VALUE-ADDED TAX (VAT)

Question 1

1. Which of the following is not a major business internal revenue tax in the Tax Code?
   a. Value-added tax
   b. Excise tax
   c. Income tax
   d. Percentage tax

Answer 1

C

Question 2

2. Which of the following is not included in the term “Gross Selling Price”?
   a. Total amount of money or its equivalent paid by the purchaser
   b. Delivery, freight and insurance paid by the purchaser
   c. Value-added tax passed on by the seller to the buyer
   d. Excise tax

Answer 2

C

Question 3

3. Statement 1: An article exempt from VAT may be exempt from percentage tax.
   Statement 2: An article subjected to excise tax may be subjected to VAT.
   Statement 3: An article subjected to VAT may be subjected to percentage tax.
   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 3

B

Question 4

4. Statement 1: The term “in the course of trade or business” includes regular conduct or pursuit of a commercial or economic activity.
   Statement 2: The term “in the course of trade or business” includes incidental business
   transactions.
   Statement 3: In value-added tax, although the seller-businessman is the one statutorily liable to pay and shoulders the burden of the tax.
   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 4

B

Question 5

5. In case of sale, barter or exchange of real property subject to VAT, the term “fair market value”
   shall mean
   a. The fair market value as shown in the schedule of values of the Provincial and City Assessors (real property tax declaration
   b. The fair market value as determined by the Commissioner of Internal Revenue (zonal
   value)
   c. Whichever is higher between the zonal value and the value per real property tax declaration
   d. Whichever is lower between the zonal value and the value per real property tax declaration

Answer 5

C

Question 6

6. Statement 1: If the debit to the Output Taxes is an amount more than the credit to the Input Taxes
   account, the balancing credit entry is an account Value-added Tax Payable.
   Statement 2: The credit to the Input Taxes account cannot be more than the debit to the Output
   Taxes account.
   Statement 3: If after debit to Output Taxes account and credit to Input Taxes account at concurring
   amounts, there is a credit balance (unused) of input taxes the excess input taxes over the output
   taxes may remain in the Input Taxes Account for use in the next month.
   Statement 4: If after debit to Output Taxes account and credit to Input Taxes account at concurring
   amounts, there is a credit balance (unused) of input taxes the excess input taxes over the output taxes may be credited with a debit to the account Deferred Input Tax, and this new account with
   a balance which will be credited against the output taxes of the succeeding month.
   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 6

D

Question 7

7. Statement 1: A taxpayer whose annual gross sales or receipts exceed P3,000,000 shall pay VAT
   even if he is not VAT-registered. He is likewise entitled to input taxes.
   Statement 2: Imported goods for personal use is not subject to VAT if he is non-VAT registered.
   Statement 3: Zero rated transactions are exempt transactions because it does not result to output tax.
   Statement 4: There may be an export sale although there is not sale or shipment of the goods from
   the Philippines to other countries.
   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 7

A

Question 8

8. Which statements is correct?
   a. A person whose sales or receipts do not exceed P3,000,000 is exempt from VAT and OPT
   b. A person who issues a VAT invoice on a VAT exempt transaction is subject to VAT on the
   said transaction
   c. Entities which are exempt from income tax are also exempt from VAT
   d. Zero-rated sales are exempt from VAT

Answer 8

B

Question 9

9. One of the following is not a transaction deemed sale
   a. Transfer, use or consumption not in the course of business of goods or properties originally
   intended for sale or for use in the course of business
   b. Distribution or transfer to shareholders or investors of goods or properties as share in the
   profits of a VAT-registered person or creditors in payment of debt
   c. Retirement from or cessation from business with respect to all goods on hand as of the
   date of such retirement or cessation
   d. Consignment of goods if actual sale is made within 60 days following the date such goods
   were consigned

