tax Flashcards
Statement 1: A progressive system of taxation means a tax structure where the tax rate increases as the tax
base increases.
Statement 2: A person may refuse to pay a tax on the ground that he receives no personal benefit from it.
Statement 3 : A tax is generally unlimited because it is based on the needs of the state.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
b. Only two (2) statements are correct
Statement 1 : Levying of taxes is a legislative act.
Statement 2: Assessment and collection of taxes is an executive act.
Statement 3 : A state has the power to tax even if not granted by the Constitution.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
c. All statements are correct
Statement 1: A state cannot exercise police power if not granted by the Constitution.
Statement 2 : The provisions in the Constitution are grants of power of taxation.
Statement 3: The President may suggest proposalsfortax reforms addressed to both houses of Congress, but
the revenue bill of such reforms must originate from the House of Representatives.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
a. Only one (1) statement is correct
Statement 1: Territoriality is one of the inherent limitations on the power of taxation.
Statement 2: International comity is a Constitutional limitation in taxation.
Statement 3: There can be a double taxation in the Philippines.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
b. Only two (2) statements are correct
Statement 1: For MSMEs, interest expense in connection with the taxpayer’s business shall be reduced by
an amount equal to 20% of grossed-up interest income.
Statement 2: Interest incurred to acquire property used in businessshallbe allowed as a capital expenditure
or outright deduction, at the option of BIR.
Statement 3: The allowable deduction for pension payments to employees will only apply to those pension plan that is funded.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
d. All statements are incorrect
Statement 1: An individual employee has no choice but to use graduated tax table in computing his
annual tax.
Statement 2: An individual engaged in trade or business may opt to use either graduated tax or 8% tax.
Statement 3: An individual purely engaged in practice of profession can only use 8% tax.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
b. Only two (2) statements are correct
Statement 1: Generally, fringe benefits are subject to fringe benefits tax if given to managerial employees.
Statement 2: Fringe benefits when given to rank-and- file are exempted from fringe benefits tax.
Statement 3: The employee is the person statutorily liable to pay the fringe benefits tax.
Statement 4: The basis of the fringe benefits tax is the monetary value of the fringe benefits.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. Only three (3) statements are correct
d. All statements are correct
b. Only two (2) statements are correct
Statement 1: A foreigner who shall stay in the Philippines without a definite intention is considered a nonresident alien.
Statement 2: A non-resident alien who shall stay in the Philippines for 180 days shall be considered engaged
in trade or business.
Statement 3: A nonresident citizen is a citizen of the Philippines who leaves the Philippines during the taxable
year to reside abroad, either an immigrant or for employment on a permanent basis.
a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect
a. Only one (1) statement is correct
The following are non-resident citizens, except
a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of this
physical presence abroad with a definite intention reside therein
b. A citizen of the Philippines who went on a business trip abroad and stayed there most of the time during the year
c. A citizen of the Philippines who works and derives income from abroad and whose employment
thereat requires him to be physically present abroad most of the time during the taxable year
d. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either
as an immigrant or for employment on permanent basis
b. A citizen of the Philippines who went on a business trip abroad and stayed there most of the time during the year
Mr. X arrived on September 1, 2024 to retire and reside permanently in the Philippines after working as
doctor in Australia for several years. Which of the following statements is correct with respect to Mr. X’s classification for income tax purposes?
a. He shall be classified as nonresident citizen for year 2024 with respect to his income derived from
sources abroad from September 1, 2024 to December 31, 2024
b. He shall be classified as nonresident citizen for the year 2024 with respect to his income derived from sources abroad from January 1, 2024 until September 1, 2024
c. He shall be classified as resident citizen for the year 2024 with respect to his income derived from
sources abroad from January 1, 2024 until September 1, 2024
d. He shall be classified as resident citizen for the entire calendar year 2024
b. He shall be classified as nonresident citizen for the year 2024 with respect to his income derived from sources abroad from January 1, 2024 until September 1, 2024
Ed Sheeran, an English singer, was engaged to sing for 3 days at the Mall of Asia Arena in Pasay City after
which he shall return to his hometown in England. For income tax purposes, he shall be classified as
a. Resident alien
b. Nonresident alien engaged in trade or business
c. Nonresident alien not engaged in trade or business
d. Resident citizen
c. Nonresident alien not engaged in trade or business
The following individual taxpayers may avail of the P250,000 tax exemption. Which is the exception?
a. Purely business income earners or exercise of profession
b. Purely compensation income earners
c. Mixed income earners
d. None. All of the above may avail of the P250,000 exemption
d. None. All of the above may avail of the P250,000 exemption
Which of the following individuals may avail of the 8% income tax rate option?
a. Self-employed with gross sales or receipts exceeding P3,000,000
b. Compensation income earner with gross compensation not exceeding P3,000,000
c. Mixed income earners with gross sales or receipts and other non-operating income not exceeding P3,000,000
d. None of the above
c. Mixed income earners with gross sales or receipts and other non-operating income not exceeding P3,000,000
Which of the following is excluded from gross income?
