[Topic 2] Appropriate business tax

Question 1

A, a resident citizen, promoted a world boxing championship in Manila featuring B, a Filipino champion. Gate receipts amounted to P3,000,000 and additional receipts from television coverage was P2,000,000. The amusement tax is

a.P900,000
b. P300,000
c. P500,000
d. None

Answer 1

None.

The INTERNATIONAL boxing championship features a Filipino champion and is promoted by a resident citizen.

Question 2

All of the following except one are liable to the 6/10 of 1% stock transaction tax. Which one is not?

a. Estates and Trust
b. Corporate taxpayers, whether domestic or foreign
c. Dealers in securities
d. Individual taxpayers, whether citizens or aliens

Answer 2

Dealers in securities are liable to VAT or CGT.

Question 3

One of the following is subject to common carrier’s tax

a. Owners of animal-drawn two wheeled vehicles
b. Owners of banca
c. Common carriers by land for transport of goods or cargoes
d. Common carriers by land for transport of passengers

Answer 3

Common carriers by land for transport of goods or cargoes

Question 4

Persons not subject to VAT are likewise exempt from OPT.

a. False
b. True

Answer 4

FALSE

Question 5

All are considered sweetened products, except:

a. Beverages using purely high fructose corn syrup
b. Beverages with purely coconut sap sugar
c. Beverages with purely natural fruit juices

Answer 5

Beverages with purely natural fruit juices

Question 6

Which of the following business is not subject to other percentage tax?

a. Sale of shares of stock in the local stock exchange
b. Carriers of passengers
c. Domestic carriers of cargoes
d. Life insurance

Answer 6

Domestic carriers of cargoes

Question 7

I. If the Grantor of the franchise is the government, a radio/TV broadcasting co.’s business tax 3% OPT or 12% vat if vat-registered or if gross receipts > Php10,000,000 for the preceding year.

II. If the Grantor of the franchise is a private co., a radio/TV broadcasting
co.’s business tax is only 3% OPT

Answer 7

If the Grantor of the franchise is a private co., a radio/TV broadcasting co.’s business tax is only 3% OPT

FALSE. This depends on gross receipts. 3% rate is not guaranteed.

Question 8

The franchise tax of grantees of radio and television broadcasting whose annual gross receipts of the preceding year do not exceed P10,000,000 shall be

a. 4% of the gross receipts
b. 3% of the gross receipts
c. 5% of the gross receipts
d. 2% of the gross receipts

Answer 8

3% of gross receipts

Question 9

DST is necessary in

a. Inheritance of real property
b. Estate tax payment
c. Sale of real property
d. Donation of real property exempt from the donor’s tax

Answer 9

SALE OF REAL PROPERTY

Question 10

Excise tax imposed on gross receipts on invasive cosmetic procedures and surgeries directly towards enhancing patient’s appearance shall be net of VAT only.

a. True
b. False

Answer 10

FALSE.

The tax base of excise tax on invasive cosmetic services is the gross receipts, gross of VAT.

Question 11

I. Generally, every person liable to pay the percentage taxes shall file a quarterly return within 25 days after the end of each taxable quarter.
II. All boxing exhibitions held in the Philippines shall be subject to amusement tax

Answer 11

All boxing exhibitions held in the Philippines shall be subject to
amusement tax.

FALSE. There are exemptions made for boxing championships featuring a Filipino champion and promoted by a resident citizen.

Question 12

This type of excise tax refers to that imposed based on selling price or other specified value of the goods/articles.

a. Ad Valorem Tax
b. Progressive Tax
c. Specific Tax

Answer 12

AD VALOREM TAX

Question 13

Franchise grantees of city gas and water utilities are subject to franchise tax of

a.5%
b. 3%
c. 4%
d. 2%

Answer 13

The tax rate for gas and water utilities franchises is 2% OPT regardless of gross receipts.

