PREFERENTIAL TAXATION

Question 1

Senior Citizens
1. Mr. X, 62 years of age, purchased a medicine from a pharmacy with a selling price of P3,360, gross of
VAT. How much is the net amount to be paid by Mr. X?
a. P3,000
b. P3,360
c. P2,688
d. P2,400

Answer 1

D

Question 2

2. Ms. A, 62 years old, was treated by her grandchildren X, Y and Z to ABC Restaurant during grandparents
   day and their total bill is P3,920.
   Question 1: How much is the discount of the Senior Citizen?
   a. P175
   b. P196
   c. P784
   d. P700
   Question 2: How much is the amount due and payable on the bill?
   a. P3,920
   b. P3,619
   c. P3,627
   d. P3,640

Answer 2

A

Question 3

3. Mr. X, 65 years old, celebrated his birthday with a lunch with his two grandchildren, Y and Z. Mr. X
   ordered chicken with spaghetti and drinks worth P224, gross of VAT. Y ordered spaghetti, drinks and
   burger with an invoice price of P140 inclusive of VAT. Z ordered chicken with rice and drinks with an
   invoice price of P120, VAT inclusive. How much should be paid by Mr. X?
   a. P484
   b. P392.14
   c. P420
   d. P439.2

Answer 3

D

Question 4

4. Mr. X, 60 years old, took an air-conditioned bus, operated by a company subject to OPT, with a normal
   fare of P1,000 from Bicol to Manila.
   Question 1: How much should be paid by Mr. X to the bus conductor?
   a. P714
   b. P1,000
   c. P800
   d. P777

Question 2: Suppose Mr. X took an airplane in going to Manila and the fare, inclusive of VAT and gross
of discount, was P5,040. How much fare should be paid by Mr. X?
a. P5,040
b. P4,500
c. P4,032
d. P3,600

Answer 4

C

Question 5

5. ABC Corporation provides discounts to senior citizens. It reported the following during the taxable year
   2021:
   Receipts:
   Regular-P10,400,000
   Senior citizen-1,300,000
   Cost of services-6,000,000
   Other deductible expenses-2,400,000

Compute for the taxable income of ABC Corporation
a. P3,040,000
b. P3,300,000
c. P3,625,000
d. P2,975,000

Answer 5

B

Question 6

6. Which of the following statements is true?
   a. A senior citizen who buys fishball from a street vendor shall be entitled to a 20% discount on
   amount which is net of VAT
   b. The monthly electric bill in a household where the senior citizen lives shall be subject to 5%
   discount based on the billed amount
   c. A Korean national who comes to the Philippines for a tourist visit in Boracay shall be entitled
   to a 20% discount on plane fare and hotel accommodations
   d. A multi-millionaire senior citizen shall be also entitled to the 20% discount

Answer 6

D

Question 7

7. Statement I: For private hospital confinement, the 20% discount and VAT exemption are deducted first
   from the medical bill before deducting the PhilHealth benefit.
   Statement II: The No Balance Billing Policy applies in public hospitals, meaning senior citizen patients
   need no longer pay for their hospital bill.
   Statement III: Families of deceased senior citizens can claim a 20% discount on funeral and burial
   services. This death benefit applies to hospital morgues, caskets or urns, and embalming and cremation
   services. On the other hand, if the deceased senior citizen was a member of the SSS, the family can
   claim an SSS death benefit provided that the late member had paid at least 36 months of contribution
   before the semester of their death.
   a. Only one (1) of the above statements is true
   b. Two (2) of the above statements are true
   c. Three (3) of the above statements are true
   d. None of the above statements are true

Answer 7

C

Question 8

8. Statement I: Senior citizens can get a 20% discount on groceries and avail an additional special 5%
   discount without VAT exemption on select grocery items, as granted by the Department of Trade and
   Industry and the Department of Agriculture.
   Statement II: Seniors who buy groceries worth up to PHP 1,300 per week enjoy 5% off the retail prices
   of basic necessities and prime commodities.
   Statement III: To get the 5% senior citizen discount on groceries, seniors must bring their OSCA
   purchase booklet when they shop in supermarkets, convenience stores, and drug stores.
   Statement IV: Sari-sari stores, cooperative stores, wet markets, and talipapa are exempted from giving
   the special discount.
   a. Only one (1) of the above statements is true
   b. Two (2) of the above statements are true
   c. Three (3) of the above statements are true
   d. All of the above statements are true

