Estate Wrcr Ertithe TTA:.

Succession Kinds of Heirs

it is a mode of acquisition by virtue of which the property, rights and obligations I.) Compulsory Heirs. They inherit with or without a will.
to the extent of the value of the inheritance, of a person are transmitted through his death Primary Compulsory Heirs
to another or others either by will or by operation of law (Alt. 774, Civil Code 'of the 0 Legitimate children and descendants
Philippines). 0 Illegitimate children
0 Widow or widower
TYPES: • Secondary Compulsory Heirs
Testamentary. That which results from the designation of an heir, inade in a will O In default of legitimate children and descendants, legitimate parents
execilted in the form prescribed by law. and ascendants
Legtal or Intestate. That which is effected by operation of law or transmission of IA The compulsory heirs are entitled to their legibme, with or without a will,
properties where unless validly "die-inherited".
0 There IS no will; or
0 If there is a • will, the same is void or lost its validity, of nobody Voluntary Heirs. They inherit only if they are in the will.
succeeds in the will. Intestate Heirs
Mixed. That whichiis effected parliV by a will or by operation of law. The compulsory heirs in testamentary succession are also heirs in intestate
succession. They are entitled to their legibme. However, as to the free
Efii The value of obligations that ma be transferred from the decedent to his/bet heir(s) should portion of the estate, it shalt be distributed to the following intestate heirs
not exceed the value of the properties and rights (inheritance) tfansferred. as follows (order of priority):•
' a. Legitimate children
WILL- an act whereby a person is permitted with the formalities prescribed by law, to Legitimate parenta
control to a certain degree the disposition of his estate, to.take effect after his death Illegitimate children
(Art. 783, CCP) from the moment of the death of the decedent, the rights to the Spouse •
succession are- transmitted, and'the possession of the hereditary property is deemed Brothers or sisters •
transmitted toithe -heir (Art. 777, CCP). Relatives by consanguinity up to Sth civil degree
State
Cr Kinds of Wills: •
Notarial or Ordinary chAtte.Sted; YVill — is one which:IS, executed in accordance
with the formalities prekribed;by PA 804th 808 of the 3wOvil Code. It is a Legitime
will that is created for the testator, by .a third party Usually his lawyer, follows divide by the number of LC, whether they survive alone or with concurring
proper form, tigniad and dated in front of the required number of witnesses (3 or compulsory heir (CH)
more witnesses),and acknowledged by the presence of a .n6tary public. 1 LC 'A
. SS 'A
.
Holographic Will-is a written .will which must be :entirely written; dated and 2 or more LC 'A
Equal to 1 LC
signed by the hand of the testator himself, without the necessity Of any witness.
LC All the concuning CH get from the half free portion, the share of the SS haang
This kind of will does not need formalities because many people can recognize SS preference over that of the IC. whose share may suffer reduction pro-rata
his handwriting and it can be verified bya penmanship expert. IC %of 1 LC because there is no preference among themselves
Codicil — a supplement or addition to a will, made after the execution of a LPA Whether they survive alone or with concurring CH
will and annexed to be taken as a part thereof, by which any disposition LPA 'A ile succeed in the % in equal shares
made in the original will is explained, added to or altered. • IC
LPA 'A
Elements of Succession SS 'A
LPA 'A
Succession takes place if the following elerhents are present:
SS 1/S
DECEDENT - the person whose prciperty. ikiransmitted through succession, whether 1/4
IC
or not he left a will (Art. 775, CCP). IC 1/2 ande equally among the IC
HEIR - the person called to the succession either by the provision of a will or by SS 1/3
operation of law (Art. 782, CCP). IC 1/3
ESTATE - refers Li all the property, rights and obligations of a person which are not SS 1/2 1/3 if marriage is in arliculo mortis and deceased spouse dies within 3 months
extinguished by his death (Art. 776, CCP). after the marriage
IP 'A
Decedent's Estate IP Excluded Children inherit in the amounts established in the foregoing rules
My child It depends
LEGITIME is the portion of the testator's property which could not be disposed of
IP 'A Only the parents of IC are included. Grandparents and other ascendants are
freely because the law has reServed it for the compulsory heirs. (Art. 886, CCP).
SS 'A excluded.
FREE PORTION is that part of the whole estate which the testator could dispose of
freely through written will irrespective of his relationship to the recipient.

366 367
Accovutliti Nleirelitolksattat dief 7/1,Cdrlfr

36 Assuming the asset above isa capital asset, the capital gains tax payable is 2017 and
PART 9
in 2018 is —
R36,000 and PO, respectively
P7,500 and P18,000, respectively
PO and P36,000, respectively
•R)8,000 and P7,500, respectively
•
ti cede 74
Answer: B
4 Capital gains tax (CGT) 2017 = P125,000 x 6% = 7,500
TRANSFER TAXES
0 Capital gains tax (CGT) 2017.= P25,000 x 12 x 6% = 18,000
Transfer taxes are taxes imposed upon the gratuitous disposition of private properties
or rights. Gratuitous transfer "is one that - neither imposeS burden nor requires
consideration from transferee or recipient. The transfer of ownership is free because of
the absence of financial . consideration. Hence; gratuitous transfers are essentially
donations. The applicable takes on gratuitous transfers are as follows:

. Object of
Effectivity • . - TYPe • .. • - Tax': - Taxation Nature
Upon
.. death of the donor moths caina Estate Tax Privilege fo
DONATION . i - .- - • • . transfer Excise Tax
During the lifetime of the • inter-NW* Donorls Tax gratultousli -
donor and thb donee

Estate Tax
Estate Tax is a tax imposed on. the privilege that a -person is given in controiling
to a certain extent, the disposition of his property to take effectupon death. As shown in
the table above, Estate Taxis an excise tax imposed dn the act Of passing the ownership
of property at the-time of death arid not on the value of the property or right.

Accruat It aecrues as of '• the death of- the decedent, notwithstanding :the
postponement of the actual. possessionor enjoyment of the estate by the beneficiary.
Upon the death • of the decedent, succession -takes place and the right of the "State".
to the tax the privilege to transmit the estate vests instantly upon death (RR 2-2003).

Filing of Estate Tax Return:

0 Decedent died before 2018: within 6 months after death
0 Decedent died upon/during OffectiVity of TRAIN Law: 1 year from date
of death
CA The accrual of the tax is distinct froth the obligation to pay the same (filing period)
LA Under meritorious cases (to be determined by the BIR), filing of estate tax return may
be extended for a period of not more than 30 days

Taxpayer The "estate" of the decedent as fa juridical person, represented by the

administrator, executor or legal heirs. •

Personal obligabbn to file and pay the applicable taxes:

0 Primarily liable: Administrator or executor
0 Secondarily liable: Any of the heirs

Law to be applied. The law/statute in forth as of the date of death of the decedent.

364 365
 EStette, 74, Erlazie 7;(
TaRMATI COMPIlatiat014;
SINGLE DECEDENT: ESTATE TAX RATE
GrossrEstate Estate Tax Due"'
LESS: Less: Tax-Crodit IF THE DECEDENT DIED BEFORE 2018
OVER BUT NOT OVER THE TAX SHALL BE PLUS
Ordinary Deductions Estate Tax Payable
Spscial Deductions -(Prior to 2018: Tax Table) P200,000 Exempt
(Beg. Jan. 1.2018: 6%) P200,000 500,000 PO 5% of excess over P200,000
Net Takable Net Estate
500,000 2,000,000 15,000 8% of excess over P500,000
2,000,000 5,000,000 135,000 11% of excess over P2,000,000
MARRIED DECEDENT: 10,000,000 465,000 15% of excess over P5,000,000
5,000,000
Conj./Comm. Exclusive Total 10,000,000 1,215,000 20% of excess over P10,000,000
GROSS ESTATE xx xx
Real or immovable property xx xx t IF THE DECEDENT DIED on or after January 1, 2018
Tangible personal properly - xx - xx 60/0 of taxable net estate
Intangible property xx xx
Certain transfersn, xx xx
Total - xx xx GROSS ESTATE
LESS: ORDINARY DEDUCTIONS . •
ELITe • Consists of all properties and interests in properties of the decedent at the time of his
Funeral Expenses (repealed under TRAIN Law) death as well as properties transferred during lifetime (only in form), but in substance was
Judicial Expenses (repealed undet TRAIN Law) only transferred at the time death.
Losses (xx)
' Indebtedness or Claims against the estate (xx) Components of the Gross Estate
1.
Unpaid Taxes , (xx)
etc., such as Claim against insolvent persons, (xx) PROPERTIES EXISTING AT THE TIME OF DEATH SUCH AS:
Vanishing Deduction — Real property and other tangible Personal Property
. •Properly,Relationshi4 cgo, (xx) Decedents interest and Intangibles
Property RelabonshifiNitoP • (xx) (xx) Decedent's Interest - Refers to the , extent of equity or ownership
3) Transfer for Public Use (generally exclusive), (xx) (xx) participation of the decedent on any property physically existing and present
Net Community/Exclusive before special deductions XX in, the gross estate, whether or, not in his poccrecsion, control or dominion.
LESS: SPECIAL DEDUCTIONS - It also refers to the value of any interest in property owned or possessed by
Prior to "MAIN Law: not alloWed to NRA.decedents the decedent at the time of his -death (interest having value or capable of
TRAIN Law: Nags are allowed of Startdaid Deduction ,
being valued, transferred)
1. STANDARD DEDUCTION
-Prior to TRAIN Law: .P1,000,000
Intangible Properties considered Located in the Philippines:
TRAIN Law:
Citizen/Resider11 decedents - P5M • . , Franchise which must be exercised in the Philippines;
NRA decedents - P500.000 Shares, obligations or bonds issued by a any corporation or sociedad
2 MEDICAL EXPENSES anonima organized or constituted in the Philippines; -
Prior to TRAIN Law: Maximum of P500,000 SharesObligations or bonds issued by any foreign corporation, at least
TRAIN Law: Repealed 85%- of the business of which is located in the Philippines;
FAMILY HOME Shares, obligations, or bonds issued by any foreign corporation if such
LI Prior to TRAIN Law: Maximum of P1.0.00,000 shares, obligations, or bonds have acquired a business situs (used in
CA TRAIN Law: Maximum of P10,000,000 the furtherance of its business in the Philippines) in the Philippines;
AMOUNT RECEIVED UNDER RA4917 t Shares or rights in partnership, business or industry established in the
NET ESTATE before share of the surviving spouse Philippines.
Less: Share of the Surviving Spouse (%el ite net common Aperty before Special Deductions)
NET TAXABLE ESTATE Properties transferred gratuitously during lifetime, but in substance, transferred.
Pxx c.
ESTATE TAX DUE (Tax Table or 6%, as the case may- be) upon death: ,
Pxx
Intangible properties including rights accruing before death, claims against insolvent persons, RA 4917, and receivable as Transfer in contemplation of death - the thought of death must be the
proceeds from life insurance taken out by the decedent.
— Refer to certain transfers made before death but will take effect upon death (transfer mortis causa) as well as transfer under Transfer with retention or reseriotion of certain right - allows the
general power of appointment, transfers made to (justified charitable organizations and transfer for public purpose. transferor to continue enjoying, possessing or controlling the property
(beneficial ownership), because only the naked title has been
transferred.

368 369
 Ethic- '7;( Estais 7;6
3 Revocable transfer - decedent transfers the enjoyment of his property c. UNDER SPECIAL LAWS
to another, subject to his right to revoke -the transfer at will, with or Proceeds of life insurance and benefits received by members of the GSIS (RA728).
without notifying the transferee, any time before he dies. Benefits received by members from the SSS by reason of death (RAI792).
Amounts received from Philippine and United States governments for war damages.
4. Property passing under General Primer of Appointment (GPA). Amounts received from United States Veterans Administration.
Benefits received from the Philippines and US government for damages suffered
during World War II (RA227).
't 5. Transfers for insufficient consideration - sale of property below fair
Retirement benefits of officials/employees of a private firm (RA4917).
market value (FMV):
Payments from the Philippines of US gbvcmment to the legal heirs of deceased of
World War II Veterans and deceased civilian for supplies/services furnished to the US
Amount included in gross estate: and Philippine Army (FtA136)
FMV at the time of death - PXXX . Proceeds of life insurance under a group insurance taken out by employer (not taken
Less: Selling Price . • 0000 • out upon his life)
Included in Gross Estate • PXXX Transfers by way of bona fide sales •
• Transfer of property to the National govemment or to any of its political subdivisions.
6 Proceeds 'from lift insurance - the following are induded in the .gross Personal tquity and Retirement Account (PERA) assets of the decedent-contributor
estate:. . (RA No. 9505)
a.• Whether REVOCABLE. or IRREVOCABLE, when. the beneficiary is
the:•
• • Ettlete of the deceased THE COMPOSITION OF THE ESTATE.Ta MAY BE SUMMARIZED AS FOLLOWS:
-• His executor; Or- • Decedent Gross Estate
Administrator-, , + Citizen or . Property (Real or Personal)-prOperty wherever
b. When the beneficiary is athird person, only if REVOCABLE. Resident alien situated •
2. Intangible personal propertYWherever situated
2. Exemptions and ExclusionsfrOm Gross Estate - + Nonresident alien 1 Real property situated in-the Philippines
2 •Tangible personal property situated in the Philippines
a. UNDER SECTION 85 AND Kick . ff • Intangible personal PrqPerW with Silts in the .
Capital or exclisivetperty of the surviving:spouse - • . - • . • 'Philippines, unless excluded on the basis of •
.• Pro.perbesairtaide th ,Philifigffies of anon-resident alien decedent • : reciprocity as described in the•next page.
. • Intawitile:perriolial,gropert.y .:,in the Philippines of a noffiresident alien when the
rulerif.RisiprprFitY:aPPIJes.:- . . • r' (.., . - RECIPROCITY CLAUSE -No tax shall be impeded with respect loinlangible personal properties of a NRA
.
situated in the Philippines{
b UNDER SECTION fd/N1k0 •••• • -.
i) 'The mergerbf the usufnia(gi ghb tb use) in the Owner of the naked title. When the foreign country, where such NRA-is a resident and citizen, does not impose tiansfer tax with
. .. . . reipect to intangible personal Properties of Filipino citizens not residing in that country; or
2) The transffilse Hon from the first heir, legatee or donee in favor of another When the foreign country imposes transfer taxes, but grants similar exemption with respect to intangible
beneficiary in accordance With the will of the -piffi
ffecessor. This type of transfer is personal properties of Filipino citizens not residing in that country.
1 t commtinly known as "'transfer under Special Power of Appointment (SPA)".
0 GPA vs SPA: . • .. , VALUATION OF GROSS ESTATE
g GPA = additionto gross estate In General - fair market value upon death.
0 -- SPA = exclusion from the gross estate .
Personal Properties - Fair market value
Real Property - the higher amount between:
The transmission or delivery of. the inheritance Or legacy of the fiduciary heir or
Fair Market Value
legatee to the faleicomissary.. .
o This
. is the 'same witkPA above. The only difference is, in Zonal Value
fideicomissary transfer, th 'relationship of the donor and donee is only Shares of stock
one degree apart (i.e.,frorh a Parent to his/her son) Traded in the Local Stock Exchange (LSE) - mean between the highest and
A lowest quotations nearest the date of death, if none is available on the date
All bequests, devices, legacies or transfers to social welfare, cultural and of death itself.
charitable institutions, provided: Not traded in thelocal stock exchange:
I) No part of the net income of said institutions inure to the benefit of any Common (ordinary) shares - Book value
individual; . Preferred (preference) shares - Par Value
2) Not more than 30% of such transfers shall be used for administration
purposes. Usufruct - based on latest Basic Mortality Table to he approved by the Secretary of
Finance, upon recommendation of the Insurance Commissioner.

370 371
 Etale, rite Lstithe 7;e.
Absolute Community of Property (ACoP}
PROPTRTY ItTigtOtalatrIP BETWEETT SPOUSES
1) Community Properties:
All properties owned by the spouses at the time of celebration of the
The Property relationship or marriage settlement Of the spouses shall be determined as marriage (properties before marriage); or •
follows (order of priority): Acquired thereafter, unless proven otherwise, as well as the fruits or income
thereof.
1. BASED eiN AGREEMENT Rule on Fruits: "FFS - The Fruit (or income) will follow the Source"
If there was an agreement entered into by the parties before marriage, apply the
type of settlement entered into by the parties such as: 2) Exclusive Properties:
Absolbte Community of Property (ACoP) ei Property acquired during marriage by gratuitous title by spouse, as well as the
Conjugal Partnership of Gains (CPC) fruits or income thereof.
Complete Separation EXCEPTION: unless it is expressly provided by the donor, testator or grantor that
they shall form part of the community property.
2. BY OPERATIONS OF LAW (New Family Code)
In the absence of an agreement, the marriage settlement will depend on the date of Ruie on Fruits: "?FS - The Fruit (or income) will follow the Source"
marriage as providediunder the law [New Family Code (NFC)) as f011ovvs:
Date: Before the effectivity of the NFC (Aug. 3, 1988), apply CPG Property for personal and exclusive use of either spouse.
Date: On or after the effectivity of the NFC (Aug. 3, 1988), apply ACoP EXCEPTION: jewelry shall form part of the community property.
Property acquired before the marriage by either spouse who has legitimate
3. BY CUSTOMS OR TRADMONB. desrondants by the former marriage, and the fruits as well as the income, if any
• of such property

Conjugal Partnership of Gains (CPG)

SUMMARY:
PROPERTY ' ACoP . CPG
Exclusive Properties:
-1 Properties acquired before marriage Common Exclusive
That which is brought to the marriage as his or her own (properties before
2 Properties acquired during marriage
marriage) , Exclusive Exclusive
• From exclusive property
That which each acquires, during marriage by gratuitous title; . Common Common
From common property
That which is iacquired by right of redemption, by barter, or by exchange with Those obtained from labor, industry, work or profession of either • Common Common
property belonging to any one of the spouses; and• or both spouses;
That which•is purchased with eiclusive•money of the Wife or of the husband. From Gratuitous Transfer (inheritance or donation)
CPG Exclusive
Conjugal Properties:. ACoP •
Those acquired by onerous title during marriage at the expense of the common Generally Exclusive
fund, whether the acquisition be for the partnership, or for only one of the The idonoritestator expressly provided that it shall form
spouses; part of the community property Common
Those obtained from labor, industry, work or profession of either or both 3 FRUITS or income on properties: Apply the following rules:
spouses; . ACoP: The Fruit shall follow the source
. .
The FRUITS (or income), natural or industrial, or civil, due or received during CPG: All Fruits are common
marriage from common property, as well as the net fruits from the exclusive 4 Property for personal and exclusive use of either spouse
property of each spouse; Generally Exclusive Exclusive
Rule on Fruits under CPG: "AFC - ALL Fruits (Or income) are Common" Except JEWELRY under ACoP Common
The share of either spouse in the hidden treasure which the law awards to the
finder or owner of the property where treasure is found;
Those acquired through occupation suchras fishing or hunting; ALLOWABLE DEDUCTIONS DEFINED
Livestock existing upon dissolution of thee partnership in excess of the number of
each kind brought to the marriage by either spouse; and I. Deductions are items wrath the law on estate tax allows, as amended, to be
Those are acquired by chance, such as winnings from gambling or betting. subtracted from the value of the gross estate in order to arrive at the net taxable
However, losses there from shall be borne exclusively by the loser-spouse- estate.
As a rule, deductions from gross estate are presumed to be common deductions
unless specially identified as exclusive.
Refer also to the "FORMAT" of computation for married decedents as shown in the
preceding pages.