Question 14

Excise taxes will only be imposed to goods or services which are exempt from either VAT or OPT.

a. False
b. True

Answer 14

FALSE

Question 15

Which of the following statement is not true about OPT?

a. It is a privilege tax
b. It is an ad valorem tax
c. It is a transfer tax
d. It is a business tax

Answer 15

It is a transfer tax

Question 16

Which of the following is not within scope of OPT transactions?

a. Annual gross receipts of P10,000,000 by a non-VAT TV/radio franchise
grantees
b. Annual sales of livestock and vegetables amounting to Php3,000,000
c. Annual sales below P3,000,000 by a VAT person.
d. Transport of passengers by land with an annual gross receipts of
P50,000,000

Answer 16

Annual sales of livestock and vegetables amounting to Php3,000,000

Question 17

ABC Corporation, a VAT-registered domestic corporation is a holder of a
franchise to operate transportation units from the Philippines to foreign
country, which of the following is correct?

a. May claim a refund or credit the input taxes against other internal revenue
taxes.
b.
The corporation is exempt from VAT
c.
The output VAT is 0, hence, the corporation cannot claim input tax.
d.
The corporation is subject to percentage tax

Answer 17

May claim a refund or credit the input taxes against other internal revenue
taxes.

Question 18

I. Excise Tax is imposed on goods manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition
II. Goods imported
III. Certain services provided under the TRAIN Law, specifically invasive
cosmetic procedures
a.
Only I and III are correct
b.
I, II and III are correct
c.
Only I and II are correct

Answer 18

All of the following are true:

I. Excise Tax is imposed on goods manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition
II. Goods imported
III. Certain services provided under the TRAIN Law, specifically invasive
cosmetic procedures

Question 19

Which of the following is not subject to other percentage tax?
a.
Franchise of gas and water.
b.
Gross sales of subsistence livelihood business
c.
Gross receipts of amusement activities.
d.
Transport of passengers through airplane.

Answer 19

Transport of passengers through airplane.

VAT or 8% tax

Question 20

One of the following is not subject to the 3% percentage tax
a.
International air carrier doing business in the Philippines

b.
International shipping carrier doing business in the Philippines

c.
Franchise grantee of electric utilities

d.
Domestic carriers and keepers of garage

Answer 20

Domestic carriers and keepers of garage is either subject to 3% OPT or 12% VAT.

Question 21

This type of excise tax refers to that imposed based on weight or volume
capacity or any other physical unit of measurement.

a.
Ad Valorem Tax
b. Progressive Tax
c.
Specific Tax

Answer 21

SPECIFIC TAX

Question 22

Excise taxes apply to goods manufactured or produced in the Philippines
for domestic sales and consumption or for any other disposition. Goods
importd and certain services provided are not subject to excise taxes.

a.
True
b.
False

Answer 22

FALSE. Imported goods are also subject to excise taxes.

Question 23

Debt instrument are instruments representing borrowing and lending
transactions including debentures, certificate of indebtedness, and bonds,
except loan agreements signed abroad wherein the object of the contract
is located or used in the Philippines.

a.
True
b.
False

Answer 23

FALSE.

Loan agreements signed abroad wherein the object of the contract is acted or used in the Philippines are included in the definition of debt instruments.

Question 24

Documentary Stamp Tax (DST) is paid by the person making, signing,
issuing, accepting or transferring the documents. However, whenever one
party to the taxable document enjoys exemption from the tax, the other
party who is not exempt shall also be exempted from paying the DST.

a.
True
b.
False

Answer 24

FALSE. The party who is not exempt will pay the DST

Question 25

One of the following is not subject to amusement tax on gross receipts
a.
Bowling alleys

b.
Disco houses

c.
Professional basketball games
d.
Cockpits

Answer 25

BOWLING ALLEYS

Question 26

A tax on the right or privilege to enter places of amusement
a.
VAT
b.
Income tax
c. Amusement tax
d.
Franchise tax

Answer 26

AMUSEMENT TAX

Question 27

In the original issuance of a stock, the bases of the DST payable are,
except:
a.
stock dividend - par value regardless of actual consideration
b.
with par value - par value
c.
without par value - actual consideration

Answer 27

The bases for original issue of shares of stock include:
- par value
- the actual consideration
-actual value represented by each share

Not included is:
stock dividend - par value regardless of actual consideration

Question 28

A person whose business is to keep automobiles for hire or keep them
stored for use or order

a.
Tourist bus operator

b.
Common carrier

c.
Taxicab operators

d.
Keepers of garages

Answer 28

Keepers of garages

Question 29

I. Hybrid vehicles shall be subject to 50% of the applicable excise tax rates.
II. Purely electric vehicles and pick-ups shall not be exempt from excise tax
on automobiles.

a.
Both statements are correct.
b.
) Only statement II is correct.

c.
Only statement I is correct.

Answer 29

Purely electric vehicles and pick-ups shall not be exempt from excise tax
on automobiles.