Answer 8

C

Question 9

9. Statement I: At least fifty percent (50%) discount shall be granted on the consumption of electricity,
   water, and telephone by the senior citizens center and residential care/group homes that are
   government-run or non-stock, non-profit domestic corporation organized and operated primarily for
   the purpose of promoting the well-being of abandoned, neglected, unattached, or homeless senior
   citizens, subject to the guidelines formulated by the DSWD.
   Statement II: Senior citizens can avail of a promotional discount in hotels, restaurants, and other
   establishments on top of the 20% discount.
   Statement III: Authorized representatives may claim the senior citizen discount on their behalf, as long
   as the senior citizens the ones who will use the discounted products and services.
   a. Only one (1) of the above statements is true
   b. Two (2) of the above statements are true
   c. Three (3) of the above statements are true
   d. None of the above statements are true

Answer 9

B

Question 10

Persons with Disability (PWDs)
10. Mr. X is a person with disability. He purchased medicines from drugstore with a list price of P10,080.
Question 1: If the amount is gross of discount and VAT, how much should Mr. X pay to the drugstore?
a. P10,080
b. P8,064
c. P7,200
d. P9,032
Question 2: How much special deduction from gross income can be claimed by the drugstore in
computing its taxable income?
a. P2,880
b. P2,016
c. P1,048
d. P1,800
Question 3: Which of the following cards is not acceptable for Mr. X’s proper identification?
a. ID card issued by the local government unit where he is residing
b. Passport of the person with disability
c. ID card issued by the National Council on Disability Affairs
d. ATM card or credit card

Answer 10

C
D
D

Question 11

11. Mr. X, a PWD, was treated by his mother and two (2) of his younger siblings at a fast-food chain and
    their total bill is P1,680.
    Question 1: How much is the actual VAT paid?
    a. P135
    b. P185
    c. P151
    d. P135
    Question 2: If the seller is a non-VAT fast-food chain, how much is the discount of the PWD?
    a. P336
    b. P84
    c. P81.55
    d. P75

Answer 11

AD
B

Question 12

12. Private entities that employ disabled persons who meet the required skills or qualifications, either as
    regular employee, apprentice or learner, shall be entitled to an additional deduction from gross income
    equivalent to:
    a. 15% of the total amount paid as salaries and wages to PWDs
    b. 25% of the total amount paid as salaries and wages to PWDs
    c. 50% of the total amount paid as salaries and wages to PWDs
    d. 100% of the total amount paid as salaries and wages to PWDs

Answer 12

B

Question 13

13. Ms. X, a person with disability, is the accountant of ABC Company earning a salary of P25,000 a month.
    Which of the following is not a tax consequence on Ms. X?
    a. She is not subject to value-added tax
    b. She is entitled to 20% discount on certain establishments
    c. The establishment may be entitled to a special deduction from gross income which is
    equivalent to the amount granted as discount
    d. If she is also a senior citizen, she will be entitled to another 20% discount exclusive of the
    discount allowed as PWD

Answer 13

D

Question 14

Barangay Micro Business Enterprises (BMBEs)
14. It is defined as any business enterprise engaged in production, processing, or manufacturing products,
including agro-processing, as well as trading and services, with total assets of not more than P3 million.
Such assets shall include those arising from loans but not the land on which the plant and equipment
are located
a. Economic zones
b. RHQs/ROHQs of Multinational Corporations
c. Barangay Micro Business Enterprises (BMBEs)
d. PEZA registered entities

Answer 14

C

Question 15

15. Republic Act No. 9178 is otherwise known as
    a. Barangay Enterprises for Micro Business
    b. Barangay Micro Business Enterprise (BMBE’s) Act of 2002
    c. Barangay Micro Business Enterprises (BMBE’s) Act
    d. Magna Carta for Micro, Small and Medium Enterprises

Answer 15

B

Question 16

16. The following are tax incentives given to micro business enterprises, except?
    a. Exemption from the coverage of the Minimum Wage Law, but employees will still receive the
    same social security and health care benefits as other employees
    b. Priority to a special credit window set up specifically for the financing requirements of BMBEs
    c. Technology transfer, production and management training, and marketing assistance
    programs for BMBE beneficiaries
    d. Income tax exemption on all types of income of the enterprise

Answer 16

D

Question 17

17. Which of the following is eligible to register as BMBE?
    a. A lawyer, in the exercise of his legal profession
    b. Manufacturing business with local non-fixed assets of P10 million
    c. A trading business with a total asset of P3 million
    d. A branch of a multinational corporation