372 • 373
 Esigic, 7;6, Esiai° 7tre
T:
,
ORDINARY DEDUCTIONS — classified as exdualve or coMmon deduction.
I. EXPENSES, LOSSCSS, INDEBTEDNESS, TAXES, etc. (ELITe) Claims Against Insolvent Persons
0 • Requisites: •
Funeral.Ex Uses re • ealed under TRAIN-Law a.. Value of the-claims is induded in the gross estate; and
0 Requisites: b. The Insolvency of the debtor.must be established. . •
k .
Must be.iiicurred prid to interment; 0 Amount deductible — the amount of dalms/receivable that 'Cannot be collected.
Shetailered bjethre estate; and
,• Ithit'to exteedthe hind sett,/ law; Indebtedness or Claims Aciainsi the Estate
' 0 Requisites:
0 Arnftdrit deductible:. Personal debt of the decedent existing.at the time of hisdeath;
• -Actualfuneral expenses • Whichever
. 5% Of Gross Estate the lowest -t Contracted In- good Faith;
tP200;0•00.-- Must be valid in law-and enforceable In tourt;
Must not have been condoned-by the 'creditors;
.• •I •

COmPonents of Acttial.Fpnerat,Eirperiset: Must nothayepresaibed;

t; Expensesforthetleoeasetleiwake ltiCILidiri food and drinks;
Publication chattes for death itotthei;" : Substantiabon Requirements:
Telecommunication expenses Inttirred ning relatives • of the
ihfOrr
In Case of Simple Loans including AdVartees •
Cost of burial plot; totribkolies; .inoriiiittent. or mausoleum hit not their . .tcDuly.Notarized Certification froth the creditor as to the unpaid balance of
upkeep/C1n7Casetthe' deceased &Mrs k family' estate or several burial lots, the debt including—interest as,•the date of ,death... The Sworn Certification
only the value Corresponding tot:beI:dot Where he is buried is deductible; shall be'signed • • • -•
Interment aniVertrematitinleet and charges; and '
CilEbITOR :SIGNATORY
The thoui-nIngcappirel Ofthe'aurvivirig'SPoySe end unmarried minor children
kOboOglitlintl.lueeil on the occasion Of.thefiurial;::. If Ciedit01 is a • Theifliesident; or
'of be
Alrotherexperisti incurred:0 the perfOrMance Of the rites and ceremonies • Corribration • VicOresident; or
inddent to inteM int. -• t, • . .•' • OtheePrinci01 Office of the Corporation - '
"i/ •
Focteitth • Meitarial, btanotitt'arndurirrait coered by. the Plan and
If Creditor fs a . • • ..Anx.ritthi4eneral partners '
• p.siid. fromp'ieat4 shall4omi part.of the alltnyablefuneral dperisias„
fr9ftnkSiliP '
•
3udicial Expen*seS as:t.sata_qi "
f „Creditor:Is .flianctil manager of the Bank or Financial
Baiik/Siincial Institution : which- Monitors and manages the
- 1. Mustibe -of the eState, but•not bethind the ;
lidaniCithe decedent-debtor
last day prestritiediprthe filing of the 'es:fratze tax'rEtorri (Within 6 months);
,2. mks( be estentiii• io 1.. y -enit of debts or the
pam
-ft ft - .' • CU In any.of tthicises abort/8;01e OneTilho should certify. racist not be a relative of the
disbibution:Of tfie'esoate. ' •• • et:amberWithin the fourth civil game, either by cansanguinity or .affinity.
0 Amount deductible drienses'incurnad, . •
inventory-tiOn9 of,assets conithising the gross estate;
• IF SAID LOAN IS CON-FRACTEO WITHIN THREE (3) years prior to the death
Their administraticin.
of the-decedent: A Statementkunder Oath executed by the administrator or
Payment of debts of the eState ft . • executor of the estate reflecting the disposition of the proceeds of the loan.
d.. Distribution .otthe estate among the heirs. .

Casualti Losses . .
• If the unpaid Obligation arose from purchase of Goods or Services:
0 Requisites:. ,L . . . • Pertinent documents evidencing the purchase of goods of service, such as
Incurred during the setdement.of the estate. Settlement period is the sales invoice, delivery reteipts, official receipts.
period alioWed by law to file ái pay the State tax is follows:,
Decedent died before 2018 -within six month's (6) after death' A Duly Notarized Certification from the Creditor as to the unpaid balance of
Decedent' died on or after Jan. 1,2018 - within one (1)year after death the debt induding interest as the date of death.
Arising from fires, storms„ shipwreck, or other casualties, or from -
robbery, theft or embezzlement;
4 Not compensated by insurance;
4 Not claimed as deduttion fir income tax purposes;
Incurred not later then' the last day for the payment of the estate tax.
0' Amount deductible.— the amount deductible is the value of the property lost.

375
374
 Es-tit& 7,;( 1-_,stittic, 74
The Sworn Certification shall be signed by: The property on which vanishing deduction is being taken must be identified
CREDITOR SIGNATORY as the one received from the prior decedent, or from the donor, or
If Creditor is a The President; or • something acquired in exchange therefore;
Corporation Vice-President; or No vanishing deduction on the property was allowable to the estate of the
Other Principal Office of the Corporation prior decedent.

If Creditor is a • Any of the general partners AMOUNT DEDUCTIBLE (PROFORMA COMPUTATION):

Partnership
Value to take (lower between FMV at the time death vs. FMV at the PXX
,
If Creditor is a . • Branch manager of the Bank or Financial time inheritance or donation)
Bank/Financial Institution which monitors and manages the Less: Mortgage paid by present decedent (on mortgaged assumed) (XX)
Institution loan of the decedent-debtor Initial Basis (TB) PXX
Less: Proportional Deduction
LH In any of the cases above, the one who should certify must not be a relative of the [(IB/GE) xI(**ELITe + TFPU)] (XX)
borrower within the fourth civil degiee,- either by consanguinity or affinity. Final Basis PXX
Rate X%
0 Amount dedUctible — the amount of debt that will qualify in the above VANISHING DEDUCTION ' PXX
requirements.
EU **II the decedent died on or after January 1, 2018, exclude the following in the
Unpaid Mortqaoe coniputation of proportional deduction:
0 Requisites: 0 Funeral expenses 'Repeat( tan&r
. a. The fair market value Of the mortgaged property undiminished by the 0 Judicial expensesrivtavolLoy
mortgage indebtednes.S should be included in the gross estate;
Contracted in gocid faith;_and • • RA
For an adequate and full. consideration. I INTERVAL OF ACQUISITION AND DEATH OF 1 ; .
0 Amount Deductible — arnount of -unpaid mortgage. PRESENT DECEDENT LE RATE .
i_ Within I year ' -. - 100%
Unpaid Taxes .: . , .I
i More than I: year but not more than 2 years ! 1300/n
0 Requisite —the tax 'muse have accrued before the death of thetlecedent 60%
I More than /years but not morethan 3 yeog 1
0 Amount deductible +.unoaid taxes that accrued before the decedent's death but 40%
I More than 3 years but not more than 4years I
not including:
I More than 4 years but not More than 5 years 1 20%
Any income tax upon income received after death; •• •
Propertytaxes not accrued before death; and
Estate taX frorn the transmission of his estate.
SPECIAL DEDUCTIONS
TRANSFER FOR PUBLIC USE (TFPU) •
SUMMARY:
Requisites:
Citizen/Resideht decedent NRA decedent
O Given to the Government of'the Philippines (National or local);
C. Must be testamentary in character; or Standa riDeduction
O By way of donation mortis cauSa executedty the decedent before his death; PI,000,000
Prior to TRAIN Law P500,000
C. Exclusively for public purpose: P5,000,000
TRAIN Law
Amount deductible — amount of all bequests, legacies, devises; or transfers to or for
the use of the Government of the Philippine;j or any of its political subdivisions. Tamffiy 'Home
E P1,000,000 (max)
Prior to TRAIN Law
VANISHING DEDUCTION (PROPERTY PFIEVIOUSLY TAXED) P10,000,000 (max)
Requisites: TRAIN Law
- The decedent died within 5- years from receipt of the property from a prior
decedent or donor; Nedical expenses
The erty is lotated in the Philippines (RECIMERECIEr Prior to TRAIN Law P500 000 (max)
repealed under TRAIN Lain RAIN La e ealed
The property must have formed part of the-taxable estate of the prior
decedent or the taxable gift of the donor and the transfer tax relative Benefits ntfe'r A% 4917 As provided
thereto had been paid;

376 377
 listafr 174 Esthete. 7;d;
SPECIAL DEDUCTIONS
Standard Deduction TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY
The ampunt deductible without any required substantiation Is P1,000,000 If the
decedent died before 2018 and P5,000,000 if the decedent died on or after January 0 WI-10 CAN QAIM?
1, 2018. A standard deduction of P500,000 shall also be allowed to nonresident alien Only resident or citizen decedents can claim tax credit.
decedent beginning January 1, 2018.
0 AMOUNT DEDUCTIBLE:
Family Home Allowance The LOWER between the Actual estate tax pald abroad and the Limit.
0 REQUITES: .
IT* decedent is inarried or. head of a family; 0 LIMIT:
The family home must be the actual residential home of the decedent and It Depends on how many foreign country is involved.
his family at the time of his death, as certified by the Brgy. Captain of the
locality the family home is situated; IF Only one foreign country is involved
It Is located in the Philippines; ' Net estate, foreign x Philippine estate tax
The value of the family home is included iri the gross estate - Net estate, wrirld •.

0 AMOUNT.DEDUCTIIILE - The LOWER between the Actual Interest and the Limit. IF More than one foreign cotmtries am involved. The limit is the lower
between Limit 1 and Limit 2 computed as follows:
The LIMIT as providedty law are as iollows: •
0 Prior to TRAIN Law = 1:11,000,000. UMIT 1 or A (Per Foreign Country where there was estate tax paid):
0 TRAIN Law = P10,000,000, ' Nit etate, per foreign -, Philippine estate tax
Net estate, world .4.
0 ACTUAL INTEREST. .
0 Plirely ExdUsive = 100% RV • i LIMIT 2 or B (Total of ALL foreign counties involved):
0 Purely Conimop Property = 100%F24182 Net estate, all fereignicountries x Philippine estate tax
O MIXED: NeteSpate; . . • .
Excitisivekkoperty.(100%), Pxx
Add:C6mrhon Property (100%/2)
. Total '• '
L i-
Medical Expenses Re ealed under'TRAIN La
031+4P.C17171c2 REQ1,1712EMETriT'S
0 REQUISITES (ApPlicable Only if the decedent died before 2018): Notice of Death
IncuiredwithIn eyear prior to the death of the decedent;
Duly substantiated; ' 0 Repealed under TRAIN Law, hence, abplicable only if the decedent died before
Not to exceed P500,000 , January 1,2018.

" 4. Amount Recehled by heirs under. R.A. 4917 Requirement:

0 REQUISITES
Include such amount in the gross estate. • In all cases of transfer subject to estate tax; or
Amount Deductible - amount received by the heirs from the decedent's The value of the gross estate exceeds P20,000.
employer as a consequence of the death of the decedent-employee.
Who shall file:

SHARE OF THE SURVIVING SPOUSE Executor/Administrator; or

0 Applicable only to married decedents. Any of the legal heirs
0 Amount Deductible:
Common Properties -- PM Date of Filing:
Common Deductions ' 4/00()
Net Common Properties before special deductions 'MX Within two (2) months alter the decedent's death; or
Multiply by: 50% Within two (2) months after the executor or administrator has qualified.
Share of the Surviving Spouse P)Ca

378 379

Estate Tax Return
When is it Required?
PRIOR TO TRAIN LAW
In' all cases subject to estate
'IL tax; • tax;
The gross estate . exceeds
,113200,000
Regardless of the amount of the
gross Sate, where it consists
of registered or registrable
property Such as real property,.
motor, vehicle, shares of stock,
or Other similar 'property for
which a "Certificate Authorizing
Registration (CAR)" from the.
BIR' is required as a condition
precedent tor' the transfer of
ownership thereof in the name
of the transferee, the
administrator, or the executor, .j
or any of the legal heirs, as the
case may be, shall fite a return.,
under oath. •
CPA Certification IS requiked if the gross estate exceeds
• P2L000,000 - If decedent died before 2018
P5,000,000 - If the decedent died pn or afterianuary 1, 2018
. ,
CPA Certification shall contain certification as to:
Composition of the Gross Estate
The allowable deductions daimed:
The estgte tax due
Who shall file the Estate Tax Return?
Executor/administrator (primary); or
Any of the legal heirs: (secondary) '
kstette, 74,
TRAIN LAW
In all cases subject to estate
Regardless of the amount of
the gross estate, where it
consists of registered or
registrable property such as
real property, motor vehicle,
shares of stock, or other similar
property for which a "Certificate
Authorizing Registration (0)1R)"
from the BIR is required as a
condition precedent for the
transfer of ownership thereof in
,the name of the transferee, the
administrator, or the executor,
or any of the legal heirs, as the
case may be, shall file a return
under oath
Place of Filing:
In case of a resident decedent
Authorized agent bank; or
Revenue District Officer;
Collection Officer; or
Duly authorized Treasurer of the city or municipality in which the
decedent was domiciled at the time of his death.
In case of a non-resident decedent
, Revenue District Office where the executor or administrator is
registered
Revenue District Office having juriadiction over the executor or
administrator's legal residence (if executor or administrator is not
registered) ,
Office of the MR Commissioner (RDO No. 39 - South Quezon City)
if the estate does not have an executor or administrator in the
Philippines.
Payment of Estate Tax:
Estate tax shall be paid at the time the return is filed (Pay as you File)
When the Commissioner finds that the payment of the estate tax or of
any part thereof would impose undue hardship upon the estate or any
of the heirs, he may extend the time for payment as follows:
Estate is setded-extrajudidally (extraludicial settlement) -2 years
Estate IS settled judicially (judicial settlement) -5'years •
The application for extension Shall be filed with the RDO) where
the estate is required to sethre its TIN end file the estate tax retum.
This application Shall be approved by the CIR or • his duly authorized
representative. Where the request for extension is by reason of
negligence, intentional disregard of rules and regulations, or fraud, no
extension shall be granted. If an 'extension is granted, the CIR may
require the executor, or administrator, or beneficiary, as the case may
be, to furnish a bond in such amount. not exceeding double the
amount of the tax and with suth sureties as the Commissioner deems
necessary, conditioned Oran the payment of the said tax in accordance
with the terms of the extension.

Date of Filing: Estate tax shall be paid at the time the return is filed (Pay as you File)
Prior to TRAIN Law - Within-six (6) months after death
TRAIN Law - Within one (1) ler after death

tEl The Court approving the project of ;partition shall furnish the Commissioner with a
codified copy thereof and its order within thirty (30) days from promulgation of such
order.

GI EXTENSION: The Commissioner or hisrher duly authorized representative, shall have

the authority to grant, in meritorious cases, a reasonable extension, not exceeding
thirty (30) days, for filing the return.

380 / 381_
 Estrito 74 Flit& iitd;
INSUFFICIENCY OF CASH FOR .THE PAYMENT OF ESTATE TAX
In case of insufficiency of cash for the 'immediate payment of the total Register of Deeds shall not register
regi i nthe registry of droperty any transfer of real
I
estate tax due, the estate may be allowed to pay the estate tax due thrbugh the. property or real rights -therein, or any mortgage, by way of donation mortis
causa or inheritance, without a certification frorn the SIR of payment of estate
following options, Induding corresponding terms and conditions (RR 12-2018):
tax, and they shall immediately ootify the SIR of non-payment of tax discovered
by them.
1. Cash Installment;
lit • The cash installments shall be made within tiNo (2) years:from the date
IF BANK HAS KNOWLEDGE OF THE DEATH OF A PERSON 'WHO MAINTAINED A
of the filing of the estate tax return; . .
JOINT ACCOUNT,
The frequency (l.e., monthly, quarterly, • semi-annually, annually)
' deadline:and the amciunt of each installment shall be Indicated in the
PRIOR TO TRAIN LAW: .••
estate tax return, subject to the approval by the 81k;
Itshall not allow any withdraWai by a surviving depositor from the said joint
,• In-case of •lapse of .hivo,(2) years without the ,payment of entire tax
accountuniess the CommIssionet has certified that the estate tax has been
due, the rernaining balance. tifereof Shall be due and demandable.
paid: Provided, however, thatthe administrator Pt the estate or anyone of
' subject bi applicable penalties and inthrett reckoned from the
the heirs of the-decedent Maiptipon authorizatien by the Commissioner of
j prescribed deadline for filing the return and paymentof estate tax; and
BM, withdraw an amount nothoiceeding twenty itvausand pesos (P20,000) -
No civil Penallies:or interest maybe Imptsied on the estatet permitted.
without the Certification. -42: •
to pay thees:tate tax.dire by InStallment.,'
/ • ,. .
UNDER TRAIN LAN':
2. Partial disposition of estate and application of Its proceeds to the estate tax
If a bank has knowledge of thè'eathbf a personevirrho Maintained a bank
deposit account alone, Or jointly with another, it shall Slew any withdrawal
s option, shall, refer to the
The distiosition,, ,.ficr ,purpoieS,Pf ,thi from the 'said deposit account, ;tubject to a final Withholding tax of six '
conveyance,of property, whether real, personel or intangible property,
percent (6%). For this' purpote;: all withdrawal shot 'shall contain a
with the eOutfalentcash consideration; ,
statement to the effect that all otthe joint depositors .are. still living at the
The written, request for the partial 'disposition of estate shall be filed,
time of withdrawal brany onecilthe joint depositort and,such statement
together witha notarized, undertaking that the proceeds thereof shall
ahall be under oath by the saki 'depositors. In all cases, the final tax
be excipshrelycitediftir the payment of the total State tax due;: withheld shall not be refunded, or; credited on the tax due;• On the
,The tomptiteilasfatelaX•
re due slip 'Oe'allotated In the • . net
taxable estate of the decedent ;
value opdrty •
„ • • 'Affelettnink 'Certificate Auth;offilng.Registration(eicAR) shall be.issued
In Instal-ices Where the den* aunts have been duly irk:hided in the
uportiretentation Ofthe;proilf of payment of, the proportionate estate
gross eitate.;of the decedent and 'the estate tax due therepresnt eon'pald,-the
meecAR
taX.due ce,theliroperbiintenried to be dispOsdcl... Accordingly;,eCARS
executor, administrator, or Tany of Ma:legal heirsshallall
. shall be Istued as Mantaithere ate..Properties
, to be'disposed to cover
issued for the said estate prior toy' withdrawing from the : bank"deposit
_ "deposit
., t
. the :total raitate .thx.'dtier ,net: the proPertiorrate estate tax(es)'
actourit. Such withdrawal shall ne longer tiPSubject to the 6% withholding.
previouslYiPaid Under this Optioh; and ;.
tax by the.bank.
In cage pf faiturato.pay the total estafte tax due out froin the proceeds .
of the said dispOsition, the estate tax dueshall be Immediately due and
d Any lawyer, notary publicOr any government office; who, by reason of- hls Official •
demandable subject to the applicable peneitiet and Interest reckoned duties, intervenes In the preparation oaCknowledgment of documents' regarding
from the prescribed deadline for filing the retuin and payment of the
partition br disposal of donations inter vivos Or, mortia thusa, legaty
estate tax, without prejudice,ot withholding. the issuance of eCARs on
Inheritance 'shall furnish the BIR 'with copies or such documents 'and' any
the remaining properties until the payment of the remaining' balance of
information whatsoever which may facilitate the collection of the estate tax.
the estate tartlue, including the penalties and interest.
.•
e. A debtor shall not pay his debts to the heirs, legatees, eXecutor Of administrator
Duties of Certain Officers and Persons' of•his creditor-decedent without a certification from SIR that the estate tax has
: There shall not be transferred to any netrowner in the books of any corporation, been paid, but he may paY the executor or judicial administrator without such
sociedad anonima; partnership, busin j or industry organized or established in
certiffation if the credit is included In the inventory of the estate of the
the Philippines any share, obligation, bald or right by way of gift inter-vivos or
decedent.
mortis cause, legacy, or inheritance, unless an eCAR is issued by the
Commissioner or his duly authorize representative. •

a. No. judge shall authorize the executor or judicial administrator to deliver a

distributive share to any party interested in the estate, unless a tertification from
the Bureau of Internal Revenue (BIR) that the estate tax has been paid is shown.