Answer 9

D

Question 10

10. Transaction 1 – An agricultural food producer sells his products in their original state to a food
    processor who also buys packaging materials and containers from a manufacturer or supplier.
    Transaction 2 – The food processor transforms the food products into processed foods and sells to
    a wholesaler or exporter.
    Transaction 3 – The exporter sells the goods to foreign buyers.
    Transaction 4 – The wholesaler delivers the merchandise to retailers.
    Transaction 5 – The retailers sell the goods to households or ultimate consumers.
    Assume that all transactions came from VAT-registered persons.
    Question 1: Which of the above transactions is VAT exempt?
    a. Transaction 1
    b. Transaction 2
    c. Transaction 3
    d. Transaction 4
    Question 2: Which of the above transactions is zero-rated?
    a. Transaction 1
    b. Transaction 2
    c. Transaction 3
    d. Transaction 4

Answer 10

A
C

Question 11

11. Statement I: Any person who is not subject to mandatory registration because his actual or
    expected gross sales or receipts from non-exempt business for the past 12 months do not exceed
    P3,000,000, may opt to register under the VAT system, but shall not be allowed to cancel his VAT
    registration for the next three (3) years.
    Statement 2: Any person who is VAT-registered but enters into transactions which are exempt
    from VAT may opt that the VAT apply to his transactions which would have been exempt but shall
    not be allowed to cancel his VAT registration for the next three (3) years.
    Statement 3: Franchise grantees of radio and/or television broadcasting whose annual gross
    receipts of the preceding year do not exceed P10M may opt for VAT registration, but shall not be
    allowed to cancel his VAT registration for the next three (3) years.
    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 is true

Answer 11

B

Question 12

12. Statement 1: When an importation is made by a VAT taxpayer, the value-added tax shall be based
    on the dutiable value if customs and tariff duties are based on quantity or volume.
    Statement 2: When an importation is made by a VAT taxpayer, the value-added tax shall be based
    on landed cost if the customs duty is based on the value of the importation.
    Statement 3: Export sales are exempt from value-added tax regardless of whether the exporters
    are VAT registered or not.
    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 12

D

Question 13

13. Statement 1: Inventories of goods for sale which are exempt from value-added tax may be subject
    to transitional input tax when the seller becomes liable to VAT for the first time, or when he
    voluntarily registers under the VAT system even if his annual gross sales do not exceed P3,000,000.
    Statement 2: The purchase of fish to be processed into sardines shall entitle the manufacturer of
    sardines to a 4% presumptive input tax.
    Statement 3: A person who sells his land classified as capital asset because he needs money for
    the hospitalization of his child is subject to VAT on the sale of real property.
    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 13

A

Question 14

14. Statement 1: Transport of passengers and cargo by domestic air or sea vessels from the Philippines
    to a foreign country is subject to VAT at a rate of 0%.
    Statement 2: Transport of passengers and cargo by domestic air or sea vessels from Luzon to
    Visayas and Mindanao, vice versa, is subject to VAT at a rate of 0%.
    Statement 3: There is a VAT in an importation by an importer-merchant even if he does not intend
    to sell the imported article.
    Statement 4: A person who is exempt from VAT may register under the VAT system.
    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 14

C

Question 15

15. Which of the following statements is correct?
    a. Transitional input tax is 2% of the value of the inventory or the actual VAT paid, whichever is lower
    b. Amounts received from services performed by an individual pursuant to an employer-
    employee relationship are subject to VAT
    c. Export sales by VAT registered persons are not subject to VAT
    d. Export sales by persons who are not VAT-registered are VAT exempt

Answer 15

D

Question 16

16. Which of the following shall be subject to 0% Value-Added Tax?
    a. Sale of electricity by generation companies
    b. Sale of electricity by transmission companies
    c. Sale of electricity by distribution companies
    d. Sale of power or fuel generated through renewable sources of energy