Answer 17

C

Question 18

18. To avail of the exemption from income tax, a BMBE must register with the BIR and submit the following
    documents, except
    a. Copy of the BMBE’s Certificate of Authority
    b. Latest audited Financial Statement or Account Information Form
    c. Sworn Statement of Assets Owned and/or Used
    d. Certificate of Registration

Answer 18

D

Question 19

19. A certificate issued granting the authority to the registered BMBE to operate and be entitled to the
    benefits and privileges accorded thereto
    a. Certificate of Authority
    c. Certificate of Incorporation
    b. BIR Certification of Registration
    d. DTI Certificate of Registration

Answer 19

A

Question 20

20. For BMBE purposes, the Certificate of Authority shall be effective for a period of __________ and
    renewable for the same period. The concerned officer shall indicate in the certificate the date when
    the registration of the BMBE commences
    a. 1 year
    c. 3 years
    b. 2 years
    d. 4 years

Answer 20

B

Question 21

21. Grounds for revocation of income tax exemption of a BMBE, except
    a. Total assets have exceeded P3 million
    b. Submission of falsified documents
    c. Merger with an entity which is not eligible to be a BMBE
    d. Suspension of operation for 6 months

Answer 21

D

Question 22

Double Taxation Agreement (DTA)
22. In general, in order to avail of relief from double taxation on income earned within the Philippines in
the form of decreased tax rates thereon or exemption therefrom, what must be submitted by a non-
resident alien to the International Tax Affairs Division (ITAD) of the BIR?
a. Tax treaty law of the host country
b. Tax treaty relief application (TTRA)
c. None of the above.
d. Memorandum of agreement between the taxpayer and host country

Answer 22

B

Question 23

23. In order to avail of relief from double taxation on dividends, interest, and royalty income earned within
    the Philippines in the form of decreased tax rates thereon or exemption therefrom, what must be
    submitted by a non-resident alien to the payor of the income?
    a. Memorandum of agreement between the taxpayer and host country
    b. Tax treaty law of the host country
    c. Certificate of Residence for Tax Treaty Relief (CORTT)
    d. None of the above.

Answer 23

C

Question 24

24. Statement I: Availment of tax treaty relief is not simply automatic in the sense that taxpayers are
    required under existing BIR rules and regulations to comply with certain formalities before the said tax
    relief can be availed.
    Statement II: Securing a tax treaty relief ruling requires the filing of a formal request with the
    International Tax Affairs Division (ITAD) of the BIR stating the nature, mechanics, and conditions of the
    specific transaction applied for together with various supporting documents which include documents
    executed abroad and thus requires certification and authentication of the concerned Philippine
    consulate abroad.
    Statement III: The processing of the application would normally take less than six (6) months although
    a longer timetable may apply if additional documents are requested in the course of the evaluation of
    the application.
    a. Only one (1) of the above statements is true
    b. Two (2) of the above statements are true
    c. Three (3) of the above statements are true
    d. None of the above statements are true

Answer 24

C

Question 25

25. Statement I: Non-resident individuals or corporations with income derived from sources within the
    Philippines and whose country of residence has an effective DTA with the Philippines or their duly
    authorized representatives may apply for a tax treaty relief.
    Statement II: For dividends, interests and royalties, the preferential tax treaty rates for these incomes
    shall be applied and used outright by the withholding agents upon submission of a Certificate of
    Residence for Tax Treaty Relief (CORTT) Form by the non-resident pursuant to Revenue Memorandum
    Order (RMO) No. 8-2017, which took effect on 26 June 2017.
    Statement III: All TTRAs shall only be submitted to the International Tax Affairs Division (ITAD).
    a. Only one (1) of the above statements is true
    b. Two (2) of the above statements are true
    c. Three (3) of the above statements are true
    d. None of the above statements are true

Answer 25

C

Question 26

Philippine Economic Zone Authority (PEZA)
26. It is the Philippine government agency tasked to promote investments, extend assistance, register,
grant incentives to and facilitate the business operations of investors in export-oriented manufacturing
and service facilities
a. Board of Investments
c. Philippine Economic Zone Authority
b. Bureau of Customs
d. National Economic Development Authority

Answer 26

C

Question 27

27. It refers to a selected area with highly developed enterprises or which have the potential to be
    developed into agro-industrial, industrial, tourist/recreational, commercial, banking, investment, and
    financial centers
    a. Pioneer enterprises
    c. Investment Priorities Plan (IPP)
    b. Special Economic Zone (ecozone)
    d. Less Developed Area (LDA)