382
383_
 Etat& 'kr. Lcegee 7acr
QUIZZER Only statement 1 is correct
Only statement 2 is correct
Choose the letter of the correct answer. C. Both statements are correct
d. Both statements are incorrect
Transfer Taxes
1. Which ofghe following statements is false? Transfer tax is Answer: C
• Imposed upon gratuitous transfer of property '
Of two kinds: estate tax and donors tax 5. Mortis causa transfer of property is effected:
ClasSiked as national lax When the property is received by the heir.
None of the above When the court awarded the ownership of property to a particular heir.
Upon the death of the decedent.
Answer: D Upon payment of estate tax.

2: Statement 1: Gratuitous transfer or donation is subject to transfer tax. C. Answer: C• • .

The right to succession is effected at the time of death of the decedent (refer also to 'statements I
Statement 2: A donation which takes effect at the time of death of the donor is a donation Mortis
and 2 of the immediately preceding number).
cause subject to estate while a donation which takes effect during the fifebrne of both the donor
and the donee is a donation inter-vivos subject to do'ner's tax.
6 The subject matter or object of transfer taxes is .
a. Only statement 1 is Othect •,
Right to transmit c. Properties of the decedent
b.. Only statement 2 is correct
Decedent d. Beneficiaries
Both statements are correct.
Both statements are incorrect
C. Answer: A '
The subject matter or object or taxation are:
Answer: C ' Perions, otherwise known as 'personal tax'
Gratuitous Transfer TAX - Property, otherwise known as "property tax"
Donation inter-civos Donors tax (a transfer tax) •• Right or Privilege, otherwise known as 'excise tax'.
Donation mortis Cat Estate tar (a trans fertax) Estate Tax is p tax imposed oh the 'privilege' that a person is given in controlling te a certain
• \ extent, the disposition of his property (right to transmit) to take effect upon death..- Consequently.
Onerous Transfer ' Estate Tax is an excise tax ithposed on the act of passing the ownership of property et the time of
nibs ordinary caws° a trade or business • Business tax (vat or opt * excise tax, if death and not on the property or right.
applicable) and Income Tex
7 Justification for the imposition of transfer tax.
Not in the ordina 'Course of trade or business • Not subject to business tax but may be
subject to income tax Redistribution of wealth theory
Benefit received theory •
3 Statement 1: A sale is:a form of transfer transaction that requires payment of transfer tax. State partnership theciry
Statement 2: Transfer tax accrues at the time of transfer of the decedent's property or rightsto the Allot the above .
heir.
Only statement us correct Answer: D
Only statement 2 is correct JUSTIFICATION FOR THE IMPOSITION OF ESTATE TAX
Redistribution of Wealth Theory
Both statements are correct The receipt of inheritance is a contributing factor to the inequalities in wealth and rncomes. The
Both statements are incorrect imposition of estate tax reduces the property received by the successor, thus helping to promote
equitable distribution of wealth in society. The tax base is the value of the properly and the
Answer: 0 progressive scheme of taxation is precisely motivated by the desire to mitigate the evils of
Transfer tax is applicable only to gratuitous tt feis (inter-vWos and mortis causer donations). Inheritance in the present form.
A 'sale', in general, is an onerous transfer, he e, not subject to transfer tax. •
Transfer tax accrues from the effectivity of tt1a gratuitous transfer (upon death in case of mortis Benefit-Received Theory -
tausa donation and Upon perfection of the donation in case of donation inter-vivos). The law considers the service rendered by the government in the distribution of the estate of the
decedent, either by law or in accordance with his wishes. For the performance of these services
4 Statement 1: The rights to the succession are transmitted from the moment of death of the and other benefits that accrue to the estate and the heirs, the State collects the tax.
decedent, notwithstanding the postponement of the actual possession or enjoyment of the estate
by the beneficiary. Privilege or State Partners ,hip Theory
Statement 2: The heirs succeed immediately to all the property of the deceased ancestor at the Under this theory, inheritance is not a right but a privilege granted by the Slate and legatees have
been acquired only with the protection of the State. Consequently, the State as a passive silent
moment of death as completely as if the ancestor had executed and delivered to them a deed for partner in Um accumulation of property has the right to collect the share which is property due to it.
The same before his death.

384 385
 k.s &if& 74 Es &tie, 7
Ability to Pay Theory • Excise tax is an ad valorem tax. It is assessed based on the net value of the estate
Receipt of inheritance which is In the nature of an unearned wealth or windfall, are place assets transferred.
, into the hands of the heirs and. beneficiaries. This creates an ability to pay the tax and thus Upon effectivity of the TRAIN Law, estate tax is a proportional tax. It is no longer based on a
contributes to government income. graduated tax rate but to a fixed rate of 6% on the net taxable estate of a decedent.
Estate tax is a specific tax.
8. Inheritance received is construed as unequal distiibtltion of wealth resulting to the imposition of
estate takulescribes:
Answer: D
redistribution of wealth theory c. state partnership theory Prior to TRAIN Law, estate tax is a graduated tax, computed using a graduated tax table.
beneffreceived
.11, theory d. ability to pay theory Specific tax is applicable only to sin products and non-essential goods.
Answer A .
14. The taxpayer in estate tax is:
The decedent
9. The tax imposed on the right to transmit property at death is known as: The estate as a juridical entity
Donor's tax a Business tax The heirs or succession
Estate tax d. Income tax The administrator or executor
9 Answer B- Answer: B
10 The tax imposed on the transfer of property-without consideration between two or more persons 15 Estate tax acmes from:
who are living at the time the transfer is made. The moment of death of the decedent
Donor's tax c. Business tax The moment the notice of death is filed
Estate tax d. Income tax The Moment the estate tax return is filed •
The moment the properties are delivered to the heirs
Answer 'A
Answer A
121. Estate tax is Upon the death of the decedent, succession takes place and the right of the 'State' to the tax
a A, property tax because It Iknposed bathe properlyfransmitted by the decedent to his heirs. the privilege to transmit the estate vests instantly upon death (Section 3, RR 2-2003).
b. An indirect tax bedaufie the rden of paying thetax is shifted oh the executor or any of the -
heirs Of the decedent • i.,- .. , . . .. . . 16 Who has the persohal liability to pay estate tax?
An excise tax because the object of,which is the shifting of economic benefits' andenjoyment a. " The decedent • .
of (imperil./ from the dead tb thi living ,, "" ' . .., , • , '',. b: The estate as a juridical entity '
A poll tax because it is also imposed on residents of the Philippines whether. Filipino Citizens a. The heirs or successors
or not , . .... , . . ,. The administrator or executor
Answer 'C Answer: D
Estate taxis unposed not on the decedent nor on the property transmitted upon death but on a Taxpayer- the estate as a juridical- person. Being a juridical person, it cannot file the estate
the 'privilege to transfer properties gratuitously upon death. tax return and pay the corresponding estee fax due on its own. The 'personal obligation" to
Estate tax is not an indirect tax. Though the personal obligation to file am:IPS/the estate lax tile and pay rests with the executor or administrator, as the case may be. In the absence of
rests with the administrator/executor or any of the heirs, respectively, the 'burden" of paying an executor or administrator, any of the legal and rightful heirs.
the tax is not shifted to them. The money used to Pay the estate will be taken from the estate,
not from the administrator/executor or any of the heirs. 17 It is a well settled rule that estate taxation is governed by the statute in force at the time of:
Creation of the last will testament or death of the decedent in case of intestate succession
12 Which among the following statements is correct?
Death of the decedent
Estate taxation is governed by the statute in fort at the time of death of the decedent.
Estate tax accrues as of the death of the deced nt. Filing of estate tax return
Succession takes place and the right of the Stat to tax the privilege to transmit the estate Either letter "b" or "c" whichever will result to higher estate tax liability
vests instantly upon death.
All of the above 9 Answer: B

9 Answer: D B. An executor or administrator, after paying the estate tax, and to escape a future liability or a
deficiency estate tax, must secure a written discharge from personal liability from:
13 Which of the following is incorrect? The heirs.
a. Estate tax is an excise tax. It is a tax on the right to transfer property at death and on certain The Commissioner of Internal Revenue.
transfers which are made by law the equivalent of testamentary disposition. The court where the estate was being settled.

386 387
 f—j& fe. 7;
1
7y.- Lstette-'77ie
d. Need not secure a written discharge as long as he has a receipt on payment of the estate tax.
FORMS OF A LAST WILL AND TESTAMENT:
Ordinary Will or Notarial or Attested Will
C- Answer: B It must be in writing and executed in a language or dialect known to the testator.
It must be subscribed at the end there& by the testator himself or by the testator's name
Concept of Stkcession written by some other person in his presence and by his express direction. '
19. It is a rngde of acquisition by Virtue of which, the property, rights and obligations, to the extent of It must be-attested and subscribed by three or more credible witnesses in the presence of
the value.of the inheritance, of a person are trinsmitted through his death to another either by his the testator and of one another.
wilt or by operation of law.
Sitocession c. Prescription Holographic Will
Donation d. Exchanges ,• It must be entirely written, in a language or dialect known to the testator.
Dated
,Signed by the hand of the testator himself.
Answer: A It is subject to no other form and it may be made in or out of the Philippines and need not be
Title IV, Chapter 1, Article 774 of RA No. 386, otherwise known as the Civil Code of the Philippines witnessed (Art. all NCC).

20, Statement 1: Decedent is the general term applied to the person whose property is transmitted 24. is a written will which must be entirely written, dated and signed by the hand of
through succession, whether or not he left a will. the testator himself. It subject to no other form and it may be made iii or out of the Philippines and
Statement 2: An heir is a person called to succession either by provision of a will or by operation of need not be witnessed. , •
law. a. Ordinary will c. Holographic will
Only statement 1 is correct b., Notarial will d. Codicil
Only statement 2 is,correct
Both statements arecorrect Answer: C '
Both statements ard incorrect Ordinary will, attested will and notarial will are one and the same '
In case of any insertion, cancellation, erasure or alteration in a holographic will, the testator
Answer: C mustauthenlicate the same by his full signature.
Title IV, Chapter 1; Article 775 and 782 of RA No. ,386, Civil Cade of the Philippines Codicil is a supplement or addition to a will, made after the execution of awill and annexed to
be taken as a part thereof, by which' any, disposition . made in the original will is explained,
21 Which statement is false about ccesston: added to or altered. In order that a codicil may be effective, it shalt be executed as in the
The successor inhedte all.th transmissible property of a decedent including his liabilities. case of a will (Arls.826 and 826 NCCI
The successor.can,be madetiabkifor the obligations of the decedent beyond the value of the ' . . •
asset he rebeived. ' •. 25 Statement 1: The making of a will is•Strictly a personal act: It cannot be left in whole or in part of
In succession, fruits and credits maturing after the death of the decedent pass to the heirs the discretion of a third person, or accomplished through the instrumentality of an agent or
even if they were not subjected to estate tax: attorney.
In succession, the successor can refuse,the inheritance. Statement 2: The burden of .proof that the testator was not of sound mind at the time of making his
dispositions is on the perion who opposes the probate of the. will; but if the testator, one month, or
Answer: B less, before making his will was publicly knowri-to be insane, the person who maintains the validity
of the will must prove that the testator made it during a lucid interval.
22. Which of the following could legally effect transfer of properties through succession? Only statement 1 is correct
By virtue of a will Only statement 2 is correct
By operations of law Both statements are correct
Ill.By onerous transfer Both statements are incorrect
I only • c. land III only
I and II only d. I, II and 1111 C. Answer: C
id Article 784 and 800 of RA No. 386, otherwise known as the Civil Code of the Philippines
Answer: B
The question is specifically pertaining to &anger 'Through succession' only, a gratuitous 26 The persons prohibited by law to make a will are:
transfer, hence, exclude onerous transfer. • I. Those below 18 years of age.
II.• Those who are not of soundmind at the time of its execution.
23. An act whereby a person is permitted, with the formalities prescribed by law, to control to a certain I only c. Both I and II .
degree the disposition of his estate, to take effect after his death. II only d. Neither I nor II
Contract c. Will -
Trust d. Legacy C' Answer: C

.1- Answer: C
The Forms of a 'will' shall be observed, otherwise, it is considered void.

388 389
 Elafr '74
Composition and Valuation of the Gross Estate
27. The following are the elements of succession, except:
Decedent c. Heir 34. One of the following is subject to estate tax'on properties situated within the Philippines only
Estate d. Executor a. resident citizen c. nonresident citizen
b. resident alien d. nonresident alien
Answer D
Answer: D j
28. Succession which results frofn the designation of an heir, made in a will executed in the form
prescribed by law is known as: 35. The personal properties of a non-resident, not citizen of the Philippines, would not be included in
a. Legatbi intestate succession the gross estate if:
b,. Testamentary succession The intangible personal properly in the Philippines
Mixed Succession The intangible personal property is in-the Philippines and the reciprocity clause of the estate
Ordinary succession. tax law applies
The tangible personal-property is in the Philippines
Answer: The pelsonal properly is shateagf stock of a domestic corporation 90% of whose business is
in the Philippines.
29. The portion of the decedent's estate which the law reserves to his compulsory heir is called:
Legifiale a -Legacy Answer: Et
Free portion d. Bequest
36. Statement 1: As a general rule, the Silts of tangible personal property is the place or country where
Answer: 'A such is actually located at the time of the decedent's death.
The estate of a decedent is divided into two categories, legitime and free portion Statement 2: The rule that the Silts of intangible personal property is the domicile or residence of
Bequest means tranifer of properhr by virtue o1a last will and testatnent the owner does not apply when the properly has a siths elsewhere.
0• Legacy is a type of bequest involving personal easterlies
Device is a type of bequest involving teal properties ,- Only statement 1 is correct •
Only statement 2 is correct
30. A personwho inherits specificjpprSonal properly thm e-will:. Both statements are correct
, a Devisee ?C.:Heir j Both statements ard incorrect'
1
b, Legatee -• • d. 'Successer •
Answer: C
rt• Answer El, •
37 All of the following are considered intangible in-the-Philippines, except:
31. A aeMon Who inherits specific real property dim a will: Franchise whibhimust be exercised in the Philippines
Shares, obligations or bonds issued by,any carpoiation or sociedad anonime organized or
a: Devisee " c. Heir ,
b. Legatee constituted in the Philippines in accordance with its laws
d. Successor
Shares, obligations or bonds by any foieign corporation 75% of the business of which is
located in the Philippines .
.5 Answer: A
Shares, obligations of bonds-issued by any foreign corporation if such shares, obligations or
32. Which of the following is a Valid will? • bonds have acquired a business situain the Philippines;
That which reduces the legitime of compulsory heirs.
That which increase the share of one heir without impairing the legitime of the other heirs, C. Answer: C
That which transfer-The legitithe of one heir to the other heir.
38 Which of the 'following item is considered situated outside the Philippines?
That which impair the legitime of compulsory heirs.
Franchise in the name of the decedent which IS exercised in the Philippines
Share of stock holdings of decedent in a foreign corporation whose business is 90% done in
Answer 8
the Philippines
33. Which of the following is not a compulsory heir? c, Bond certificate issued by a domestic corporation owned by a non-resident decedent
Legitimate children and descendants, with respect to their legitimate parents or ascendants d. Foreign currency deposited in bank outside the Philippines
In default of letter ga', legitimate parents or ascendants, with respect to their legitimate
children or descendants • Answer: D
Widow or widower
Relatives by affinity 39. Shares are not deemed properly Within the Philippines when
The shares are issued by a domestic corporation. •
The shares are issued by a foreign corporation with no business situs in the Philippines.
Answer: D

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The shares are issued by a foreign corporation with 85% business in the Philippines
The shares are issued by a corporation organized under Philippine laws. Answer: C
•
Answer: B 43. Pedro March 1, 2018. The following data were available in connection with the property.
SITUS of INTANGIBLEs Assessed valued, six (6) months before death P2,500,000
INTANGIBLE SITUS Fair market value at time of filing estate tax return on Feb. 28, 2019 3,000,000
In General Domicile of the owner Zonal value, March 1,2016 2,000,000
2. Shares, bonds, securities What would be the value of the piece of land in the gross estate?
DC (regardless of % of operations in the Philippines P2,000,000 , c. P3,000,000
,),1 , Philippines)
P2,500,000 d. P5,000,600
FC
0 In °envie; • Foreign
. At least 85% of its operations is hi the Philippines
Answer: A •
The higher between the FMV provided by the City or Provincial assessors (assessed value) or
Philippines
zonal value provided by the BIR, at the time of death.
0 Regardless of % of 'operations in the Philippines
Philippines, but expressly provided that It had
acquired businesasitus in the Philippines 44. A decedent left 10,000 PLOT shares. The shares were traded in the local stock exchange. At the
SALE or shares, bonds, securities of: time of death, the following were available:
DC . • Philippines. Fair market value p400 per share
FC • Place of Bale Mean between the highest and the lowest quotations P500 per share
Franchise, copyright, trademark.s, patents . - Where it is exercised Book value P350 per 'share
Receivables • Residence of the debtor
Bank deposits • • Location of the depository bank What was the value included in the decedent's gross estate?
P3,500,000 • •
SITUS of TANGIBLE Properties
I. MovableApersonal properly Where it is located P4,000,000
2. Immovable or real Where it is situated P5,000,000
Whichever was the highest afnong the fair market value, mean and book value
40 The following are general rules oktus. Which One issnot?'.. r

Thesitus of real property is th: place or country where it is•situated. Answer: B •

The situs of tangible personal property is the place or country where such iC actually located VALUATION of Shares of Stork:
at the time of decedent's death: . .'; • . In General, FMV at the time of death,
The situs of intangible perscinal properly is the piaCe or country where such is actually located Traded FMV (closing rate) at the date:of death
at the time of the decedent's death.. Traded. FMV at the time of death is not available - the average between the highest and lowes
The sibs of intangible personal property is the dornicile or residenee of.the owner. quotation nearest the date of death.
Common or ordinary sharen.not traded- book value at the date of death
Pretend or preference Shares, not traded - par value
Answer C
-
GE r P10,000 shares x P400 per share= P400,000 '
41. Which is not a test of situs? Use Mier t'only if there is no valuation atthe date of death.
Residence of the debtor in case of accounts receivable.
Place of storage in case of shares of stocks. 45 Which properly is valued using the book value?
c.. Location of depository bank in case of bank deposit. Bonds being traded in the bond market
d. Place of exercise in case of copyright • Annuity
Shares of stock not traded in the stock exchange
Answer B
Usufruct.
42. Statement 1: For estate tax computation, real estate 4311 be valued at fair market value at the date
of death of the decedent. .< 4. Answer: C
Statement 2: If zonal value is available at date of death, and this is higher than the fair market
value per assessor's listings of values, then the amount to be reported in the gross estate is the 46. Pedro died on Nov. 2, 2018, leaving the following properties:
zonal value. Common stocks of Sunchamp .Corporation (2,000 shares) - listed in the Philippine Stock
Only statement.1 is correct Exchange (highest -P40; lowest- P39).
Only statement 2 is correct Common stocks of AgriNurture Corporation (1,500 shares) -not listed in the stock exchange.
Both statements are correct Cost P50 per share; book value- P45 per share.
Both statements are incorrect