Answer 16

D

Question 17

17. Which of the following statements is incorrect?
    a. VAT on importation is paid to the Bureau of Customs before the imported goods are
    released from its custody
    b. When a person who enjoys the tax-exemption on his importation subsequently sells in the
    Philippines such imported articles to non-exempt persons, the purchaser-non-exempt
    person shall pay the VAT on such importation
    c. Expenses incurred after the goods are released from Customs custody are disregarded in
    computing VAT on importation
    d. Imported goods which are subject to excise tax are no longer subject to value-added tax

Answer 17

D

Question 18

18. Which statement is correct? VAT on importation
    a. Should be paid by the tax-exempt importer, if he subsequently sells the goods to a non-
    tax-exempt purchaser
    b. Should not be paid if the importer is tax exempt but the imported article was subsequently
    sold to a non-exempt purchaser because the transaction was exempt at the point of
    importation
    c. Should be paid by the non-tax-exempt purchaser to whom the tax-exempt importer sells
    it
    d. Is a liability, either of the tax-exempt importer or the non-tax exempt purchaser

Answer 18

C

Question 19

19. Statement 1: VAT is imposed on goods brought into the Philippines, whether for use in business or
    not.
    Statement 2: In case tax exempt products are sold domestically to a VAT registered person, the
    VAT otherwise due on such product shall be considered as input tax creditable against his output
    tax payable.
    Statement 3: Export sales by a VAT registered person are subject to zero-rating and so he can claim
    and enjoy a credit for the tax invoiced to him on his purchases. If he is not VAT registered, his
    export sales are exempt, but he is still entitled to tax credit for inputs.
    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 19

A

Question 20

20. Statement 1: There is a presumptive input tax on sales of goods, properties and services.
    Statement 2: There is a transitional input tax on sales of goods, properties and services.
    Statement 3: The transitional input tax shall be two percent (2%) of the value of the beginning
    inventory on hand or actual VAT paid on such goods, materials and supplies, whichever is higher.
    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 20

B

Question 21

21. Statement 1: Lease of residential units with a monthly rental per unit not exceeding P15,000,
    regardless of the amount of aggregate annual gross rentals shall be exempt from VAT but subject
    to OPT.
    Statement 2: Lease of residential units with a monthly rental per unit exceeding P15,000 but the
    aggregate of such rentals during the year do not exceed P3,000,000 shall be exempt from OPT but
    subject to VAT.
    Statement 3: Lease of commercial units regardless of monthly rental per unit.
    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 21

A

Question 22

22. Sale of the following real properties are subject to VAT, except
    a. Residential lot, held for sale in the ordinary course of business, sold for P1,800,000
    b. Residential house and lot, held for sale in the ordinary course of trade, sold for P2,800,000
    c. Sale of real property not primarily held for sale in the ordinary course of business
    d. Sale of real property used in the ordinary course of business
    Note: VAT exemption threshold to be used for residential house and lot is now P3,199,200 (RR 8-2021).

Answer 22

C

Question 23

23. Which of the following is not subject to VAT by a VAT-registered seller?
    a. Remaining inventory upon retirement from business
    b. Sale of company used car to its officers
    c. Sale of goods or services to the national government
    d. Sale of residential lot amounting to P1,000,000

Answer 23

D

Question 24

24. Statement 1: Sale of drugs and medicines of pharmacy run by the hospital to outpatients are
    subject to VAT.
    Statement 2: Pharmacy items used in the performance of medicinal procedures in hospital units
    such as in the operating and delivery rooms and by other departments are considered part of
    medical services rendered by the hospital, hence, exempt from VAT.
    a. Only Statement 1 is true
    b. Only Statement 2 is true
    c. Statements 1 and 2 are true
    d. None of the above statements are true

Answer 24

C

Question 25

25. Tax credit for input taxes shall be allowed if
    a. The seller is VAT-registered regardless of whether the purchaser is VAT-registered or not
    b. Both the seller and the purchaser are VAT-registered
    c. Either one of the seller or the purchaser is VAT-registered
    d. Neither one of the seller or the purchaser is VAT-registered as long as VAT invoice is issued