Answer 27

B

Question 28

28. The short title of Republic Act 7916 is
    a. The Special Economic Zone Act of 1995
    b. The Special Economic Zone Act of 2005
    c. The Philippine Economic Zone Act of 1995
    d. The Export Processing Zone Authority Act of 1995

Answer 28

A

Question 29

29. Incentives to enterprises locating in export processing zones
    a. Foreign merchandise, raw materials, equipment, spare parts, etc. brought into the zone shall
    not be subject to customs and internal revenue laws and regulations nor to local tax ordinances
    b. BOI-registered enterprise incentives
    c. Exemption from local taxes and licenses except real estate taxes
    d. All of the above

Answer 29

D

Question 30

30. These are enterprises engaged in the manufacture, processing or production of commodities of raw
    materials that are not yet being produced in the Philippines on a commercial scale
    a. Pioneer enterprises
    c. Multi-national companies
    b. Non-pioneer enterprises
    d. Export-oriented enterprises

Answer 30

A

Question 31

31. A PEZA registered enterprise has a registered and an unregistered activity. The MCIT shall apply to
    a. Registered activity
    c. Both activities
    b. Unregistered activity
    d. Neither registered nor unregistered activity

Answer 31

B

Question 32

32. The chairman of the PEZA Board is
    a. PEZA Director General
    b. Undersecretary of Trade and Industry
    c. Secretary of Tourism
    d. Secretary of Trade and Industry

Answer 32

D

Question 33

33. Fiscal incentives may be granted to pioneer project for a maximum period of
    a. 2 years
    c. 6 years
    b. 4 years
    d. 8 years

Answer 33

D

Question 34

34. The following is a non-fiscal incentive to PEZA registered enterprise
    a. Income tax holiday
    b. Tax and duty free importation of raw materials, capital equipment machineries and spare parts
    c. Exemption from wharfage dues and export tax, impost or fees
    d. Special non-immigrant VISA with multiple entry privileges for non-resident foreign nationals

Answer 34

D

Question 35

35. Which of the following is an incorrect statement? An enterprise which is registered with PEZA is
    a. As a general rule, subject to real estate taxes while it is enjoying income tax holiday
    b. Exempt from real property taxes on production equipment not attached to real estate
    c. Exempt from real estate taxes for the first three (3) years of operation of machineries installed
    and operated in the economic zone for manufacturing, processing or for industrial purposes
    d. Exempt from real estate tax while it is enjoying income tax holiday

Answer 35

D

Question 36

36. Upon the expiration of income tax holiday, a PEZA registered enterprise may avail of the following
    fiscal incentive, except
    a. 5% Special Tax on Gross Income and exemption from all national and local taxes
    b. VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements
    c. Exemption from wharfage dues and export tax, impost or fees
    d. Four (4) years of exemption from income tax for non-pioneer project

Answer 36

D

Question 37

37. Which document is not required to be submitted in applying for registration with the PEZA?
    a. Project feasibility study
    b. Project brief
    c. Articles of Incorporation and By-Laws
    d. Mayor’s permit

Answer 37

D

Question 38

38. ABC Corporation, A PEZA-registered company, has introduced a major innovation in technology. The
    said technology is new and untried in the Philippines. ABC Corporation yielded the following financial
    results for 2021, its fifth (5th) year of operations:
    Gross revenue-P60,000,000
    Cost of services-20,000,000
    Operating expenses-8,000,000
    Other income-4,000,000
    Question 1: How much is the tax due in 2021 assuming ABC Corporation qualified as a pioneer
    enterprise?
    a. P10,800,000
    b. P3,000,000
    c. P1,800,000
    d. P0
    Question 2: Using the same information, except that it is already the seventh (7th) year of operations.
    How much is the tax due assuming it is subject to 5% preferential rate?
    a. P3,000,000
    b. P2,200,000
    c. P1,800,000
    d. P0

Answer 38

D
B

Question 39

Board of Investments (BOI)
39. Statement 1: EO 226 otherwise known as the Omnibus Investment Code of 1987, is a relatively focused
and systematic grant of incentives based on an Investment Priorities Plan (IPP).
Statement II: The Investment Priorities Plan (IPP) is an annual listing of activities or undertakings
considered critical to the attainment of the country’s overall economic growth and development.
Statement III: BOI registered enterprises are subject to 5% gross income tax in lieu of national and local
taxes, except real property tax.
Statement IV: PEZA registered enterprises are subject to 5% gross income tax in lieu of national and
local taxes, except real property tax.
a. Only one (1) of the above statements is true
c. Three (3) of the above statements are true
b. Two (2) of the above statements are true
d. All of the above statements are true