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Es
- tab, lift(
Preferred stocks of Greenergy Inc. (3000 shares) — not listed in the stock exchange. Cost -
P70 per share; book value - P60 per share; par value — P50 per share 50 Continuing the preceding number and the rule of reciprocity applies, the gross estate is:
Car (cost - P600,000; book value - P.350,000; market value - P400,000) P2,000.000 P. P2,600,00
Gen! properties (zonal value - P120,000; assessed value - P72,000) P2,500,000 d. P3,800,000

The gross estate of Pedro is: Answer: B

Rp16,500 c. P824,000 Citizen/Resident NRA w/o rec. NRA w/ rec.
P817,500 d. P848,500 House and Lot in Syria P1,000,000
Vacant Lot in Manila ' 2,090,000 P2,000,000 P2,000,000
Shares of stock in a domestic corporation - 100,000 - 100,000
Anskat: A Shares of stock in a foreign corp., 200,000
Solution: Car in Manila 500,000 500,000 500,000
Sunchamp f(P40+P39)/2 x 2000 shares P79,000
Total P3,800,000 P2,600,000 P2,500,000
AgriNurture (P45 x 1,500 shares)' 67,500
Greenergy(P50 x 3,000 shares) 150,000
Car 400,000 The .situs of shares of stocks of I domestic corporation is 'always considered in the
Rea properties 120.000 Philippines, regardless of the % of its operations in the Philippines.
Total P816,500 The situi Of shares ofstocks of a foreign Lorpuration is Philippines ONLY IF: '
"
1 At least 85% of its operations is in the Philippines; or .
47. Part of the estate left by Aare preference shares of MERALCO. The shares are listed and traded i it expressly provided that the foreign corporation have already acbuired business sites
in the Philippine Stock Exchange. Which of the following rules of valuation is correct? in the Philippines (regardless of the % of operations in the Philippines)
Do not assume reciprocity.
The preference share's will be valued using the arithmetic mean between the highest and
lowest quotation at the date nearest the date-of death, if none 11 aVailable on the date of 51 Following are properties in the gross estate with their fair market value:
death itself. . •, House and lot, family home in-Quezon City P1,500,000
The preference shares will be valued based on theirhook value. ,, Deposit in the foreign branch of a domestic bank 500,000
;The preference stirs will be valued based on their par value, .. ' Shares of stock issued by a domestiecorperation, certificate kept in the US 1,000,000
The.preferents spares will ..be valued haSed on theizfair market valbais detennined by the Pieces of jewelry 800,000
Commissioner-of Internal ventie . Receivable, debtor in Cebu . 200,000
. .
If decedent was non-resident Oken and there is reciprocity, property excluded from gross
.9 Answer: A
estate is valued at
P4,000000 a. P700,000
48. Ana, Filipino, dud-in Syria leaving the,folloMnPprripeities:
P1,700,090 d. P200,000.
House and Lot in Syria • • 1,-,000,000
Vacant Lot in.Marilla • --• 2,000,000 Answer: B .
- Shares of stock in a dOmestic corp.,
% 50 of the business-is located 100,000 Solution:
in the Philippines • Deposit in the foreign branch oba domestic bank P500,000
Shares of stock in a foreign corp., 70% of the business is located in 200,000 Shares of stock of a DC 1,004000
the Philippines Receivable, debtor in Cebu 200,000
Car in Manila 500,000 Total exclusion P1,700,000

How much is the gross estate? Since the decedent is NRA and there is reciprocity, eke/oiled from GE are properties without the
P2,000,000 c. P2,600,00 Philippines and Intangibles.in the Philippines.
Shares of a DC is always considered an estate in the Philippines, regardless of where the
P2,500,000 d. P3,800,090 certificate is kept.
The silos of bank deposit is where the depoSitay bank is located (regardless of whether the bank
9 Answer D is foreign or domestic). Therefore, the bank deposit in the problem is considered part of estate
ci Refer to the solution n 650 without the Philippines because though the bank is domestic, it pertains to its foreign branch.

52 A non-resident alien left the following properties at the time of his death:
49. Based on the preceding number, but assuming Ana is a non-resident alien, the gross estate is: Bank deposit, Canada
P2,000,000 c. P2,600,00 Bank deposit, BOO-Manila
P2,500,000 0. P3,800,009 Car in Ouezoncity
Investment in Ponds, PLDT
Answer C Investment in stocks, IBM; USA
House and lot, USA

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cl, The poWer of the decedent-transferor to revoke terms may be exercised just once.
The country of the non-resident alien decedent does not impose aftansfer or death tax of any
character with respect to intangible personal property of citizens of the Philippines not C. Answer:
residing in that foreign country. What properties will be included in the Philippine gross estate
of the non-resident alien decedent? 57. Lob Sot, 95 years old, was 'diagnosed of various ailments on January 1, 2018. Motivated by
ct All the properties above though of death, he decided to dispose all his properties to his children and relatives. He executed
Properties BC, and D a last will and testament disposing all his properties in the Philippines to his children. On the same
,!roperty C only day, he made donations inter-vivos to his other relatives as to his properties in the United States.
-171roperties A and C Lob Sot died a month after disposing all his properties. Should the properties donated by Lob Sot
to his other relatives be included in his gross estate upon his death?
Answer: C a. No, because they were not his properties anymore at the time of death.
NRA decedents are taxable only on their estate 'boated in the Philippines. If reciprocity rule h. Yes, because the donations were donations mortis causa.and should be governed by the
applies, Intangibles in the Philippines are likewise excluded. rules on estate taxation.
In the problem proyided, ,the decedent is NRA and reciprocity rule is applicable.. Therefore, No, if the donor's tax had been paid already on the donations.
included in his estateere tangible properties boated in the Philippinen only. . '
No, because they were not transfers in contemplation of death, since the donations were not
- simultaneous with the execution of the last will and testament.
53. Using the same data in the preceding number, assuming the decedent is a resident alien, and his
country does not impose transfer taxes to Filipino not 'residing therein, the Philippine gross estate Answer: B
should include: The motivating factor of Lob Sot in transferring his properties was the 'thought of his death'.
a All the properties above Hence, both transfers, in substance, were made in cOntemplation of death. Consequently, both
b. Property B, C and 0 transfers' must be included in his gross estate.
C. Property C only
58. To prevent undue avoidance of tax, inter-vivos disposition in contemplation of death is subject to
d. Properties Aend C Donor's tax c. Income tax
Estate tax d. Excise tax
C. Answer: A
Citizen and Residentc. &dents are taxable On their estate located within and without the G Answer: B
'Philippines. Reciprocity I e is/applicable onlyon intangible's within off/PA decedents.

59 The following are deemed transfth in contemplation of death, except

54. Which of the following %hall be included in the decedent's gross.estate?
While still alive, the decedent donated property where the.donation will take effect at the
.Share in coalman proPerties.of the Sunliving spouse '
time Of his death.
Capital or paraphernal property ofthe sun/Wing-spouse
The decedent transferred a property in the regular course of the business operation.
-Ill. Properties outside the Philippines-of a non-resident 'citizen decedent
The decedent donated a property with the condition that he/she will enjoy the fruits of such
IV. Intangible personal property in the Philippines ofa non-resident alien
while he/she is still alive.
1 only. c. 1,111 and IV Only
The decedent transferred a property to take effect after his/her death
land III only ' d. 1, II, Ill and IV
G Answer B
Answer: C
General Power of Appointment (GPA) and Special Power of Appointment (SPA) '
Transfer in Contemplation of Death and Revocable Transfers
60. Statement 1: A special power Of appointment authorizes the donee of the power to appoint only
55. Which of the following is not a characteristic of donation mortis causa? from among a designated class or group of persons other than himself.
The transfer to the donee is irrevocable while donor is alive.
Statement 2: The donee-decedent of a special power of appointment only holds the property in
There is no conveyance of title or ownership the donee before the death of the donor.
trust, hence, the property shall form part of the donee-decedent's gross estate.
The transferor retains the kill or naked ownership and control of the properly while alive.
Only statement 1 is correct
The transfer should be void lithe donor should survive the donee.
Only statement 2 is correct
Both statements are correct
G Answer: A
Both statements are incorrect
56. Which of the following statements is incorrect?
Answer: A
a. In a revocable transfer, the decedent during his lifetime may revoke, alter, amend, or GPA = + to GE; SPA= exclude from GE
terminate the terms of enjoyment or ownership of the properly. The power granted to the donee-decedent or current decedent shall be known as 'General Power
b. A revocable transfer is always includible in the gross estate of the decedent-transferor. of Appointment (GPA)' if he is authorized to choose 'anyone' who should inherit the property, and
c. A revocable transfer shall be included in the gross estate of the decedent-transferor even not merely based on the desire of the predecessor. It encompasses ownership, hence, shall be
though the power to revoke was not exercised. added to the gross estate upon his death.

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65. Statement 1: The power of appointment is 'general' when the power of appointment authorizes
the donee of the power to appoint only from a restricted or designated class of persons other than
The power granted to the donee-decedent or current decedent shall be known as "Special Power
himself.
of Appointment (SPA)" if he is authorized to choose only from those identified hy the predecessor.
Statement 2: Special power of appointment exists when the power of appointment authorizes the
Thus, the properly involved under SPA was only entrusted to the donee-decedent in favor of
another as desired by the predecessor, therefore, excluded in his estate upon death. donee of the power to appoint any person he pleases.
Only statement 1 is correct
61. Which ihorrect? Only statement 2 is correct
The person who creates the power is.the donor of the power (donor-decedent). Both statements are correct
' The mobil who is given the right to.exerdee the power of appointment is the donee (donee- Both statements are incorrect
dededent).
The property being transferred and the subject of the power of appointment is the appointed Answer: D
property. Statement 1 pertains to SPA, not CPA
All of the above Statement 2 pertains to CPA, not SPA

Answer: D 66 Which of the following transfer ii not included in the gross estate?
The donor-decedent is also known as predecessor while the donee-decedent is also known as Transfer with reservation of ceriain rights .
the present decedent. Transfer for insufficient consideration
i Transfer fot an adequate and full consideration in money or money's worth
62 Which of the following statements is incorrect? Transfer in contemplation of death
A general power of appointment authorizes the donee of the power to appoint any person to
possess or enjoy the prOperty. Answer C
A general powerof appointment makes the donee of the power the owner of the property. Transfer for an adequate and full consideration in money or money's worth = valid sale. It is an
The appointed properly passing under a general power of appointment is not includible in the onerous transfer, not subject to transfer tax
grossiestate of the donee-daqedent. • The term money or moneys worth includes tangible and intangible property, services, and other
None•of the above consideration reducible to among Value (Monarch v. US, 2009, US,Dist LEM 64546)

,Answer: 67 Statement 1: Pedro died giving Juan the power to appoint a person who will inherit his house and
' f •
lot. Juan, hoWever can only choose among Ana, Loma and Fe. Juan decided to transfer the
63. One of the following donations is hot included as part of gross estate properly to Fe through the formers will. Theitransfer from Juan to Fe is subject to estate tax.
a: Revocable transfers ' " • Statement 2: During A's lifetime, he decidekno give- B as gift his (A) car subject to the condition
Transfers with reSeniation of certain rights * that if B does not becorbe a.CPA within 3,years, A 'tall revoke the transfer. In The second year
Transfers under special politer Of appointment however, A died. The car should form part cif A's gross estate.
• Transfers in contemplation of death ' " • a. Only statement 1 is correct
b. Only statement 2 is correct
Answer: C Both statements are correct
Both statements are incorrect
64. Statement 1: Aguinaldo devisediin his will a piece of land; naked title to Bonifacio and usufruct to
Bizet for as long as Rizal lives, thereafter. to Bonifacio. The Transmission from Aguinaldo to
4. Answer: B
Bonifecio and Rizal is subject to estate tax but the merger of the usufruct and the naked title to Statement 1 pertains to SPA' hence, not subject to estate tax.
Bonifacio upon the death of Rizal is exempt. • Statement 2 pertains to revocable transfer, subject to estate tax.
Statement 2: Erap devised in hie will real property to his brother Fidel who is entrusted with the
obligation to preserve and transmit the property to JDV, a son of Fidel, when JDV becomes of age. 68. The following are transactions and acquisitions exempt from transfer tax, except
The transmission from Fidel to his son JDV is subject to tax. Transmission from the first heir or donee in favor of another beneficiary in accordance with
Only statement 1 is correct the desire of the predecessor
Only statement 2 is correct Transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
Both statements are correct fideicommissary •
Both statements are incorrect The merger of usufruct in the owner of the naked title
All bequests, devises, legacies or transfers . to social welfare, cultural and charitable
C- Answer: A institutions
Fidel to JEW = not subject to estate tax
Answer: D •
Choices 'a' end "b" are properties 'held in trust" only by the decedent
The decedent in letter "c" is not the owner of the property, therefore, excluded.

399
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 Estill& 7-
71 Based on the preceding number, if the fair market value of the property at the time of death is only
Bequest to Charitable Institutions - Requirements for Exclusion: P600,000, how much will form part of gross estate?
All bequest devises, legacieS or transfers to social welfare, cultural and charitable institutions, no PO . c. P800,000 ..
. part of the net income of which inures to the benefit of any individual: Provided, however, that not P500,000 d. P1,200,000
more than thirty percent (36%) Of the said bequest, devises, legacies or transfers shall be used by
such institutions for administration purposes. The government agency which is empowered to
Answer: A
detemiine the exemption is the BIR. To enable it to exercise such power, the value of transfer to
The FMV at the time of death was already loWer than the proceeds received. As discussed in the
',I social welfare, cultural and charitable institutions should be included in the gross estate. An equal
preceding number, the amount to be included in the gross estate is the excess of FMV upon death
.amount, however, may be taken up asth deduction. While the Tax Code includes this item in the
over the proceeds:,
exempt acguiSitions and transmissions, it is actually considered a deduction from the gross estate.
,Failure to include the properly transferred to social welfare, cultural or charitable institutions will
impair the power of the BIR to assess taxes properly. Proceeds of Life Insurance
74. Which of the following is not included in the gross estate?
Insufficient Consideration Revocable transfer where the consideration is not sufficient.
69. On the belief that Pedro is about to die, he mild to his daughter a parcel of land valued at Revocable transfer where the power of revocation was not exercised:
P3,000,000 for the same amount. One (1) year later, Pedro died of a car accident. At that time, the Proceeds of life inkurance where the beneficiary designated is the estate and the designation
property had already a value of P1,500,000. For -Philippine estate tax purposes, the amount is irrevocable
includible in the gross estate is Proceeds of life insurance where the beneficiary designated is the mother and the
P500,000 0. P3,500,000' designation is irrevocable.
P3,000,000 d. nil
; Answer: D
Answer: D
If the proceeds is substantially the same or higher than the FAN of the property sold. ft is a bona 75 Amounts receivable by the estate of the deceased, his executor or administrator as an insurance
Ode sale, a valid sale, excluded from the gross estate. under policy taken by the decedent upon his own life is:
Excluded from the gross estate;
70. Vlad died on October 20,2018. During his lifetime, ugion knowing that he had Stage 4 cancer, sold Part of the-gross estate whether the beneficiary is revocable or irrevocable;
his Lamborghini car to his son for P4,000,000. The fair market value of the car at the time of sale is Part of the gross estate if the beneficiary is revocable;
P3,000,000 while it is already valued at 95,000p0 at theeme of death. The amount thatwill be Part of the gross estate if the beneficiary is irrevocable..
added to gross estate is:It: ' .•
PO c.1/2 800,000 Answer: B
R500,000 d. R1,200,000 ' APPLY THE FOLLOWING RULES:

Answer: A. ft is a valid or honetide safe. INCLUDED-IN THE Gross Estate IF:

Proceeds of life insurance taken out by the by thedecedent on his own life should be included in the
gross estate if the following requisites are present
71. Based on the preceding number, if the consideration is fictitious, how much will form part of gross It must be an insurance on the life of the decedent
estate? The beneficiary must be either of the following;
P1,000,000 c. P5,000,000 • His estate, his executor, his administrator (revocable Or not).
P2,000,000 d. nil My third person provided that the designation is not irrevocable

C' Answer: C EXCLUDED IN THE Gross Estate IF:

Fictitious sale means labhcatee sale.. The proceeds from sale is assumed to be PO. Proceeds of life insurance taken out by the by the decedent on his own We should be excluded in the
gross estate if the following requisites are present: .
It must be an inSurance on the life of the decedent
72. Pedro, decedent, owns a property valued at P1,500,000 at the time of his death. The said property.
The beneficiary must be OTHER THAN;
was sold by Pedro during his lifetime to Juan for P700,000 when its value was P1200,000. It was His estate, his executor, his administrator (i.e., children, spouse, parents); and
agreed by Pedro and Juan that the ;former will enjohthe income of the property as tong as he lives. The designation is irrevocable
For Philippine estate tax purposes, how much will b included in determining gross estate? SUMMARY-
PO c. P800,000 LIFE INSURANCE
P500,000 d. P1,200,000 Taken out by Me
Taken out by the decedent decedent's EMPLOYER
Beneficiary: Estate or administrator or Other than the estate,
Answer: C executor administrator or executor Not subject to estate tax
The amount to be included in the gross estate is the excess of FAN upon death over the proceeds.
The P700,000 proceeds vs. FAAV at the time of transfer of PI,200,000 shall be used only to Designation.
determine whether or not it will fall under sale for 'insufficient consideration'. Revocable Include in the GE Include in the GE
Irrevocable Include in the GE • Exclude from the GE

