which the Philippines is a
signatory or on the basis of reciprocity.
47. (D.) 345,000
Computation:
Gross receipts – transport of passengers P16,000,000
Gross receipts – transport of cargoes 7,000,000
Total Gross receipts 23,000,000
Multiply by income tax rate 1.5%
Income tax due 345,000
48. (D.) 18,000,000
Computation:
Cash Prize – Inkigayo Philippines P5,000,000
House and lot won as the winner 10,000,000
Philippines lotto winnings 3,000,000
Total taxable prizes and winnings 18,000,000
*All the prizes and winnings provided are subject to tax.
*Philippine Lotto winnings exceeding P10,000 are subject to 20% FWT under the
Tax Code as amended under RA 10963 (TRAIN Law)
49. (A.) 4,000,000
Gross business income, Philippines 7,000,000
Business expenses 3,000,000
Taxable income 4,000,000
50. (C.) 318,500
First 800,000 income 102,500
Gross sales (2,700,000*8%) 216,000
Income tax due 318,500
*The 8% tax shall not be applied to compensation income. The P318,500
represents two taxes, business and income taxes.
 Polytechnic University of the Philippines
Federation of Junior Philippine Institute of Accountants
Federation Year 2022-2023