a. 13th month pay and other benefits amounting to P100,000
b. Separation pay within the control of the employee
c. Proceeds from life insurance wherein the corporation is the beneficiary
d. Stock dividends and liquidating dividends
d. Stock dividends and liquidating dividends
Y was injured in a vehicular accident with Z, a drunk driver. Y incurred and paid medical expenses of P100,000
and legalfees of P50,000 during the year, both reimbursed by Z. Y recovered P350,000 assettlement from the
insurance company which insured the car involved in the accident. Y likewise recovered P50,000 from Z to
compensate Y’s one-month absence from work. The amount taxable to Y is:
a. P0
b. P50,000
c. P200,000
d. P350,000
b. P50,000
Which of the following is included from gross income?
a. Life insurance proceeds
b. Amounts received by insured as return of premium
c. Share of a partner in the net income of a general professional partnership
d. Prizes received by athletes sanctioned by Philippine Government
c. Share of a partner in the net income of a general professional partnership
In computing net taxable income, no deduction shall in any case be allowed in respect to, except:
a. Any amount paid out for new buildings or for permanent improvements, or betterment made to increase the value of any property or estate
b. Premiums paid on any life insurance policy covering the life of any officer or employee, when the immediate family members of such employee are directly the beneficiary
c. Any amount expended in restoring property or in making good the exhaustion thereof which an
allowance is or has been made
d. Personal, living or family expenses
b. Premiums paid on any life insurance policy covering the life of any officer or employee, when the immediate family members of such employee are directly the beneficiary
Ms. Z retired from GHI Corporation and received P1,000,000 as retirement pay. The corporation went
bankrupt the following year. Which of the following cases would the P1,000,000 retirement pay received by
Ms. Z be subject to income tax?
Case 1: If the retirement pay was paid based ona reasonable pension where Ms. Z was 55 years old and has
served the corporation for more than 12 years.
Case 2: If Ms. Z was forced by the corporation to retire beyond her control.
a. Case 1 only
b. Case 2 only
c. In both cases
d. None of the above cases
d. None of the above cases
A non-resident alien engaged in trade or business (NRA-ETB) shall be exempt from tax on:
a. PCSO winnings of more than P10,000
b. Prizes of less than P10,000
c. Interest income under the foreign currency deposit system (FCDS)
d. Royalties from books, literary works and musical compositions
c. Interest income under the foreign currency deposit system (FCDS)
Which of the following is included from gross income?
a. Refund of donors’ tax paid in prior year
b. Refund of income tax in prior year
c. Refund of local taxes paid in a prior year
d. Refund of VAT paid in prior year
c. Refund of local taxes paid in a prior year
Which of the following is incorrect regarding the use of 8% income tax rate option?
a. AVAT-registered taxpayer is not qualified to avail of the 8% tax
b. The qualified taxpayer must signify his choice of the 8% tax rate in the first quarterly ITR before he can avail of the same
c. The qualified taxpayer who avails of the 8% tax option is exempt from paying the 3% other percentage tax under Section 116 of the Tax Code
d. The qualified taxpayer who avails of the 8% tax option is no longer entitled to the P250,000 tax exemption
d. The qualified taxpayer who avails of the 8% tax option is no longer entitled to the P250,000 tax exemption
Which of the following benefits received by an employee may be subject to the graduated income tax?
(1) Annual medical benefits of P20,000
(2) Payment of tuition fee of the daughter of a rank-and-file employee.
(3) Housing allowance provided to a rank-and-file employee.
(4) Uniform and clothing allowance of P6,000 per year.
a. All except (1)
b. All except (2)
c. All except (3)
d. All except (4)
d. All except (4)
The monetary value of the following housing privilege shall be 50% of the value of the benefit, except
a. If the employer leases a residential property for the use of his employee and the said property is the usual place of residence of the employee
b. If the employer owns a residential property and the same is assigned for the use of his employee as his usual place of residence
c. If the employer purchases a residential property on installment basis and allows his employee to use the same as his usual place of residence
d. If the employer acquires a residential property and transfers the ownership to his employee without consideration.
d. If the employer acquires a residential property and transfers the ownership to his employee without consideration.
The following are required to file an income tax return, except
a. Resident citizen
b. Nonresident alien not engaged in trade or business
c. Domestic corporation
d. Resident foreign corporation
b. Nonresident alien not engaged in trade or business
Which of the following is incorrect? A proprietary education institution (PEI) is
a. Exempt from income tax if with permit from DepEd, CHED or TESDA and income from related activity is higher than unrelated activity
b. Subject to 25% regular rate if income from unrelated activity is higher than related activity
c. Subject to 10% rate if it is a non-stock corporation with duly issued permit from DepEd, CHED or TESDA
d. Subject to 25% on the portion of the revenue of a non-stock, non-profit educational institution not used actually, directly and exclusively for educational purpose
a. Exempt from income tax if with permit from DepEd, CHED or TESDA and income from related activity is higher than unrelated activity
Which of the following is correct?
a. Hospitals for profit are subject to preferential tax of 10%
b. Offshore banking units are subject to 10% preferential rate
c. Regional area headquarters are exempt from income tax
d. Regional operating headquarters are exempt from income tax
c. Regional area headquarters are exempt from income tax
Which of the following is not one of the requisites for exemption from 6% capital gains tax on sale of real property classified as capital asset?