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Ea The Philippine Insurance Code presumes that the designation of a policy is revocable in case 80. Statement 1: Conjugal partnership of gains, absolute community of property and complete
the designator' of the beneficiary is not clear or silent: Section II. of the Insurance Code states separation are all valid regimes that may govern property relations between spouses.
that 'the insured should have the right 'to change the beneficiary he designated in the policy, Statement 2: Under the regime of absolute community of property, the husband and the wife place
unless he has expressly waived this right in said poky,'
in a common fund the proceeds, products, fruits and income from their separate property and those
76. Proceeds of fife insurance where the beneficiary of the decedent IS not his estate, executor or acquired by either or both spouses through their effort or by chance.
administrator is: • Only statement 1 is correct
Paha( gross income if the beneficiary is revocable Only statement 2 is correct
Part of gross income regardless whether the beneficiary is revocable or irrevocable e. Both statements are correct
Not pert of gross estate if the benefidary is irrevocable d. Both statements are Incorrect
Partletgress estate regardless whether the beneficiary is revocable or irrevocable
.
10 Answer: C
C' Answer: C
81, Under the law, the properly relationship between husband and wife shall be govemed in what
77. Proceeds of life insurance to the ektent of the amount receivable by the estate of the deceased, his order?
executor or administrator under policies taken out by the decedent upon his own life 'shall be . By marriage settlements executed before the marriage.
I. Part of the gross estate irrespective -of whether Or not theinsUred retained the power of By the provisions of this Code
revocation By the local custom.
Not part of the gross estate if the beneficiary is irrevocable. a,,ll, lll c.11,111, I
Part of the gross income if the designation of the beneficiary is revocable la.1 , 11 d. III, 11,1
Not part of the gross, incorhe trrespective of -whether or not the' insured retained the
power of revocation Answer: A
land It c. :I and IV
I and III d. only I Exclusive property of the wife is called?
a, income c. paraphemal
C' Answer: D b. capital d. equity
. . -1. Answer: C
. 78 Which of the folloWirig. life 'ipso nce proceeds shall not be included in the computation of gross
estate? • . ..
a. Beneficiary is the estate, .executor, oradministrator and the.designalion of the beneficiary is Exclusive property of the husband Is called?
revocable; .. a. income , c. paraphemal
. . . .
. b. Beneficiary is the estate, executor or administrator and•the des ofithe beneficiary is b. capital , d. equity
ignation
irrevocable; .
Benefidary - is other. thart-the estate, executor or 'administrator and - the . designation of the .1. Answer: B
„ . .
beneficiary is revogable; . .
Beneficiary is other than.the estate, eXecutor, or administrator and -thedesignation of the 84 The gross estate of a decedent who was married at the time of death will be composed of:
beneficiary is irrevocable. ,- / . a His capital property, the wife's paraphemal property and the common property •
. . • b. His cepital property and the common property -
,
Answer: 0 c. Common property
d. His capital property
PROPERTY RELATIONSHIP; MARRIAGE SETTLEMENT .
79. Which of the following statements is incorrect? C. Answer: B
a.: Marriage settlements may fix the property relationS of spautes during the marriage within the
limits provided by the family code. 85 Statement 1: In the absence of mardage settlements executed before the marriage, the property
‘tp . -
The purpose of system of property relations isiii
to distinguish a conjugal or community relationship between husband-and wife shall be governed by local custom and by the provisions of
property from an exclusive proderty. law, respectively. •
1 ,
Modifications or amendments in the marriage settlements may only be allowed after the Statement 2: Claims against insolvent persons may be charged against exclusive property
celebration of the marriage. - .. a. Only statement 1 is correct
None of the above e Only statement 2 is correct
- a Both statements are correct -
Answer: C .d. Both statements are incorrect
0 Amendments shall be. made prior to marriage.
Answer: B

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Statement 1 rderpfP,icly: That Which is acquired by right of redemption. -
Agreement of the spouses executed before marriage That which is purchased with the spouses' common fund.
By operations of law
Customs or haaions
Answer: D
' 86 In thi absence of a marriage settlement, or Mien the regime agreed upon is void, the property
92. Which of the following is exclusive properly under the system of conjugal partnership of gains?
relations of the spouses who married before August 3, 1998 shall be mivemed by:
Property be' ' marriage
Aholute community of properties.
Inheritance during marriage , •
Conjugal partnership of gains
Absetute separation of properties. Property acquired during marriage out Of exclusive money
Al of the above.
Nolleperly relations.
. .•
Answer: 0 •
Answer 8
. .• ticr
Absolute Community of Property . • P.,. "4 .
87. In the absence of a marriage settlement, or when the regime agreed upon was void, the
93. One of the following is not a community properly of the spouses' ... •
properly relations of the spouses who were Married on or after August 3, 1988 would be: Property inherited by the husband before marriage 't 2,21.1
a.' Absolute community of property
Winnings in gambling .
b. Conjugal partnership of gains • • Fruits of property Inherited during the marriage . 7 •-;:is--vc, ;-t.,•
Absolute separation of property Fruits of property inherited before the marriage •A : . 7:
Either absolute community of property or conjugal partnership of gains
Answer: C e: . '..
rir Answer: A Property acquired during marriage, under ACeP, Cr wrier* erti1 e progeny.
RULES on FRUITS:
88 The foilowing are exclusive properly of each spouse. Whiclione is not? AC0P: ifs- FS vnl I Follow the Source Se.:12mmunoty itfrom cornmurciy pr' dm
rto
That which each acquires during the marriage bv. lucrative title. CPG: AFC • AO Ruits are Common (regardless oisource).
That which is purchased with the exclusiVe money of either spouse. Since the hut in this Particular case - Carte (PM "'entente thinng adage (an exdusive
properly), I strati be classified es exclusive prctoettyk ; 11
That which is acquired by exchange with other property belonging •to the spouses.
inTrirSi.,..ter
. .•
That which is brought to th marriage as his or her own. i.e
94. Which of the following is exclusive properly under the systilm ot absolute community of property?
Answer: C Property before marriage 4*,
Inheritance during marriage
Conjugal Partnership of Gains (CPO s. Properly-acquired during marriage :et
- d. All of the above. . .
89. One of the following is a conjugal property of the spouses
That which is brought to the marriage as his of her own d.'r Answer 8 , .
That which each acquires during the marriage by inheritance
C. The fruits of an exclusive property, 95. Properties owned by the spouses before and brought into the marriage shall be classified as:
d. That which is purchased with the exclusive property of the wife Absolute Community Property Conju
__q_L gal Par mr
Community - Conjugal ,
Answer: C Exclusive Exclutiv,e,•
The term 'conjugal property shall pertain to common properly under CPS. Community Exclusive
The 1M -community property shall POMOto common properly under ACoP. Exclusive Conjugek
.•
90 Which of the following is exclusive property under the system of conjugal partnership of gains? Answer: C
Property before marriage
Inheritance during marriage 96. The fruits on properties owned by the spouses before and brought into the marriage ShaN be
Property acquired during marriage out of exclekive money classified as:
All of the above. Co—alPar shio
Absolute Community Property s_teL_P__— of Gains • 4 4 lit'
A• '•
Community Conjugal
Answer D Exclusive EXClUahle

Community Exclusive
91 Which is not an exclusive property of a spouse? Exclusive Conjugal
That which is brought to the marriage as his or. her own.
That which each acquired during the marriage by gratuitous title. cr Answer: A

404 405
 Estate, Az: tstitti& 74,
97 Properties received from gratuitous transfer during maniage Shall be classified as: Car, inherited by wife during marriage (the decedent provided in his 1,300,000
Absolute Community Property Conjugal Partnership of Gains Will that it shall form part of the common properties of the spouses)
Community Conjugal Jewelry, acquired during marriage for exclusive use of the wife 200,000
Exclusive . Exclusive
Community . Exclusive 101 How much is the conjugal properties under Conjugal Partnership of Gains?
..,. Exclusive Conjugal ' P12,510,000 c. P22,310,000 '
P18,510,000 d. P23,610,000 -
Answer: B
C. Answer: A
Solution:
98 Properties received from gratuitous roister during marriage where the donor or testator expressly
Rest house in Cebu . Excl. of the decedent (Mr. J)
provides that it shall form part of the common property of the spouses shall be classified as: . Income from rest house in Cebu ..: . .P.660: 19, 0
:. Conjugal
Absolute Community Properly Conjugal Partnership of Gains Condominium in Davao 0 30:
:1,1: 6500
, 00
090, ,,,,;:::::ofthe SurvivingSpo
conjug
us I
Community • Conjugal • Income from condominium in Davao ' In- 360000 ' • Conjugal
Exclusive Exclusive , ToWn house in Quezon City Conjugal
Community Exausive Income from town house in Quezon City Conjugal
Exclusive , Conjugal Car, inherited by wife during man*, - : of Ihe Surviving Spouse
‘.Eiol
Jewelry, ai...).,.=.•)-
-_=,-) —±Excl. of the Surviving Spouse
Answer: C Total Conjugal Properties - P12,5,000-

99 The fruits received during marriage from gratuitous transfer will be classified as: 102. How much is- the gross estate under Conjugal Partnershipof. Gains?
P12,510,000 c. P22,310,000:,
Absolute Community Property' Conjugal Partnership of Gains
P18,510,000 ' d. P23,610,0004
Community. ' . ' • • Conjugal - J•ox
Exclusive .•, . ... : Exclusive .
, Community , . .. Answer: B
• , , Exclusive • „ow
Rest house in Cebu Ent of the decedent (Mr.1411'
. d. .- Exchnive • , •, , . , ' Conjugal. '.• . Conjugal
Income from rest house in Cebu -)690-Q00
Condominium in Davao Excl. of the Surviving Spouse
C. Answer:: D . J. •' : • . Income from condominium in Davao :360,00 Conjugal
Properties re,ceivecl from-gratuitous transfer' during Montage are.generefirclassified as exclusive Town house in Quezon City io:60,060 .0011u9ad
properly unless the Marriage settlement 0 ACoP and the donor or festater expressly provides that Conjugal -
Income from town house in Noon City lib.5A000
it shall loon part of.the,Common &Lowly& the spouses.. ' Car, inherited by wife during marriage Eitt c4
Excc otthe
;e ,,5
Suum
tyrim
oving SP
; ejutp,}
se -
Fruits: refer to rules prOitided in 093 , Jewelry,
. . , P16,510.000
. .-. Total Gr&s Estate under CPG
1110. Personal property for personal and exclusive use shall be classified as: -. •
Absolute Community Properly ' Conjugal Partnership of Gaina- 103. How much is the community properties Undo} Absolute GoniMunifY of Property?
Community. ' Conjugal a. P12,510,000 c. P22,310,000 "
Excluilye Exclusive - 'b. P18,510.000 d. P23,610,000
C. Community Exclusive . tt
. .
d. . . Exclusive Conjugal Answer: D.
olution:
P6,000,000 ) CemmontlY
Answer: B Rest house in Cebu'
600,000 .kCOMMLIWIY
General Rule: Exclusive . Income from rest house in Cebu
3,600,000 Conway
However, 'jewelry under ACoP, shall be classified as community property as piovided under Condominium in Davao
‘Community
Section 92o1 the new Civil Code. This ruletver, shall not apply to CPG. Income from condominium innavao 360 000
Town house in Quezon City . 10,500,000 - C;ammUMid
Income from town house in Quezon City 1,050,000 COMTPUOtt
The next four (4) questions are based on the data provideg below Community
Car, inherited by wife during marriage 1,300,000
Mr. J. Chavez died leaving the following properties: 200,000 community.
- Jewelry,
Rest house in Cebu, acquired before marriage 6,000,000 P23,610,000
Total Gross Estate under CPG
Income from rest house in Cebu. 600,000 ordonation) 'during
Under ACoP, properly acquired though gratuitous transfer (iobedience
Condominium in Davao, brought to marriage by wife 3,600,000 donor expressly provided that such shall
marriage,, is generally exclusive, unless, the testator or
Income from condominium in Davao cpc.
369,000 form part of the community property. This rule, however, is not applicable to -,
Town house in Quezon City, acquired during marriage 10,500000 0 Jewelry: refer to discussion in 100.
Income from town house in Quezon City 1,050,000

406
407
 Ethic/74
104. How much is the gross estate under Absolute Community of Properties? 107. How much is the net taxable estate under Conjugal Partnership of Gains?
P12,510,000 c. P22,310,000 a. P3,926,000 c. P3,426,000
P16,510,000 d. P23,610,000 , C P6,426,000 d. P1,348,000

Answer: D .1- Answer: D

• Same solution above. Exclusive Common iota/
4 Under ACoP, estate may be classified as exclusive or common. However, under this particular Family home-lot P4,000,000
case, all the properties are classified as community properties. . Family home-house P10,000,006
, .1 , Other properties 6,000,000
105. Statement The right to successien is effected at the time of transfer of the decedent's property Jewelry 2,500,000
or rights to the heir. Properly in U.S. 2,300,000
Rental income 1,200,000
Statement 2: Ana is the surviving spouse of Jose. Her share in their community property is
Total Qress Estate P8,800,000 P17,200,000 P26,000,000
classified as her exclusive properly and shall form part of the decedent's distributable estate. • ORDINARY DEDUCTIONS:
Only statement 1 is correct • • Casualty Losses (600,000)
Only statement 2Is correct: Claims against the estate (t600,000)
Vanishing deduction" (952,000)** (3,152,000)
Both statements are correct
NET Estate before Special P7,848,000 P15,000,000 P22,848,000
Both statements are incorrect • Deductions and Share of the SS
SPECIAL DEDUCTIONS:
Answer: D. Standard Deduction (5000,000)
• Family Home (9,000,000
106. The list provided below is not included in the gross estate Of a decedent, except: Lot = P4M -
Share in common properties of the Surviving spouse; House = P1OW2
SHARE OF THE SS (P15W2) (7.500,000)
Exclusive property of the'surviving spouse; P1,348,000
Properties outside the Philippines of a non-resident alien decedent; Taxable Net Estate
Intangible personal property in the Philippines. of a non-resident alien when the rule of
Reciprocity applies. tik 108. How much is the net taxable estate under Absolute Community Of Properly?
• :-
P4,636,060 s. P1,174,000 •
Answer: A (P2,174,000) d. P2,174,000
71": The entire common' property Shell be included first in gross estate before share of
the surviving spouse is deducted' qf Answer: D
Exclusive Common Total
Family home-lot P4,000,000
Family home-house 10,000,000
Use the following data for the next two (2) questions: Ofher properties . 6,000.000
The estate of Pedro, resident citizen decedencrhanied, who died on April 1, 2018 are as follows: Jewelry . Z500,000
Property in U.S. 2,300,000,
House and lot (Family Home) P14,000,000 Rental income 1,200,000
The lot was acquired at a coif of P3M before marriage while the house was Total Gross Estate P3,500,000 , P22,500,000 P26,000,000
constructed on March 1,2018, during marriage, at a cost of P1OM from partnership ORDINARY DEDUCTIONS:
funds. The lot had a FMV of P4,000,000 after construction of the house. Casualty Losses (600,000)
- (1,600,000)
Other properties acquired during marriage Claims against the estate
6,000,000 (952,000)" (3,152,000)
Vanishing deduction"
Jewelry inherited on Feb. 14, 2017, during marriage, then with a fair market 'value 2,500,000 NET Estate before Special P3,500,000 19,348,000 P22,848.000
of P1,300,000 _
.. •
Property in U.S., received as gift during marriage tor* friend on Jan. 12, 2017 •
Deductions-and Share of the-SS
2,300,000 SPECIAL DEDUCTIONS:
(the applicable donor's tax was not paid by the donor)s Standard Deduction' (5,000,000)
Rental income on the above property tip to time of deal Family Name (P14W2) (7,000,000
1,200,000 (9,674,000)
Expenses/Claims: SHARE OF THE SS (P22,500
Taxable Net Estate P1,174,000
Funeral expenses 420,000
Judicial expenses , 800,000
Casualty losses incurred on Dec. 10, 2018 600,000
Claims against the estate 1,600,000
- Medical expenses within 1 year prior to death, only half wasTeceipted 4,000,000

408 409
 fr_stettc Effrite,
DEDUCTIONS FROM GROSS ESTATE 114. Based on the above data, how much is the dedudble claims against the estate?
a, P5,000 c. P150,000
Funeral Expenses b. P100,000 d. PO
Mowed only if the decedent died before 2018 taitable yek •
Assume the decedent died befoye 2018 taxable year in the following questions on funeral C- Answer: D
menses
• 115. Assume. Jose died on Nev. 1, 2018, how much is the funeral expense that can be claimed.in
109. Which of the following is correct? computing the taxable net estate?
a, •Coartqf burial plot, tombstone, monument or mausoleum can be claimed as deduction from P150,000 c. P250,000
gross estate including their upkeep. P200,000 d. nil
Expenses of the-prayer vigils succeeding the burial are deductible from the gross estate.
Telecommunication expenses incurred to inform relatives of the decedent may be claimed as Answer: D
deduction from gross estate. Funeral, judicial and medical expenses as deduction from the gross estate were repealed under
' • RA No. 10963, othenvise known as the TRAIN Law
All of the above

Answer: C 116. Aling FeN, administrator, claims the following funeral expenses for a decedent who died in 2017: ,
Expenses of interment (paid by fiend) , P 60,000
110. Which is deductible front gross estate? Cost of burial & tombstone (1/2 paid by relatives) 42,000
Other funeral parlor expenses 36,000
Interment fees unsupported by receipts or otherwise
Expenses incurred after interment Expenses during the•wake 13,000
Obituary notice 7,500
Interment expenses borne bithe decedent's bent fdehd
Card of thanks 3,500
Death and interment notice Published and duly receipted
Mouming clothing of friends 15,000
C. Mourning clothing of unmerited minor children 5,000
Answer: .0

111. Not allowed as funeral expenstg. If the gross estate is P1,500,000, the allowable funeral expenses is: -
Burial plot - - a. P75,000 • c: P93,500 •
• ‘•
b. P82,500 , . d. P174,500
Mouming clothes of surviving Spouse • • .
c: Maiming clothes of minor and unmarried children
d. Expenses for religious rites 40 days after death . C. Answer: A
Solution:
Expenses CI interment (paid by friend)
.C• Answer: O . Cott of burial 44 tombstone (1/2) 21,000
Other funeral 'parlor expenses- 36,000
112. Statement 1: Funeral expenses derived from assistance by sympathizers are deductible funeral Expensesduring die wake 13,000 '
expense. Obituary notice • . 7,500
Statement 2: Rdceipts or invoices or other evidence to show that the expense was really incurred Card ofthanks
must duly support thefuneral expense. Mourning clothing of friends
Mourning clothing of unmarried miner children - 5,000
Only statement 1- is correct
Total actual allowable deductions P82,500
Only statement 2 iscorred-
Both statements are correct vs. Limit (P1,5M x 5%) P75,000'
- Both statements are incorrect ALLOWED (Lower Amount) P75,000

i• Answer: El 117. Based on the preceding number, but the gross estate is P2,500,000, the allowable funeral
expenses is:
113. Jose died on November 1,2017 leaving a gross est . te of P4,500,000. The actual funeral expense P75,000 c. P93,500
on his burial is P250,000. Of the said amount, P100,000 is unpaid. How much is the funeral P82,500 d. P174,500
expense that can be claimed in computing the taxable net estate?
P100,000 c. P200,000 Answer: B -
P150,000 d. P250,000 Actual = P82,500
Limit = P2.5M x 5g= P125,000; Lower (allowable deduction). P82,500
C.. Answer: C