Answer 39

C

Question 40

40. The Philippine Board of Investments (BOI) is an agency under the
    a. National Economic Development Authority
    c. Office of the President
    b. Department of Trade and Industry
    d. Bureau of Domestic Trade

Answer 40

B

Question 41

41. The appointing authority of the members of the Board of Governors in the Board of Investments
    a. President of the Philippines
    c. Secretary of Trade and Industry
    b. Commission on Appointments
    d. Secretary of Labor

Answer 41

A

Question 42

42. Which of the following statements is correct?
    a. The income tax holiday may be further extended not to exceed 8 years (maximum ITH) upon
    meeting certain conditions
    b. New registered firms under the Board of Investments enjoys income tax holiday for 6 years
    from commercial operations for pioneer firms and 4 years for non-pioneer firms
    c. For BOI-registered enterprises, the income tax holiday is same with PEZA-registered
    companies in general
    d. All of the above

Answer 42

D

Question 43

43. Which of the following statements is incorrect?
    a. BOI registered companies are subject to zero rated (0%) VAT
    b. After Income Tax Holiday period, BOI registered companies are treated as ordinary
    corporations
    c. BOI registered companies are subject to 5% gross income tax in lieu of national and local taxes
    d. None of the above

Answer 43

C

Question 44

44. Which of the following is not a preferred area of investment by the BOI?
    a. Energy
    c. Infrastructure
    b. Hospital medical services
    d. Food production

Answer 44

D

Question 45

45. It refers to the most recent list of the thirty (30) poorest provinces of the Philippines at the time of
    application as determined by the National Economic Development Authority (NEDA)
    a. Pioneer enterprises
    c. Investment Priorities Plan (IPP)
    b. Special Economic Zones (ecozones)
    d. Less Developed Areas (LDA)

Answer 45

D

Question 46

46. To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy that Board
    of Investments that the applicant is, except
    a. Filipino citizen
    b. If it is a partnership or association, that it is organized under the laws of the Philippines and
    that at least 60% of its capital is owned or controlled by Filipinos.
    c. If it is a corporation, it is organized under Philippine laws and that at least 60% of the capital
    stock outstanding and entitled to vote is owned and held by Philippine nationals, and at least
    60% of the members of the Board of Directors are citizens of the Philippines
    d. If it is a corporation, it is organized under Philippine laws and that at least 60% of the
    authorized capital stock is owned and held by Philippine nationals

Answer 46

D

Question 47

47. One of the following statements is false. Which is it?
    a. Filipino enterprises are eligible to register their activity with the BOI if their project is listed as
    a preferred project in the current Investment Priorities Plan (IPP)
    b. An activity which is not listed with the BOI may also be entitled to incentives if at least 50% of
    the production is for export (for 60% Filipino and 40% foreign-owned enterprises)
    c. An activity of more than 40% foreign-owned enterprises which is not listed with the BOI may
    also be entitled to incentives if at least 70% of its production is for export
    d. Foreign owned firms are not eligible to register their activity with the BOI

Answer 47

D

Question 48

48. What are the documentary requirements for registration of firms with the Board of Investments?
    a. Certificate of Incorporation
    b. Audited Financial Statements and Income Tax Return for the past three years
    c. Board resolution expressing intention to register with the BOI
    d. All of the above

Answer 48

D

Question 49

49. Statement I: Additional deduction for labor expense (ADLE) For the first five (5) years from date of
    registration, a registered enterprise shall be allowed an additional deduction from taxable income
    equivalent to fifty percent (50%) of the wages of additional skilled and unskilled workers in the direct
    labor force.
    Statement II: The ADLE shall be doubled or become one hundred percent (100%) if the activity is
    located in an LDA. The privilege, however, is not granted to mining and forestry-related projects as
    they would naturally be located in certain areas to be near their source of raw materials.
    Statement III: ADLE cannot be simultaneously availed of with ITH.
    a. Only one (1) of the above statements is true
    b. Two (2) of the above statements are true
    c. Three (3) of the above statements are true
    d. None of the above statements are true

Answer 49

C