FALSE. Purely electric vehicles and pick-ups shall be exempt from excise tax on automobiles

Question 30

Amounts received for overseas dispatch, message or conversations
originating from the Philippines are subject to:
a.
2% franchise tax

b.
3% franchise tax

c.
10% VAT

d.
10% overseas communications tax

Answer 30

10% overseas communications tax

Question 31

Sale, importation, printing, or publication of books and any newspaper,
magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale, and which is not devoted principally to the
publication of paid advertisements is:
a.
Exempt from VAT and OPT

b.
Exempt from VAT, subject to OPT

c.
Subject to VAT and OPT

d.
Subject to VAT, exempt from OPT

Answer 31

Exempt from VAT and OPT.

Question 32

These are procedures exempt from excise tax, except:
a.
Congenital/development defect or abnormality
b.
Disfiguring disease, tumor, virus or infection
c.
Surgical enhancement to improve flat nose

Answer 32

Surgical enhancement to improve flat nose

Question 33

The OPT on amusement activities is a

a.
Local tax

b.
Specific tax
c.
National tax
d.
Transfer tax

Answer 33

NATIONAL TAX

Question 34

Section 116 of the Tax Code, as amended, provides that any person whose
sales or receipts under Section 109(1) (CC) of the Tax Code from the
payment of VAT and who is not VAT-registered shall pay a tax equivalent to
3% of his quarterly sales or receipts. Provided, that cooperatives, shall be
exempt from the 3% gross receipts tax herein imposed: Provided, further
that effective July 1, 2020 until June 30, 2024, the rate shall be 1%.

Answer 34

FALSE.

The rate shall be 1% from July 1, 2020 to June 30, 2023.

Question 35

The BIR assessed the taxpayer for deficiency DST on a loan extended to it
by its affiliates, which is not covered by any document but disclosed in
Note 18 of its 2019 Audited Financial Statements (AFS).
The taxpayer argues that the Notes to AFS are neither documents nor debt
instruments within the purview of Section 179 of the Tax Code. Thus, the
advances extended to it by related parties as appearing in Note 18 of its
2019 AFS are not subject to DST.

a.
The taxpayer is correct. The DST is not imposed on intercompany
advances.

b.
The BIR is correct. The DST is an excise tax because it is imposed on the
transaction rather than on the document.

c.
The BIR is correct. The Notes to AFS serve as taxable documents and can
be used as debt instruments.

d. The taxpayer is correct. The DST is literally a tax on the document that
embodies the transaction.

Answer 35

The BIR is correct. The DST is an excise tax because it is imposed on the
transaction rather than on the document.

Question 36

In order to be subjected to Percentage Tax:

I. Not VAT-registered person
II. The annual gross sales or receipts do not exceed Php3,000,000

a.
Both statements are correct
b.
Only statement II is correct

c.
Only statement I is correct

Answer 36

Both statements are correct:

I. Not VAT-registered person
II. The annual gross sales or receipts do not exceed Php3,000,000

Question 37

I. Failure to stamp a taxable document shall invalidate the document
referred thereto.
II. No notary or other officer authorized to administer oaths shall add his
acknowledgment to the document unless the proper documentary stamp is
affixed thereto.

a.
Only statement I is correct
b. Both statements are correct
c.
Only statement II is correct

Answer 37

Failure to stamp a taxable document shall invalidate the document
referred thereto.

FALSE. Failure to stamp a taxable document does not invalidate the document.

Question 38

Which of the following statements is incorrect?

a.
Percentage tax may be imposed together with excise tax.

b.
A taxpayer whose annual gross receipts/sales do not exceed P3,000,000
but who is VAT-registered shall pay VAT.

c.
A taxpayer whose annual gross receipts/sales exceed P3,000,000 shall pay
VAT only if he is VAT-registered.

d.
Excise tax may be imposed together with VAT.

Answer 38

A taxpayer whose annual gross receipts/sales exceed P3,000,000 shall pay
VAT only if he is VAT-registered.

If gross receipts exceed P3,000,000 taxpayer is automatically liable to pay VAT.

Question 39

Percentage tax is

a.
all of the above
b.
Imposed together with the excise tax
c.
Imposed on sale of goods
d.
A tax on sale of services

Answer 39

All of the following is true:
b. Imposed together with the excise tax
c.
Imposed on sale of goods
d.
A tax on sale of services