410 411
 E-thic 743 Etat& 74
Judicial Expensed ' • • . d Both statements are incorrect
Allowed only if the decedent died before 2018 taxable year
Assume the decedent died before 2018 taxable year in the following questions on funeral Answer: C
expenses
122. Which of the following incurred expenses shall not be deducted under the category of judicial
118. Judicial, expenses may be deducted from the gross estate of a decedent who died before 2018. expenses for a•decedent who died before 2018?
Which df the statements provided below is correct? Expenses for the inventory-taking of the assets comprising the gross estate;
Judicial expenses are costs and expenseS incurred during the settlement of the estate and Expenses for the administration and payment of debts of the estate;
beydod. Expenses for the distribution of the estate among the heirs;
Any unpaid arimunt of judicial expenses need not be supported by a sworn statement of Expenses as of the last illness of the decedent.
account issued and signed by the creditor.. , • Answer: D
Attorney's feel incident to litigation incurred by the heirs in asserting their respective rights •
cannot be claimed as deduction from gross estate. 123. Which of the following is deductible as judicial -expense of the testamentary and judicial
Expenses incurred in .the administration and settlement of an estate in extrajudicial proceedings?
proceedings is not allowed as deduction. • Expenditures incurred for the individual benefit of the heirs, devisees or legatees
Premiums paid on the bond filed by the administrator as an expense of the administration in
Answer: C the nature of a qualification for the office. '
• Attorney's fees incident to litigation incurred by the heirs in asserting their respective rights.
119. Judicial expenses may be deducted from 'the gross estate- of a decedent'who died before 2018. Payments to an accounting firm for services in taking inventory-of assets, tax consultations,
However, expenses not essential in the proper settlement of the estate but incurred for the and preparation of income tax returns for the the estate..
individual benefit of the heirs, legatees, or devisee's are not allowed as judicial expenses. Which
of the following is non-deductible under this category?' AnsWer: D
AttOrney's fees paid by the heirs to their respective layryers arising from conflicting claims
are not deductible as judicial expenses. These expenses should be separately borne by 124. Mr. Ded, a bachelor and resident Filipino citizen, died on November 2, 2017. The following fees
them., . were paid to the following In Connection with the settlement of his estate. 50.000
Premiums paid by a jukcial administrator on his bond are not deductible because the ability Executor, for time and effort in executing the will
of the appointee to givetyond is in.the nature o/ a qualification. , • -Attorney, for legal advice in carrying aid the will Pe0,000-
Compensation of trustees such as expenses being for the account and benefit not of the AppraiseV, for establishing property values .
estate but of the beneficiaries. Administrative expenses for locating and collecting assets. 4730,0:
000
All of the above Accountant, for estate tax return preparation •
-
Answer:, D How much deduction for judicial expenses may the estate claim?
a: P150,000
120. Statement /: To he deductible,' judicial expenses should be incurred during the settlement of the . b. P220,000 cdl.P2
P237000
010000
estate but not beyond the last day prescribed by law, or the extension thereof, for the filing of
estate tax return. Answer: D
Statement 2: Expenses primarily incurred by ad hew intended to establish his interest in the estate Solution,'
Executor, for time and effort in executing the will P50,000
are deductible judicial expenses from the gross estate. 80,000
Attorney, for legal alike in carrying out the will
Only statement 1 is correct, Appraiser, for establishing property values 70,600
Only statement 2 is cowed- Administrative expenses for locating' and collecting assets 40,000
Both statements are correct Accountant, for estate tax return preparation 30000
Both statements are indirect Total allowable judicial expenses P270,000

Cr Answer: A Losses
1 125. Pedro died in 2017. The following are the requisites in claiming casually losses in the computation
121. Which of the following statements is true? of estate tax, except:
Statement /: Expenses incurred in locating a legal heir of the testator is a deductible judicial Losses are not compensated by insurance;
expense. losses must not have been claimed as deduction in the computation of income tax;
Statement 2: Brokerage fees in selling property of the estate are part of the deductible judicial Losses were incurred not later than the six (6) months from the time of deal.
expenses. Losses were incurred not later than one (1) year from the time of death.
Only statement 1 is correct
Only statement 2 is correct Answer: D
Both statements are correct o To be deductible, losses must be incurred after death but within the settlement period

412 413
 [sue& 'retc k.sta,t6 7:1('
Settlement period refers to the period allowed by law to file and pay the estate tax which are as
follows: Accommodation Loan
,O Decedent died prior to 2018- within six (6) moths from dale of death. 131. If a loan is found to be merely an accommodation loan where the-loan proceeds went to another
0 Decedent died on or after January 1,2018 - within one (1) year from data of death. person, which of the following statements is incorrect?
The value of the unpaid loan must be included as a receivable of the estate. •
126. Pedro died in January 2018. the following are the-requisites in claiming-casually losses in the If there is a legal impediment to recognize the same as receivable of the estate, said unpaid
computetion of estatelax, except: obligation shall not be allowed as a deduction from gross estate.
Losses are not compensated by insurance; In all instances, the mortgaged property, to the extent of the decedent's interest therein,
Losof must not have-been claimed as deduction in the computation of inco e tax; should always form part of the gross estate.
Losses were incurred imitator than one (1) year from the time of death None of the choices
None of the abrive
C. Answer:
Answer. .0
132. Which of the followingth not a requirement in claiming unpaid mortgage as deduction for estate tax
Indebtedness or Claims Against the Es. tateAnd Umpald Taxes • purposes?
127. Deductible claims against the estate ,or indebtedness in respect of property May arise out of, a. The fair market value of the moitaged property, net of the mortgage indebtedness, should
except: - be included in the gross estate;
a. contract c: °Orations of law b The fair market value of the-mortgaged property undiminished by the mortgage indebtedness
b tort . d. none of the -above should be included in the gross estate; -
c, The loan must be contracted in good faith • •
C. Answer: D d. The loan must be for an adequate and kill consideration
128.. Which of the following statements pertaining to the dilly notarized certifiChtion from the creditor as Answer: A
tote unpaid balanceot debt of debt by the decedent inclUdingtinterest ai of the date is correct?
a If the Creditor is a.corptitation, it shall bpi. signed by President, or Vice-President or other 133. Mr. Pobre is in need of money to.start a small business. However, he has rid properly to secure a
principal officer of the,corpothtion:-. • . loan from a bank so he sought the help of his good hiend Mr. Rich:tiAr. Rich-then obtained a loan
t b. If the creditor is ipartnerAlp, it Shall he signed by Stith general partners. • . from Banco de Uro amounting to lmillion Pesos secured by a real property worth 2miliion pesos to
c. If the creditor is d- bank o ;other financiut, inslitutions it shall be executed by ,the branch accommodate the request blMr. Pobre. If subsequent to securing the loan and delivering to Mr.
manager of -theliankifinancial institution Urhibh trionito'rs'anctmenades the loan of the debtor- Pobre the proceeda, Mr. Rich died, how much grossetate should? reported?
dededent. .P1-,000,000, • . c. P3,000,000
. ,.
cf. All of the above - P2,000,000 d. nil .

C. Answer 19. C. Answer: C

129. The , following are the requisites -in order far claims against the decedent's' estate may be 134 A piece of land with a fair market value of P10,009,000 at-the time of thedecedent's death was
deductible, except which one? included in the gross estate. Upon closer examination, you found out that the value used was net
They must be the personal debt of the decedent • of P2,000,000 unpaid mortgage on the some land. How much should have been included and
They must be enforceable in court. deducted from the gross estate?
They may have been condoned prior to death, Amount to be included Amount to be deducted
If the loan was contracted 3 years before death, submit statement showing the disposition of P12,000,000 P2,000,000
the proceeds. P10,000,009 2,000,000
P10,000,000 0
C. Answer: C P8,000,000 0

130. Which of the following is not deductible from the grws estate of a decedent? C. Answer: A
1 . Income taxes on income received after death
Property taxes not accrued before death Vanishing Deduction
Estate Tax 135. The following are the requisites for vanishing deduction lobe allowable, except one.
a land II onh, c. All of the above The estate tax of the prior succession must have been finally determined and paid.
b. II and III only • d. None of the above The present decedent died within five (5) years from date of death of the prior decedent.
The property with respect to which deduction is sought can be identified as having been
4- Answer: C received by the present decedent from the priorsiecedent. •
in To be deductible, the lax shall be due on or before date or death None of the above
Estate tax Ls not deductible hem the Gross Estat

414 415
 t—staie,

Cash (inclusive of P5001000 received as inheritance from the father) 1,500,000

Answer: D
The following obligations and expenses were also made available:
136. Ded Nha, a citizen of the Philippines and resident of Manila died intestate on November 2, 2018. Claims against conjugal properties 600,000
Among his gross estate are properties acquired through public sale of properties left by Bernardo Unpaid mortgage on the inherited house and lot. 100,000
who died 41/2 years ago. What percentage of deduction will be Used in computing the amount of (original mortgage was for P600,000) •
vanishiitdeduction?
a60% • c.20% How much is the total vanishing deduction?
b. 40% d. nil P1,000,000 c. P1,530,000
P1.080,000 d. nil
Answer: D
.0 Vanishing deduction is allowed only if the properly was acquired through gratuitous transfer Answer: C
(donation or inheritance). The property in,this particular probfem was acquired through public sale Solution:
(public auction; onerous transfer) • INHERITANCE FROM THE FATHER:
Value to Take: •
137. Which Of the following properties of Namayapa Nha viho .died December 1, 2018 is subjdct to House and rot (lower amount) P1,500,000
vanishing deduction? 6th • 500400
Property 1: Rest House in Tagaytay.purchased in 2012 Total P2000,000
Less: Mortgage paid on mortgage assumed 7500,000)
Properly 2: Commercial lot and building inherited from her mother in 2011 where the estate
Initial Basis ' '1,500,000
tax thereon had not beentaid. . Less: Proportional deduation
Property 3: Donatiod from a friend in 3013 . (1,500/7,000 x e700,000) (150,000)
Property 4: Property won in a lottery six (6) months before death. Final Basis P1,350,000
Property 1 Property 2 Property 3 Properly 4 x Vanishing deduction % 80%
No No • Yes • Yes . Vanishing deduction- inheritance • P1,080,000
No No •Yes. No
Yes Yes Na, Yes OONATION FROM THE MOTHER:
Value to take/initial Basis • (3500000
Yee t, Yes. No No
. • Less: Proportional deduction
(500/7,000 x P700,000) ,(50,000)
4 Answer. B • Final Basis • Roux,
x Vanishing deduction % 100% 1,450,000
138.. Pedro a citizen of the Philippines-and resident of Mekati .Cihk died testate on May 10, 2018.•Among TOTAL VANISHING DEDUCTIONS 131,530,000
his gross estate were properties inherited from, his deceaSed• futheriwho died on April 4,•2015.
What percentage of the deduction wouldte used in computing the amount of vanishing deduction? 140 Teh Pok died on November 20,2018. Some of the properties he left are the following:
60% c. 20% Market Value
40% d. nil Mode Date Date . Date of
Asset of Acquisition Acquired Acquired Death
Answer: B Land Purchase 7-3-14 500,000 350,000
o The propeffy—was inherited from the predecessor more than three years before the present 10-2-17 800,000 980,660
Car Donation
decedent's death. The vanishing deduction rate shall be:

Interval of Acquisition and death of the present decedent Other information:

Within one year 100% The gross estate of the decedent amounts to P3,000,000.
Within two years_ , 80% The car was mortgaged for P50,000 when it was acquired and Teh Pok paid the same
Within three, years‘• 80% before he died.
Within rourythars t 40% The allowable deductions totaled P325,000, which includes judicial expenses of
Within fare years 20% P30,000 and funeral expenses of P150,000.

139. Mr. Pim Manaw, resident decedent, married, died, leaving the following properties: The vanishing deduction is -
Real and personal properties acquired during the marriage P 3,000,000 P581,000 c. P648,783
House and lot inherited from his father one year and 3 months before he 2,000,000 P571,000 d. P637,617
died (fair market value when inherited, P1,500,000) used as the .
decedent's family home Answer: B
Car purchased with cash received as gift from his mother during the year 500,000
he died

416 - 417
 Edit& 7a-j
Solution: Solution:
Value to Take (lower value)" P6,500,000
Value to Take - Car P800,000 Less: Mortgage paid on mortgage assumed (500,000)
Less: Mortgage paid on mortgage assumed (50,000) Initial Basis 6,00+3,000
Initial Basis 760,000 Less: Proportional deduction
fees: Proportional deduction • 6,000/18,000x P2,500 (800,000)
750/3,000 x P145,000n (36,259) Final Basis P5,200,000
Final Basis P726,250 a Vanishing deduction % 60%
x Vanishing deduction % 80% Vanishing deduction P3,120,000
Vanklyng deduction - inheritance P571 000
ID Allowable Losses, indebtedness, taxes and transfer for public use (excluding funeral
Ea "UT = (P325,000-30,000-150,000) P145,000 and judiciaf expenses) P3,000,000-200,000-400,000. P2,400,000 -
ID Funeral end judicial expenses are no fonder allowed as deduction from gross estate of fa Funeral and judicial expenses were repealed under the TRAIN Law, consequently,
a decedent who died on or after the effectivity of the TRAIN Law (Jan. 1,1018) these expenditures shall be excluded in the computation or determination Of the
proportional deduction for vanishing deduction purposes.
141. A decedent died in 2016 leaving properties helnhedted 2% years ago which had fair market value
of P8,000,000 at the time•of his death (P6,500,000 at the time of inheritance, and unpaid, mortgage 143. Mrs. Nathy Gok died on March 20, 2017 leaving a gross estate of P8,000,000 including a land
of P500,000 paid by the present decedent). After inheritance, the decedent mortgages the properly inherited from his uncle on October 15, 2013 and a car donated to him on April 20: 2011: The
for P500,000 and paid the sarrie before his death. Other properties in his gross estate had fair following data pertain to the thro properties: •
market value of P10,000,000.. The total, expenses, losses; indebtedness, taxes and transfer. for Unpaid Mortgage FMV upon receipt FMV upon death
public purpose amounted to P3,000,000. • , Land • P100,000 . P1,800,000 P1,250,000
Car 50,000 300,000. 400,000 •
How much is the vanishing deduction?
P2,000,000. c. P3,000,000 The decedent was able to pay.% of the unpaid mortgage on the land before his death. The
P2,750,1100 d. P3,126,000 deductions are:
Expenses, losses, indebtedness, taxes (excluding the Unpaid mortgages- P 1,200,000
Answer: above but including actual funeral expenses of P300,000 and medical
expenses of P600,000)
Transfer to the Government included above 300,090
Value to Take flower value) , P6A00,000 '2,000,000
Family home (included above)
Lass: Mort0age Paid on mortgage assumed ' (500,000)
The allowable vanishing deduction is:
Initial Basis '
P213,000 c. P440,625
, Less: Pmportional deduction
6,000/18,000 x P3,000 , P426,000 - d. P626,000
(1,000,000)
Final Basil. • . ' P5,000,000
x Vanishing dedication % 60% Answer: .8
Vanishing deduction P3,000,000 Value to Take -Land (lower value) P1,250,000
Less: Mortgage paid on mortgage assumed . (50,000)
ca The mortgage 'alter inheritance and contracted by the present decedent after Initial Basis 1,200,000
settlement of the mortgage assumed when inherited shall be ignored for purposes of Less: Proportional deduction
computing the vanishing deduction. 1,20018,000 x P900,000— (135,000)
The subsequent mortgage has nothing to do with the inheritance or donation, hence, Final Basis P1,065,000
shall be ignored in computing the applicable vanishing deduction. x Vanishing deduction % 40%
Vanishing deduction P426,000
142. Assume the same data in theimmediately preceding number except for the following assumptions:
The decedent died in 2018 eb‘
titiness
. , ,. o **Corrected ELITe and TFPU:
. ELITe unadjusted P1,200,000
Out of the P3,000,000 expenses,
pe losses, Ind , taxes and transfer for public use,
ADD:
P200,000 was incurred for funeral expenses and Pa00,000 for judicial expenses.
Unpaid mortgage on land 50,000
How much is the vanishing deduction? 50,000
Unpaid mortgage on the car
P2,009000 c. P3,000,000 LESS:
P2,75,000 d. P3,120,000 Excess on allowable funeral expenses (100,000)
Medical expenses (600,000)
Answer: D ADJUSTED ELITe P600,000
ADD: TFPU 300,000
ADJUSTED ELITe and TFPU** P900,000

418 419
 Estettc Zric

144. The taxable net estate based on the preceding numbers: - 146. The taxable net estate based on the preceding number is:
P2,174000 c. P4,074000 P2,174,000 c. P51,620.000
P3,174,000 d. P4,174,000 P40,000,000 d. P52,000,000 •

C. Answer: D Answer:, D
Gross estate . P8,000,000 Gross estate P60,000,000
1 /41. Adjusted ELITe (600,000) Adjusted ELITe (6,000,00)
Transfer for Public Use (300,000) Transfer for Public Use (3,000,000)
Vanishing Deduction • (426,000) Vanishing Deduction (4,380,000) ,
.4:-.1 . Standard Deduction (1,000000) Standard Deduction (5,000,000)
Family Home (1,000,000) ' 'Family Home (10000,000)
Medical expenses '(500,000) Taxable Net Estate P51,620,000
Taxable Net Estate P4,174,000
„. . • 147. Vanishing deduction on properties received from gratuitous transfer -before marriage shall be
145. Mrs. Natty Gok died on March 20, 2018 laving a gross estate of P80,000,1100 including a land classified as:
inherited horn his uncle on October 15,.2014 and ,a car donated to him on 'Apd1 20, 2012. The Absolute Community Property Conjugal Partnership of Gains
following data pertain to the two properties: . • . Community Conjugal
Unpaid Mortgage • : Fhiv uporireceipt - FMV upon death • Exclusive Exclusive
Land P1,000,000', P18,000000. . P12,500000 , Community Exclusive
.
Car 500,000 . 3,000,000 .4,000,000 . Exclusive Conjugal

The decedent Was able to pay % of the unPaid Mortgage on the land before his death. The C• Answer: C
deductions are: , . The classification of the deduction will depend on the classification otthe property.
.
Expenses, losses, indebtedness', taxes (exclbding.the unpaid mortgages P 12,000,000 Property before Marriage: ACoP r Communiqc CPO= Exclusive .
, above but including actual funeral eiperries of p3,000,000-and medical
expenses of, P6,000,000) - • .. • .. • :: 1 : ' 148. Vanishing deduction on properties received --frOm 'gratuitous: transfer during marriage shall be
Transfer to the GovemmenWholuded above . 3,000,000 classified as: •-• "
. Family home (included °bine). - 20,000,000 Absolute Conimuhity Property Conjugal Partnership of Gaint
Community . , Conjugal
Exclusive Exclusive
The allowable vanishing deduction is:
Community Exclusive'
P2,130,000 " C. P4,380,000. •
Excliisive Conjugal
P4,260,000 - d P6,260000
•
Answer: C •- C.' Answer B
Solution: The classification of the deduction wit depend on the classification of the properly..
Property from gratuitous transfer during marriage: AC,oP,= generally exclusive; CPG exclusive
, Value to Take -Land (lower value) P12,500000
Less: Mortgage paid on mortgage assumed (500000)
Initial Basis 12,000,000 149. lithe decedent is married under the conjugal partnership of gains, vanishing deduction shall be
Less: Preportienal deduction • chargeable against? .
12,000/80,000 x P7,000,000** - (1050,000) Exclusive Properties
Final Basis P10,950,000 Conjugal Properties
x Vanishing deduction % 40% Either Exclusive Properties or Conjugal Properties
Vanishing deduction P4,380,000 Neither Exclusive nor Conjugal Properties
0 -Corrected LITe + TFPU:
‘.4!
C. • Answer: A .
LITe 'unadjusted ' .P12,000,000
Refer also to the two preceding numbers
ADD:
Unpaid mortgage on land 500,000
Unpaid mortgage on the car 500,000 150. The following are required to be- listed as part of the gross estate, but are exempted from estate
LESS: tax, except
Funeral expenses (3,000,000) Share of the surviving Spouse
Medical expenses (6,000 000) Transfer for public use
ADJUSTED ELITe P4,000,000 Exclusive property of the decedent
ADD: TFPU 3,000 000 Amount received by heirs under RA 4917
ADJUSTED ELITe and TFPU- P7,000,000

420 421
 Estate 74
4. Answer C The deductible claims against insolvent person is
0 'A, 8, and D' are part of GE but also part of deductions, hence, not subjected to'estate tax a P29,285 c. P48,000
b. P32,000 d. P80,000
Claim Against Insolvent Persons
151. Which statement is incorrect about claims against insolvent persons? Answer: B
They must be included in the gross estate even if uncollectible. Assets P100,000
They mIst be duly notarized ai a rule. Unpaid taxes to the government ( (40,000) :
C. The deduction is only the uncollecbble portion. Aratable assets ' P60,000
Divide by remaining liabilities P100,000 .
d. The insolyepty of the debtor must be established.
Co/lea-Ole % of receivables 60%
C• Answer.B • .P80,000
Juan's receivable from Pedro
x uncollectible portion (10055-50%) 40%
152 Statement 1: In a claim against insolvent person, the insolvency of the debtor must be proven and Uncollectible Portion - Claim Against
not merely alleged. Insolvent Persons P32,000
Statement 2: It could be that the amount tote included as pad of the gross estate is a claim
against insolvent person Leless than the full amount pled. SPECIAL DEDUCTIONS
Only statement 1 is correct,
Only statement 2 is correct
Standard Deduction
Both statements are correct 156. The following statements are correct regarding standard deduction under the TRAIN LAW, except:
Both statements are incorrect A deduction in the amount of P5,000,000 shall be allowed as an additional deduction without
need of substantiation.
P Answer: A The full amount of P5,000,000 shall be allowed as deduction for the benefit of the decedent.
Standard deduction is not allowed to decedents Who are non-resident aliens.
153 The following data were taken from the estate of Pedro:-
None of the above
Claims against Juan (insolvent), Filoopoo, fully uncollectible.
Claims against Manuel (insolvimt), P200;000, 50% collectible. Answer: C •
Claims against a person who dnroaded,• R300,000. PRIOR TO 2018:
. Allawable.only to citizen and resident decedents.
Deductible amount = P1,000,000
Based on the data provided-how much should be deducted from Pedro's gross estate? For decedents who died on or after January 1, 2018:
P600,000 c. R200,000, AlloWable only all decedents (citizens, residents and NRAs)
P500,000 Deductible amount:
Citizen and Resident Decedent = P5,000,000
Answer:. A ' IrIRA Decedent P500,000
Substantiation requirements= none
'Allowable deduction = receivable from Juan end 50% receivable from Manuel = P200,009
A person 11110 absconded Is a person who escaped or runaway.
157. If a decedent died prior to 2018, standard deduction from his gross estate is allowed for
154. One of the following statements is wrong. Claims against insolvent persons P1,000,000, unless the decedent
• Should always be-included in the gross estate. . has a gross estate valued not more than P1,000,000
If entirely uncollecbble, may be omitted in the computation for the net taxable estate. has his estate opted for itemized deduction
Can give rise to reduction even if the debtor had some properties. was a resident alien
. d. Can boa deduction even if secured by a mortgage.. , was a non-resident alien.