Answer 25

B

Question 26

26. Any input tax attributable to zero-rated sales by a VAT-registered person may at his option be
    a. Deducted from output tax
    b. Refunded
    c. Applied for a tax credit certificate which may be used in payment of other internal revenue
    taxes
    d. All of the above

Answer 26

D

Question 27

27. Which statement is not correct?
    a. The excess input taxes of a taxable period arising from local sales may be refunded
    b. The excess input taxes of a payable period arising from exports sales may be refunded
    c. The excess input taxes of a taxable month arising from local sales may be carried over the
    succeeding month
    d. The excess input taxes of a taxable quarter arising from local sales may be carried over to
    the succeeding quarter

Answer 27

A

Question 28

28. Statement 1: On a sale of real property on installments by a real estate dealer, the seller shall be
    subject to VAT on the installment payment received, excluding interests and penalties for the late
    payment.
    Statement 2: On sale of real property on installments by real estate dealer, where the VAT is
    computed not on the consideration in the deed of sale but on the higher fair market value, the Vat
    must be billed separately with a specific mention that it is based on the market value of the
    property.
    Statement 3: In the case of sale on deferred payment basis not qualifying under the installment
    plan, the transaction shall be treated as cash sale and the VAT is payable on the month of sale.
    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 28

B

Question 29

29. Statement 1: Monthly VAT declaration is filed on or before the 25th day from the end of each
    month.
    Statement 2: Quarterly VAT return shall be filed on or before the 20th day from the end of each
    quarter.
    Statement 3: A taxpayer who has two or more businesses shall look at the aggregate of gross
    receipts from all businesses.
    Statement 4: Husband and wife with separate businesses determine liability for the value-added
    tax based on his or her separate business.
    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 29

B

Question 30

30. The following are exempt from VAT, except
    a. Sale of gold to the BSP
    b. Association dues, membership fees, and other assessments and charges collected by
    home-owners associations and condominium corporations
    c. Sale of marinated fish
    d. Services of banks, money changers, pawnshops and cooperatives

Answer 30

C

Question 31

31. The following are exempt from VAT, except
    a. Importation of ordinary feeds for poultry chicken
    b. Sale of roasted chicken
    c. Sale of newspaper
    d. Sale of pet food

Answer 31

D

Question 32

32. Statement 1: A sale of smoked fish by its producer is subject to value-added tax if the seller-
    producer is earning annual gross sales of more than P3,000,000.

Statement 2: A sale of a goldfish by a pet shop is subject to value-added tax, while a sale of fresh
tilapia in the market is exempt.
Statement 3: A sale of live chicken by an agricultural contract grower to ABC Corporation, its
supplier of feeds is subject to VAT.
Statement 4: Both the sale of fresh eggs in the market and the sale of fried egg in a restaurant are
exempt from value-added tax.
Statement 5: The sale of raw sugar is exempt from value-added tax, while the sale of refined sugar
is taxable.
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 32

B

Question 33

33. If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction,
    but fails to display prominently on the invoice or receipt the words ‘VAT-exempt sale”, the
    transaction shall
    a. Still be exempt from value-added tax
    b. Become taxable and the issuer shall be liable to pay VAT thereon
    c. Be effectively subject to zero percent
    d. Be considered erroneous transaction and must be disregarded

Answer 33

B

Question 34

34. Which statement is correct?
    a. The sales invoice that shows a total, with an indication that it includes the value-added tax
    even if it does not show the tax separately, is a correctly prepared invoice
    b. The invoice which shows the selling price and the value-added tax separately, but with a
    total which is a correct amount is a properly prepared invoice
    c. An invoice which shows the selling price and the value-added tax separately, which is paid
    by the buyer, is violative of the revenue regulations on issuance of sales invoice
    d. All of the above are correct

Answer 34

B