a. Notice to make utilization of the proceeds from sale of the principal residence was given to the BIR
within 30 days from the date of sale
b. The reacquisition of the new residence must be within 18 months from date of sale
c. The exemption must be availed of once only every 10 years
d. The sale of principal residence must result in a gain
d. The sale of principal residence must result in a gain
Which of the following statements is correct?
a. A joint venture for undertaking construction projects, whether licensed or not by PCAB, is not taxable
as a corporation
b. A general professional partnership is taxable as a corporation
c. A co-ownership where the activities of the co-owners extend to the development of property and collection of income from the property is taxable as a corporation
d. A consortium for energy operations pursuant to an operating consortium agreement under a service contract with the government is taxable as a corporation
c. A co-ownership where the activities of the co-owners extend to the development of property and collection of income from the property is taxable as a corporation
Which of the following is not one of the Constitutional limitations?
a. Equal protection of law
b. Concurrence of majority of all the members of the Congress for the passage of law granting tax exemption
c. Exemption of the government
d. LGUs can create its own sources of revenues
c. Exemption of the government
For income tax purposes, which of the following is taxable on income within and without the Philippines?
a. An American who is married to a Filipina and residing in Makati, who is in the process of obtaining Filipino citizenship by naturalization
b. Filipino citizen residing in Laguna
c. Non-resident Filipino citizen working and residing in Japan
d. Resident foreign corporation
b. Filipino citizen residing in Laguna
The following are your clients as a tax practitioner CPA:
A – an online seller of pastries whose gross sales amounted to P3,500,000.
B – an employee whose gross compensation income amounted to P3,000,000.
C – anoperatorof cockpit arena (sabungan)whose grosssales amounted to P2,000,000.
D – a non-VAT-registered seller of milk tea whose gross sales amounted to P1,000,000.
Who among them is qualified to use 8% optional income tax?
a. A
b. B
c. C
d. D
d. D
Which of the following statements is not correct?
a. In general, joint ventures are taxable as a regular corporation
b. A joint venture for undertaking construction projects is taxable the same as an ordinary partnership
c. A general professional partnership is exempt from income tax
d. A co-ownership where the activities of the co-owners are limited to the preservation of property and
collection of income from the property is taxable same as a general professional partnership
b. A joint venture for undertaking construction projects is taxable the same as an ordinary partnership
Which of the following statements is correct for Optional Standard Deduction (OSD)?
a. OSD is available against compensation income arising out of an employer-employee relationship
b. For individual taxpayers, the OSD is an amount equal to 40% of gross sales or receipts
c. The election of OSD is irrevocable only for the specific quarter for which the choice is made
d. Unless the taxpayer signifies in his return his intention, he shall be considered as having availed of
OSD
b. For individual taxpayers, the OSD is an amount equal to 40% of gross sales or receipts
Which of the following income received by a resident citizen is subject to final withholding tax?
a. Dividend income from a resident foreign corporation
b. Gain from sale of capital assets
c. Share in net income in an ordinary partnership
d. Interest income from notes receivable
c. Share in net income in an ordinary partnership
Which of the following is an income subject to final tax?
a. Share of an individual taxpayer from the distributable net income of a general professional partnership
b. Dividend income from a domestic corporation to a nonresident foreign corporation
c. Withholding tax on compensation arising from employer-employee relationship
d. Fringe benefits given to rank and file employees
b. Dividend income from a domestic corporation to a nonresident foreign corporation
Which of the following is not one of the requisites for tax exemption on foreign-sourced dividends received
by a domestic corporation?
a. Funds from such dividends actually received or remitted into the Philippines are reinvested in the business operations of the domestic corporation in the Philippines
b. The domestic corporation has held the shareholdings for a minimum of 2 years at the time of dividend distribution
c. The domestic corporation holds directly a maximum of 20% of the outstanding shares of the foreign corporation
d. All of the above are requisites for tax exemption
c. The domestic corporation holds directly a maximum of 20% of the outstanding shares of the foreign corporation
The following rules apply to sale of capital assets not subject to capital gains tax, except
a. Holding period does not apply to corporations
b. Capital losses are deductible only up to the extent of capital gains, whether individuals or corporations
c. The holding period for individuals is 50% on short-term capital loss
d. Net capital loss carry-over applies only to individuals
c. The holding period for individuals is 50% on short-term capital loss
Which of the following is an incorrect statement on sale of real property classified as capital asset?
a. Subject to 6% CGT based on higher of selling price or fair market value
b. Taxed whether gain or loss
c. Must be located in the Philippines
d. Withheld at source by the seller
d. Withheld at source by the seller
Which of the following is incorrect on fringe benefits?
a. The assumed useful life for motor vehicles is 5 years
b. The assumed useful life for housing privileges is 25 years
c. The monetary value of the fringe benefit is always 100% if there is a transfer of ownership
d. Transfer of ownership does not matter for fringe benefits other than housing privileges and motor
vehicles
b. The assumed useful life for housing privileges is 25 years