Answer: B • Answer: D

155. The gross estate of Juan includes P80,000 receivablesthich is duly notarized from debtor Pedro 158 All of the following items are allowed as deductions against exclusive portion of the estate, except
r-
whose records show: Taxes
Assets Floo,000. Claims against insolvent persons
Indebtedness to: Share of the surviving spouse
•• Government (unpaid taxes) 40,000 Family home
Juan • 80,000
Other creditors • it• Answer: C
20,000 • Share of the surviving spouse as well as special deductions are not deductible under 'exclusive'
nor "common property of the decedent.

422 423
 Estait> Etat& ria(

Medical Expenses ire I TRAIN w • nl I the.ece.et" 161. A decedent died on Nov. 1,2017 leaving a family home composed of the following: Conjugal house
worth P800,000, and the land which he exclusively owned valued at P400,000. He also owns a
PRIOR 10201K: vacation house in Baguio worth P700,000. The deductible amount of family home is:
Allowable only to citizen and resident decedents. P800,000 c. P1,200,000
Deductible amount = Actual expenditure but nett° exceed P500,000 P1,000,000 d. P1,900,000
Must be incurred within one (I) year before death, paid or unpaid, with supporting documents
The unpaid portion shall not be classified under indebtedness or claims against the estate
For decedents who died on or after January 1, 2018: C' Answer: A
REPEALED. No Longer deductible from the gross estate Allowable FH = (P800,000/2) • 400,000' P600,000

159. Medical expense is allowed as a deduction from the gross estate of a decedent who died odor to 162. Based on the preceding number, if the house is also an exclusive property, how much is the
the effectivity of the TRAIN Law. Which of the following is coned? deductible family home allowance?
If the actual amount of medical expenses incurred is P300,000, then only P300,000 P800,000 c. P1,200,000
shall be allowed as deduction and not to the extent of the P500,000 threshold amount. P1,000,000 d. P1,900,000
If the actual amount of medical expenses incurred within the year prior to decedent's
death is P700,000, Only the maximum amount of P500,000' shall te allowed as ti Answer: B
Allowable PH' P800,000 + 400,000= P1,200,000, max= P1,000,000
deduction. If in case the excess of P200,000 (P700,000 - P500,000) is still unpaid,
such amount shall be deducted from the ofoss estate as 'claims against the estate'.
only 153. In 2016, a moiled, nonresident citizen decedent has the following common properties,
c. Fund II • •
b. II only d. None of the above • obligations, and expenses
Real property, Philippines P4,000,000
C. Answer: A Real property, USA 5,000,000
Funeral expenses . 250,000
Family Home (FH) -• Judicial expenses, 150,000 .
PRIOR TO 2018: Unpaid taxes 50,000 '
Medical expenses , j 650,000 '
Allowable onfyto cilizegnd resident decedents who are meta& or heed cit the family.
Deductible amotint = A al FAN of the FH but not to exceed P1,000,000
If the FH is purely comrhen,„ Its FMV,shall be divided by•hvo but The deductible 'amount shall not The real property in the Philippines includes the family home valued at P1509,000. How
exceedihe /imit of P1,000,000 ' - much is the taxable net estate? ,
If the FH is purely exclusive 'the deductible amount shall be its entire FMV but not exceed the limit P6,350,000 c. P2,050,00 .
of P1,000,000 . . .
P3,050,000 d. P2,300,000 1
If the FH is partly exclusive and peaty:gamin:On; the deductible amount shall be the total allowable
common and exclusive EH as describe in the preceding paragraphs, but its total a/leviable amount
shall not exceed the limit 01 P1,000,000 - . , . • Answer C
For decedents who died on or after Jahuary.1, 2018: Solution:
. Allowable'Only to citizen and resident decedents who are married or head of the family. Gross Estate
Deductible amount =Actual FMV of the FH but net to exceed P10,000,000 Real properly, Philippines pa.odo,000
If the FH is purely com-mon, its FAN shall be divided by two but the deductible amount shall not Real properly, USA 5,000,000
exceed the limit of P10,000,000 Total P9,000,000
;
If the FH is purely exclusive, the deductible amount shell* its entire FMV but not exceed the limit Less:
of P10.000,000 ' . • Funeral expenses (200,000)
If the FH is partly exclusive and partly common, the deductible amount shall be the total allowable Judicial expenses (150,000)
Unpaid taxes (50,000) (400000)
common and exclusive FH as describe hi the preceding paragraphs, but its total allowable amount
shall not exceed the whit of P10,000,000 Net common estate P8,600,000
Less:
Share of surviving spouse (8.6W2) (4,300,000
160. Which of the following statements is incorrect in nnection with family home deduction prior to (500,000)
Medical expenses
TRAIN Law? (750,000)
Family Home (1.5M/2)
Family home deduction shall be snowed only if such family home is situated in the Philippines Standard Deduction (1,004000)
The total value of the family home must be included as part of the gross estate of the Net taxable estate P2,050,000
decedent
For purposes of availing family home deduction, person may constitute only one family
home •
rt. Family home deduction may not be lower than P1,000,000

C. Answer: D

424 425
 Es tette r Eta& rit6
Use the following data for the next three (3) questions:
The following information were from the estate of a married citizen decedent Who died on June 2017: 168. Under TRAIN Law, all of the following, except one, are not deductible from the gross estate of a
Properly: non-resident alien:
Family home • • 1,200,000 Funeral and judicial expenses
Domestic shares inherited 6 years ago during marriage 600,000 Death benefits under RA 4917
Bank deposit, representing dividend earned during marriage 100,000 Family home allowance
Awelty received as gift 8 years ago during marriage 100,000 Standard deduction
Expenses:
Funeral expenses 100000 Answer: 0 . .. , . .
AAA! 50,000 Prior to TRAIN Law, letter 'a' is deductible (prorated) from the gross estate of NRA decedent
Medical expenses 150,000 Beginning January 1, 2018, standard deduction amounting to P500,000 is now allowed to NRA
decedents. .
164. Under conjugal partnership of gains, gross onnjugal prope is
P1,300,000 c. P800,00 169. One of the following cannot be claimed as deduction m the gross estate of a non-resident alien
P1,200,000 d. P600,000 decedent: •

Vanishing deduction
Answer( A Medical expenses
Share of surviving spouse
165. The 1/4 share of the surviving spouse is Transfer for public use
P600,000 c. P500,00
P575,000 d. P300,000 Answer: B
t Answer: B
170. One of the following is allowed as a deduction from the gross estate of a non-resident alien
166. The net taxable estate of the decedent is decedent who died prior to 2018, but is prorated between Philippine gross estate and the total or
P600,090 • c, P500,00 • world gross estate: ,
P575,000 d. P475,000 Expenses, tosses, indebtedness, taxes, etc
14. Share of the surviving spouse
Answer: D - Vanishing deduction
EXCif ISMS Cantu* Total Amount received under RA. 4917
GrossEstate: '
Family home , P1,200,000 e Answer: A
Domestic shams
Bank depOsif 100,000 171. One of the following is allowed as a deduction from the gross estate of a non-resident arien
Jewelry 100,000 decedent Who died on or after January 1,.2018, but is prorated between- Philippine gross estate
Total P700,000 P1,300,000 P2,000,000
and the total or world gross estate:
Deductions:
Funeral expenses (100,000)
Losses, indebtedness, taxes, etc.
Judicial expenses (50 000) (150,000) Share of the surviving spouse
Net estate before special deductions P700,000 P1,150,000 P1.850,000 Vanishing deduction
Special Deductions • Amount received under B.A. 4917
Standard deduction (1.00(,000) Answer: A
Medical expenses . (150,000) Beginning January -1, 2018, funeral and judicial expenses are no longer deductible from the gross
Family Home (1,200,000/2) (600,000) estate of a decedent (regardless of classification).
Share of the surviving spouse (575,000)
Net taxable estate ‘t • (P475,000) 172. One of the following is allowed as a deduction from the gross estate of a non-resident
alien decedent (prior or after TRAIN Law)
Computation of Net Taxable Estate for Nonresident Alien Decedents transfer for public use c, medical expenses
167. Prior to TRAIN Law, which of the following is deductible from the gross estate of a non-resident standard deduction d. family home
alien decedent? 4- Answer: A
Funeral and judicial expenses
Death benefits under RA 4917 173 Allowable deduction for non-resident alien decedent who died on January 1,2018:
Family home allowance a, funeral expenses c, family home
Standard deduction b. vanishing deduction d. all of the above
4- Answer: B
Answer: A

426 _427
 Esette, 74, beettc

Use the following data for the next four (4) questions: 'FLIT
Sarah, a resident of China and a Chinese citizen died last July 4,2017 leaving the following properties: Funeral expenses (max) P200,000
Land in Davao P2,000,000 Claims against insolvent person 500,000
Rest house in China 1,000,000 Judicial expenses 100,000
Jewelries received from Leni, a week before her death 500,000 Total P809,000
Family Howe 1,500,000
Car 800,000 **VANISHNG DEDUC77ONS
Value to take/Initial Basis P500,000
The descendahlsof Sarah claimed the following deductions: Proportional or?Jr deduction (54,795)
P300,000 (500/6,300r 690,411)
Funeral expenses
Final Basis • 445,205
Claims against insolvent persons 500,000
rate 100%
Amounts received under RA 4917 1,000,000 Vanishing deduction P445,205
Judicial expenses 100,000
Medical expenses incurred from September 2016 to July 4,2017 200,000'
Use the following data for the next three (3) questions: ,
Family home 1,500,000 Kano, a non-resident American:died on May 1,2018 leaving the following:
Standard deductions 1,200,000
Exclusive properties, Philippines P5,600,000
. Conjugal properties, Philippines 4,200,000
174. The gross estate is Conjugal properties, Abroad 18,200,000
P4,800,000 c. P5,800,000
Claims against insolvent persons 1,000:000
P5,300,000 P6,300,000
Funeral expenses . 200,000 ,
Judicial expenses 850,000
Answer: D Claims against the estate 1,500:000:
Losses: occurring 8 mos. after death due to fire 1,700,000
175 Total ELITe to be deducted from the gross estate Donation MIAs causa to M.akati City Hall 1ft00,000i
P300,000 • o. P690,411 10,000,000)
Family Home (inc. above), located abtoad
P604,911 . d. P800,000
-Standard deduction
Answer: C 178. The taxable net estate is:
P5,165,000 C; P4,981,250
176. Deductible vanishing deduction shall P4,665,000 d. P21,000,000
PO C. P445,205
P335,205 d. P545,205 Answer: 13
Solution:
Answer: C Exclusive Common Total
Gross estate P5,600,000 P4,200,000
177. Net taxable estate is Allowable Proportional Life (1,470,000)
P1,854,795 P4,000,000 Whit - Makati (1,800,000)
P2,049,884 P5,164,384 Net P3,800,000 P2,730,000 P6,530,000
Standard deduction (500,000)
Share of the surviving spouse (1,365,000) "
Answer: D P4,665,000
Net taxable estate
Solution:
Land in QC P2,000,000
dewy/des 500,000
Family home 1,500,000 Claims against insolvent persons P1,000,000
Toyota car 800,000 Claims against the estate 1,500,000
Claims against insolvent person
hi 500,000 Losses 1,700,000
Amounts received under RA 4917 1,000,000 Total P4,200,000
Total gross estate P6,300,000 9,6(28
Deductions: Allowable Proportional Life P1,407,000**
Allowable FLIT Beginning January 1, 2018, funeral and Judicial expenses are no longer deductible from the gross
T6,300/7,300 x P800,000 (690,411) estate of a decedent (regardless of classification).
Vanishing Deductions (445.205) Standard deduction of P500,000 is allowed as deduction from the gross estate of NRA decedent
NET TAXABLE ESTATE P5,164,384 under the TRAIN Law.

428 429
 &alai& 74 7:16
179. The taxable net estate assuming Kano died on Nov. 1,2017: The taxable net estate is:
P5,165,000 c. P4,981,250 P2,672,329 c. P3,757,500
P4,665,000 d. P21,000000 P2,757,500 d. P4,982,500
+ Answer: C Answer: B
Exclusive Common Total
Sniss estate P5,600000 P4,200,000 P9,800,000 Solution:
Allowable Proportional Lire . (1,837,500)
TFPU (Cash in bank, QC and Nat'l Gov't) P300,000
TFP1.1- Maker' (1,800000) Family Home 1,500,000
Net P3.800,000 P2,36Z 500 P6,182,500 Personal properties 1,500,000
Standard deduction NA Farm lot 825,000
Sham of the surviving spouse (1,181,250) Claim against an insolvent debtor 225,000
Net taxable estate P4,981,250 Transfer in contemplation of death (gratuitous) 1,5oosoo
Transfer passing under special power of appointment
DEDUCTIONS CLAIMED:
Claims against in:solvent persons P1,000,000 Funeral expenses ( 200,000)
Funeral expenses 200,000 Judicial expenses ( 67,500)
Judicial expenses 850,000 TFPU (300,000)
Claims against the estate 1,500,000 Claim against an insolvent debtor (225,000)
Losses 1,700,000 Unpaid mortgage on the farm lot ( 75,000)
Total P5,250,000 Medical Expenses (225,000)
9.8/28 Standard deduction (1,000400)
Allowable Proportional ELITe P1,837,500- Family Home (1,000,000)
Net Taxable Estate P2,757,500
o Prior to 2018, funeral and judicial expenses am allowable deductible from the gross estate as part
of Ellie. ' al The decedent died before the effectivity of the TRAIN Law.
is' Prior to TRAIN Law, Special Deductions am non-deductible from the gross estate of a NRA CU No vanishing deduction. The Inheritance was received mom than five (5)pars before,
decedent' cleathef the present decedent.
• •
180. If decedent is a Filipino citizen, le taxable net estate is: 182. Bonifacio, head of family died on January is, 2018, leaving the following properties and
P11,490,000 c: P4,100;000 obligations:
P12,645,000 d.. P7,900,000
Cash in bank, 50%, donated Mortis causa to Nab Govt;50-% to Q.C. goVt P3,000,000
4. Answer: D House and fot tn Mat F. Koine - 15,000000
Personal properties 15,000,000
Comprehensive Problems Farm lot • 8,250,000
181. Bonifacio,-- head Of family. died on January 15, 2017, leaving the following properties and Claim against an insolvent debtor 2,250,000
obligations: Transfer in contemplation of death (gratuitous) 15,000,000
• Cash in bank, 50%, donated mortis cause to Nett Govt;50-%-to Q.C. govt P300,000 Transfer passing under special power of appointment 750,000
House and lot in Makati, F. Home 1,500,000 DEDUCTIONS CLAIMED:
Personal properties 1,500,000 Funeral expenses 5,750,000
Farm lot 825,000 Judicial expenses 675,000
Claim against an insolvent debtor 225,000 Donation mortis cause to Quezon City government . 1,500,000
Transfer in contemplation of death (gratuitous) 1,500,000 Unpaid mortgage on the farm lot 750,000
Transfer passing under special power of apporent 75,000 Medical expenses (included in. the funeral expenses• incurred within the 1 2,250,000 ,
DEDUCTIONS CLAIMED: year period with receipts)
Funeral expenses , 575,000
Judicial expenses 87,500 The farm lot was inherited 5 'A years by the decedent before his death with a value then of
Donation mortis cause to Quezon City government 150,000 P5,750,000 and a mortgage indebtedness of P1,500,090.
Unpaid mortgage on the farm lot 75,000
Medical expenses (included in the funeral expenses incuned within the 1 225,000 The taxable net estate is:
year period with receipts) a. P26,720,000 c. P41,500,000
b P37,500,000 d. P50,500,000
The farm lot was inherited 5 1/2 years by the decedent before his death with a value then of
P575,000 and a mortgage indebtedness of P150,000. 4 Answer: B

