[EXERCISE 9-1] TRUE OR FALSE - TAXATION ON CORPORATIONS Flashcards
[TRUE or FALSE] The Philippine Airlines is classified as an international carrier because it travels from the Philippines to other countries in Asia and America.
ANS: False. Philippine Airlines is a domestic corporation and is not classified as an international carrier for tax purposes.
BASIS: A domestic corporation is taxed on its worldwide income, while an international carrier is defined as a foreign corporation engaged in the transport of persons or goods outside the Philippines. (p. 309, 326)
[TRUE or FALSE] The bank deposit under the expanded foreign currency deposit system is protected by the Law on Secrecy of Bank Deposits.
ANS: True.
BASIS: The expanded foreign currency deposit system protects deposits under the Law on Secrecy of Bank Deposits, ensuring confidentiality. (p. 309)
[TRUE or FALSE] A non-resident foreign corporation which sells not listed and traded shares of stock is subject also to the same tax rate and tax base as a domestic corporation.
ANS: False. A non-resident foreign corporation is subject to a different tax rate on capital gains compared to a domestic corporation.
BASIS: A non-resident foreign corporation selling shares not traded in the stock exchange is subject to a final tax of 5%–10% on net capital gains, while domestic corporations are subject to regular income tax rates. (p. 328)
[TRUE or FALSE] The improperly accumulated earnings tax is not applicable anymore on corporations.
ANS: True.
BASIS: The improperly accumulated earnings tax was removed effective taxable year 2021. (p. 330)
[TRUE or FALSE] A resident foreign corporation is not covered by the application of the MCIT.
ANS: False. A resident foreign corporation is subject to MCIT just like a domestic corporation.
BASIS: The MCIT applies to both domestic corporations and resident foreign corporations. (p. 312)
[TRUE or FALSE] A resident foreign corporation may also avail of the 40% optional standard deduction.
ANS: True.
BASIS: A resident foreign corporation may avail of the optional standard deduction of 40% of its gross income instead of itemized deductions. (p. 319)
[TRUE or FALSE] Interests on peso bank deposit accounts are not included in the gross income in computing the 40% optional standard deduction.
ANS: True.
BASIS: Interest income subject to final tax is not included in the gross income for purposes of computing the optional standard deduction. (p. 319)
[TRUE or FALSE] A proprietary educational institution is subject to an income tax rate of 1% while a non-stock non-profit school is exempt from income tax.
ANS: True.
BASIS: Proprietary educational institutions and hospitals pay a tax of 1% from July 1, 2020 to June 30, 2023, and 10% thereafter. Non-stock, non-profit educational institutions are exempt from income tax. (p. 323, 325)
[TRUE or FALSE] A private educational institution may deduct as expense the cost of constructing a school building in the year of its completion instead of capitalizing it.
ANS: False. The cost of constructing a school building must be capitalized and depreciated over time.
BASIS: Capital expenditures such as buildings must be depreciated over their useful life and cannot be fully deducted as an expense in the year of completion. (p. 320)
[TRUE or FALSE] The Philippine Amusement and Gaming Corporation (PAGCOR) is subject to income tax.
ANS: True.
BASIS: PAGCOR is subject to income tax under the Tax Reform Act, except for income derived from its regulatory functions. (p. 327)
[TRUE or FALSE] In income taxation, a business partnership is taxable as a corporation.
ANS: True.
BASIS: A business partnership is taxed as a corporation, while a general professional partnership is exempt from income tax. (p. 306)
[TRUE or FALSE] The applicable tax rate on nonresident foreign corporations is generally the same as the tax rate on domestic corporations.
ANS: False. **Nonresident foreign corporations are taxed at a different rate.
BASIS: A nonresident foreign corporation is generally taxed at 25% on gross income from sources within the Philippines, while a domestic corporation is taxed at 25% on net taxable income. (p. 328, 309)
[TRUE or FALSE] A corporation is generally subject to an income tax rate of 25% of taxable income, but if it suffers losses, it may instead be subject to a tax rate of 1% of gross income.
ANS: True.
BASIS: Corporations are generally taxed at 25% on taxable income, but if the minimum corporate income tax (MCIT) applies, they are subject to a 1% tax on gross income from July 1, 2020 to June 30, 2023. (p. 312)
[TRUE or FALSE] A corporation which has been registered with the Bureau of Internal Revenue in 2017 shall be covered by the application of minimum corporate income tax (MCIT) effective January 2022.
ANS: True.
BASIS: The MCIT applies beginning the fourth taxable year following the start of business operations. A corporation registered in 2017 would be subject to MCIT in 2021, making it applicable in 2022. (p. 312)
[TRUE or FALSE] Proprietary hospitals are exempt from the coverage of the minimum corporate income tax.
ANS: FALSE.
BASIS: The MCIT does not apply to proprietary educational institutions and non-profit hospitals. (p. 318)