430 431
 f—sth-t&
Solution: -4- Answer: C
TFPU (Cash in bank. QC and Nat'l GM) P3,000,000
Family Home 15,000,000 186. Statement 1: This deduction is allowed by law to lessen the harshness of international double
Personal properties 15,000,000 taxation where the same estate is being subject to both the foreign estate tax and the Philippine
Fam lot 8,250,000 estate tax.
Claim against an insolvent debtor 2,250,000 - Statement 2: Nonresident alien decedentsaM not entitled to estate tax credit.
Transfer in contemplation of death (gratuitous) 15,000,000
Only statement 1 is correct
Transfer passing under special power of appointment
Only statement 2 is correct
DEDUCTIONS CLAIMED:
,‘ funeral expenses Both statements are correct
Judicial expenses Both statements are incorrect
TEM (3,000000)
Claim against an insolvent debtor (2,250000) Answer: C
Unpaid mortgage on the farm lot • ( 750,000)
Medical Expenses 187. Statement 1: An estate tax credit is allowed as deduction from the estate tax due if the decedent at
Standard deduction ,(5,000,000) the time of his death was a resident citizen of a foreign country which at the time of his death did
Family Home • (10,000,000)
not impose an estate tax of any character in respect-of intangiNe personal property of citizens of
Net Taxable Estate , P37,500,000
the Philippines not residing in that foreign county.
The decedent died during the effectivity of the TRAIN Law.
Statement 2: An estate tax credit is allowed as deduction from the estate tax due if the laws of the -
REPEALED UNDER TRAIN LAW: Funeral, Judicial, and Medical expenses. foreign country of which the decedent was a resident citizen at the.time of his death allow a similar
Standard DeductionAncreased from PIM to P94 for citizen and resident decedents exemption from °State taxes of every character, in roe& of intangible personal property owned
Standard Deduction for NRA decedents: Alreidy allowed at a fixed amount of P500,000 by citizens of the Philippines not residing in that foreign country, .
Limit for Famih; Home: Increased from PIM to PIOM Only statement 1 is correct
Only statement 2 is correct
Estate Tax Credit Both statements are correct
183. Statement 1: Estate Tax credit refets to the taxpayer's right to deduct from the tax due the amount Both statements are incorrect
of tax it has paid to a foreign gountry.
Statement 2: Estate Tax creditieould be claimed as a deduction if Such taxes pertain to properties Answer: D
which are included in the grills estate for Philippine estate tax computation.
Only statement 1 is correct 188. Which of the following is not allowed with tax credit for parnehtiCt
Only statement 2 is toted A resident alien •
Both statements are correct • A non resident citizen
Both statements are incorrect An alien who was a resident of his own county at the datijofid
An American residing in the Philippines at the date of death
C. Answer: C
-) • Answer: C
184. In computing the estate tax, which.of the following shall not be allowed tax-credit for taxes paid
abroad? 189. Statement 1: Tax credit for foreign estate tax is alloWed to minimize the effect of multiplicity o
Resident alien decedent Statement 2: Tax credit for foreign estate tax is allowed to minimize the effect of indirect
Non-resident alien decedent taxation.
Resident citizen decedent - a. Only statement 1 is correct
Non-resident citizen decedent Only statement 2 is correct
c. Both statements are correct _. . .
C' Answer: B Both statements are incorrect
185. Statement 1: Estate Tax credit refers to the taxpater's right to deduct from the tax due the amount C' Answer: C
of tax it has paid to a foreign country.
Statement 2: Estate Tax credit could be claimed as a deduction if such taxes pertain to properties
which are included in the gross estate for Philippine estate tax computation.
a Only statement 1 is correct
b Only statement 2 is correct .
Both statements are correct
Both statements are incorrect

432 433
 E eide, 7716 Ethafr
Tax Credit -I Foreign Country Only
Next two (2)ouestions are based on the following: The estate tax payable in the Philippines is:
A alien-dude:lent died in 2018 with the following data: P9.000 c. P13,250
Phibppines USA P13,500 d. P14,000 .
Gross Estate P14,200,000 P4,400,000
Allowable Deductions 6,400,000 2200,000 Answer: D
(exchling standard deduction) Solution:
Estate tax paid 150900 Gross Estate P3,125,000
Aknrable dedabui (2,475,000)
k
190. Flow muCh fs the estate tax payable in the Philippines assuming the decedent is a non-resident Taxable Net Estate P750,0%
citizen?
P132,000 c. P168,000 ESTATE TM DUE (old Tax Table) PAW
P150,000 Less: Allowahle Tax Crecq
d. P300,000
LIMIT 1 Actual Mowed
China' 150/750 x P35,000 P7,000 . P3,750 . P3,750
4. Answer: C Japan. No estate tax payment
Gross estate (ratan and arkhout) .
P18,602000 USA x- 375750 , P35,000 17,50a 18$00 17,500
Allowable deductions exckrdiv standard deduction (8400,000) TOTAL LIMIT 1
Standard deduction P21,150
(5000,000)
Taxable Net Estate P5000000 LIMIT 2 (M foreign countries)
China, Japan, USA
Estate Tex Due (PM. 4 x 6%) P300,000 450/750 x P35,000 11,750 21,000
Less: Estate Tax Crest '
Estate lax paid ,in abroad P150,000 •
ALLOWABLE TM CREDIT (low) (21,000)
vs. Unit n (1,1005,000 x P300,004 132.000 ESTATE TM PAYABLE
Alorrtible Tax Dye& (LOWER amount) P14, 0%
(131,000)
Estate Tax Payable . P168,000 ai FORMULA FOR ESTATE TM CREDIT where more than on (1) foreign countrIeS are inched:
LIMIT (Per Foreign CountryMyra there wattle tax Fald): •
1:12 FORMIASFOR ESTATE TM CREDIT where only one (I) foreign couney is involved: Net es ' ippine Ntsto hx
Rat eike, tocsin xr. Or/mile estikte Aix • • •
. . -•
LIMIT 2: (Totai el ALL foreIgn coedits invcRed):,
191. How much is the estate tax gayable in the Philippines assuming the decedent is a non-resident Nefesteeal forage countries..., xr: •pp re re la.
alien?
P150,000 . . . • c. P300,000
P168,000 d. P438,000
Compliance Requirements
C. Answer: D 193, Statement 1: The estate tax •imposed under the Tait Code she% be path by the executor or'
Gross estate (wet* on))) P14,100400 administrator before the delivery of the distributive sham in the inheritance to any he or •
Movable deductions excluding standard deduction (8,400,000) beneficiary.
Standard deduction (500,000) Statement 1: The executor or administrator of an estate tas the primary ottgaf en to pay the
Taxable Net Estate P7,330000 estate tax but the heir or beneficiary has subsidiary liabty for paying that porton of the estate
corresponding to his distriwtive share In the value of the total net estate.
Estate Tax Due (P7.3M x 6%) P438,000
CO NRA decedents am not catlike, to estate tax credit
Only statement 1 is correct
CO The Standard deduction for NR4 Øcedents under the TRAIN Lawn P500000 only. Only statement 2 is correct
c, Both statements are correct
Tax Credit- More than 1 Foreign Countries d. Both statements am incorrect
a
192. Mr: Bombo, Filipino died on April 10,2016 with the following data: Answer C
Allowable Estate tax
• Gross Estate Deductions 194. Statement 1:11 the decedent died before 2018,a notice of death is always required to be filed.
Paid
Phppines . P1,875,000 P1,575,000 P- Statement ?If the decedent died before 2018, the notice of death shall be filed by the executor,
China 300,000 150,000 3,750 administrator or any of the legal heirs within two (2) months after the decedent's death, or within like
Japan 450,000 525,000 period after qualifying as such executor or administrator.
USA 600,000 225,000 a. Only statement I is correct • •
'18,000
b. Only statement 2 is correct

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 Ef tette. ret6 _seictec 74
Both statements are correct
Both statements are incorrect e Answer: C

e Answer: •B 198 Who shall file the estate tax return?

a. Executor, or administrator, or any of the legal heirs
195. Lobo Sot died in 2017 leaving's gross estate amounting to 1)150,000 only. No estate tax is due b_ Creditors of the decedent
based on-the tax code. The gross estate is composed of a second hand car worth -P80,000, Personal secretary — decedent
shares of stocks valued at P50,000 and P20,000 time deposit. The administrator believes that Debtors of the decedent
only notice,sfe death should be filed since the value of the gross estate is exempt from tax. What
will you telrhim? Answer: A
Notice of death and estate tax return have to be filed because the gross estate exceeds
P20,000 and when the gross estate consists of registered or regis)zable properties, estate tax 199, The Estate Tax Retum shall be filed and payment made with
is required Jo be filed regardless of the value of the gross estate. An Authorized Agent Bank (MB) of the Revenue District Office (RDO) having jurisdiction
Only notice of death is required to be filed because the gross estate exceeds P20,000. over the place of residence of the decedent at the time of hls/her death.
Estate tax return is required to be filed only when the gross estate exceeds P200,000 and/or If there is no MB within the residence of the decedent, the Estate Tax Return must be filed
there is estate tax due. and the payment made with the Revenue Collection Officer or duly Authorized City or
Neither notice of death nor estate tax return need to be filed in this particular case. Municipal Treasurer of the RDO having jurisdiction over the place of residence of the
Only estate tax return has to be filed because the filing of the return also serves as the notice decedent.
of death. If the required filer has no legal residence in the Philippines; the Estate Tax return will be filed
with the Office of the Commissioner or in the Philippine Embassy or Consulate in the country
Answer: A where. the decedent was residing at the time of his or her death.
The decedent died prior to effectivity of the TRAIN Law All of the above
•
The rules prior to TRAIN Law are:
• Answer: D
NOTICE OF DEATH:
When Required?' • . .
In altEases of hansfer subject to estate tam or 200. If the decedent died before 2018, the estate tax return'shou •6aii6d
The vacue of the gross estate exceeds P20,000. At the time of death
„ Within 30 days after death
ESTATE TAX RETURN: Within six months after death -
When Required? Within one (1) year after death
7 In all cases subjectio estate tax
te exceeds P200,000
The gross esta e Answer: C
Regardless of the amount of the gross estate, where it consists of real or •
registrable properties. 201. If the decedent died on or after January 1,2018, the estate takretum
At the time of death
196. A decedent died before the effectivity of the TRAIN Law, under which of the following situations an
Within 30 days after death
estate tax return is not required to be filed?
Within six months after death
Transfers which are subject to estate tax. •
Within one (1) year after death
The gross value of the estate exceeds P200,000.
The estate consists of registered or registrable properties for which a clearance from the SIR
Answer: D
is required as a condition precedent fort he transfer of ownership.
The gross value of the estate consisting of 09n-registrable properties does not exceed
202. An estate tax return is not necessary in the following instance
P200,000 and the deductions amount to P150 000. •
sie Donation of P50,000 cash •
Transfer of motor vehicle valued at P130,000
Answer: D
Both "a" and "b"
Neither "a" nor "b"
197. A decedent died upon the effeCtivity of the TRAIN Law, under which of the following situations an
estate tax return is not required to be filed?
Answer: A
Transfers which are subject to estate tax.
The estate consists of registered or registrable properties for which a clearance from the BIR
is required as a condition precedent fort he transfer of ownership.
c The gross value of the estate consisting of min-registrable properties does not exceed
P5,000,000.
M None of the above

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 1- stale, ra,
Extra-judicially settled = 2 years from expiration of the original due date
203. Statement 1: The Commissioner or any of the Revenue Officer authorized by him pursuant to the Judidatiy-settled F 5 yeara from expiration of the original due date
tax Code shall have the authority to grant, in meritorious cases, a 'reasonable extension not
exceeding thirty (30) days for filing the return. 209. A died leaving a house and lot to 8 on April 1,2018 which Was questioned by C and it is under
Statement 2', The application for the extension of time to file•the estate tax return must be filed with litigation but, subsequently, the parties executed an extra-judicial settlement. The last day for filing
the RDO where the estate is required to secure its TIN andble tax return of the estate. the estate tax return is:
On statement 1 is correct April 30, 2018 c. October 1, 2018
Only statement 2 is correct April 30, 2019 d. March 31,2019
Both statements are correct
BothAtements are incorrect 4 Answer: D; (RR 12-2018)
Answer C 210. The last day for the payment of estate tax may be extended; until;
October 1,2019 c. October 1, 2021
204. Extension for the payment of the estate tax shall be allowed on the ground of: March 31,2021 d. March 31,2022
Undue hardship upon the estate or any of the heirs
Negligence Answer: B
Intentional disregard Of rules and regulations Extension to pay estate tax:
Fraud Extra-judicially settled .7..2 years from expiration of the original due date
Judicially settled = 5 years from expiration of the original due date
Answer: A
211. A resident citizen died September 3, 2017. An administrator was appointed on September 15,
205. The Commissioner, on meritodouS cases, may extend the timetor payment of estate tax: 2017. The inventory taking of the decedent's properties was completed on October 10, 2017.
In Case the estate is settled In case the estate is When should the estate tax return be filed?.
judicially settled extra-judicially November 3,2017
a, 5 years 5 years March 3,2018
b. , 2.yearS 2 years ' March 15,2018
C., 5 years 2,years Sept 2, 2018.•
d. • '2 years Tears
4 Answer: B
4 Answer: C ,
• 212. In filing the estate tarreturn of a decedent who died prior to the effectivity of the TRAIN Law, a
206. When an estate is settled extra-judicially, the estate tax return may be filed and the estate tax paid CPA certificate is required when:
By any.of the heirs, with a right Of reimbursement from the other heirs.' Gross estate exceeds P 2,000,000
Only by the heir with authority from the bther heirs. •, Gross estate exceeds P 5,000,000
By each of the heirs, the payment being fothis distributive share in the estate tax: • Gross estate exceeds P10,000,000
The eldest of the heirs and closest in relationship to the decedent. Gross estate reaches P 2,000,000

Answer: A Answer: A

207. A died leaving a house and lot to B on March 31, 2012 which was questioned by C and it is under 213. In fling the estate tax return under the TRAIN Law, a CPA certificate is required when:
litigation but, subsequently, the parties executed an extra-judicial settlement The last day for filing a. Gross estate exceeds P 2,000,000
the estate tax return is: h Gross estate exceeds P 5,000,000
April 30,2013 c. September 30,2012 c. Gross estate exceeds P10,000,000
April 30, 2016 d. Octoberit 2012 d Gross estate reachesP2,000,000

Answer: C C. Answer: B; (RR 12-2018)

Filing of estate tax return if decedent died prior to 2018 = Whin six (6) months after death
214. One of the following is not a content of the statement certified to by a CPA:
208. The list day for the payment of estate tax may be extended, until; Itemized asset of the decedent with their corresponding gross value at the time of his death
a. April 30, 2015 c. September 30,2014 or in case of non-resident alien of that part of his gross estate situated in the Philippines
b. April 30, 2018 d. April 30, 2018 Itemized deductions from gross estate
r The amount of tax due whether paid or still due and outstanding
4. Answer: C d. Certified copy of partition
Extension to pay estate tax:

439
438
 Eittette, fret( Esthie 177.1
9- Answer. 0 219. Can the estate tax be paid in installment?
Yes, in case the available cash of the estate is not sufficient to pay its estate tax liability.
215 Statement): If an extension for payment of estate tax is granted, the Commissioner or his duly YS, at the option of the heirs with corresponding interest charges.
authorized representative may require the executor, or administrator, or beneficiary, as the case No, tax is the lifeblood of the State, hence, collection cannot be delayed under any
may be, to furnish a bond in such amount, not exceeding double the amount of the tax. circumstance.
Statement 2: Any amount paid after the statutory due date of the estate tax, but within the None of the above
extension loriod, shall be subject to interest but not-to surcharge.
Only statement-1 is correct • • Answer: A
Only statement 2 is correct • •
Both stagments are correct 220. Which of the following is not correct regarding the estate of a decedent who died before 2018?
Both statements are incorrect No judge shall order a distribution of any part of the estate to an heir without a certification
from the BIR that the tax has been paid. .
Answer: C A bank shall not allow the co-depositor of a deceased to withdraw from the joint bank account
without a certification from the BIR that the tax has been paid)
216. Which of the following is not correct? • No Register of Deeds shall transfer to any heir the title of a decedent to real property without
When a compulsory heir is given by-will less than:his legitime, the provisions of the will should certification from the BIR that the tax has been paid.
be modified in such a way that he will receive his legitime. - None of the above
The CIR may examine the bank deposit of a decedent for the. purpose of determining hi$
gross estate even if the estate did not request for a compromise on the ground of .financial ir Answer: D
incapacity.
The sharing of heirs in testamentary succession must satisfy the rulei on legitime. 221. A -decedent who maintains a bank account died in March 12, 2018: Which of the following,
If an extension to pay the estate taxis granted, the Commissioner or his duly authorized • 'statements is correct?
representative may require the administrator,- or executor, or beneficiary, to fumish a bond in Statement 1: If a bank has knowledge of the death of a person, who maintbined a bank account
such amount exceeding double the amount of .the tax and with such sureties as the alone, or jointly with another, it shall allow the withdrawal from said deposit account, subject to a:
Commissioner deems neCeisary, Conditioned upon the payment of. said tax in .accOrdance final withholding tax of 6% of the amount to be withdraw, provided, that-the withdrawal shall only be,
.with the ten's of the extension: '• • made within 'one year from the date of said decedent.
Stateinent 2: In all cases, the filial tax withheld shall not be refunded, or credited on the tax due,
Answer: 0; (RR 12-2018) . on the net taxable estate of the decedent. •
Only statement 1 is correct •
217. Statement 1: My amount paid•beyond the staiutory due date of the tax, but within the extension Only statement 2 is conoct
period, shall be subject to interest but net to.surCharge.. Both statements are correct
Statement 2: No extension for 'payment, of 'estate tax shall be granted, where the request for cl.. Both itatements are incorrect
extension is by reason of negligence, intentional disregard of lutes and regulations, or fraud on the
pan of the taxpayer. Answer: C; (RR 12-2018)
Only statement 1 is coned
Only statement 2 is correct 222. Which of the following statements is correct?
c Both statements are correct There shall not be transferred to any new owner in the books of any corporation, sociedad
d Both statements are incorrect anonima, partnership, business, or industry organized or established in the Philippines any
share, obligation, bond or tight by way of gift .inteOvivos -or mortis causa, legacy or
9. Answer: C inheritance, unless an eCAR is . issued by the Commissioner or his duly authorize
representative.
218. In case of a resident decedent, the administrator of executor shall register the estate of the In instances where the deposit accounts have been duly included in the gross estate of the
decedent and secure new TIN from the the. decedentand-the estate tax due thereon paid, the executor, administrator, or any of the legal
Office of the Commissioner. heirs shall present the eCAR issued for the said estate prior to withdrawing from the bank
RDO where the administrator or executor is regisWred. deposit account.
RDO where the decedent was domiciled at the time of his death. The withdrawal describe in letter b shall no longer be subject to the 6% withholding tax by the
cl. Duly authorized treasurer of the city or municipality where the decedent domiciled at the bank.
time of his death. All of the above
Answer: C C- Answer: D; (RR 12-2018)

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PART 10
at/toili
-f

Formal Requisites
Deitetr ), cli(tj6
Although the law used the term tact", the law considers donation as a
"contract, as shown by the fact that it requires acceptance, and that the rules on
obligations and contracts apply to it as a suppletory law (Art. 732 NCC). Being so, the
required form, as provided below shall be observed, otherwise, void.

Personal Properly Real orregistrableproperty

Amount of donation P5,000 or less More than P5,000 Regardless of amount
Form of Donation Oral or in writing In writing In public document
Nature of Donor's Tax
Classification of Donors
Donation is an act of liberality whereby a person disposes gratuitously of a Citizen or Resident (RC/NRC/RA)
thing or right in favor df another, who accepts it (Art. 725 of the New civil 'Code). A Non-resident Alien (NRA)
donor's tax .(or gift tax) is a tax levied, assessed, collected and paid upon the transfer With reciprocity
by any person, resident or nonresident, of the property by Oift.(whether the transfer is Without reciprocity
in trust or otherwise, whether the gift is director indirect, and whether the property is
real or personal, tangible or intangible). ! FORMAT OF COMPUTATION

It ISM tax imposed on the exercise of the donor's right during lifetime to FIRST DONATION OF THE YEAR
transfer property to others in he form -of gift. "Hence, donors'tax is not re property ! Gross Gift I P)30(
tax, but it is an excise tax imppsed on the transfer of property- by way of 'gift inter- Less! Exem_ptions/DeductiOns i !Pal
vivos (RR 12-2018). Net Gift 1 MCC
Multiply: Rate ,i >MO
Although the law used the term "act"; the law cOnsiders donation as a , Donor's Tax , .{. PXXX
rcontractn, as shown by the fact ,that it requires a'cceptance; 'and that the rules on, -4-
Less! Tax Credit 1 (X)O)
obligations and contracts apply to it as a suppletoryla it. 732 'NCC): Donor's Tax Due/Payable 1I P)00(
Purposes of Donor's Tax
To supplement the estate tax
SECOND AND SUBSEQUENT DONATION WITHIN THE
To prevent the avoidance of income taxes. Without donor's tax, the donor may
YEAR
exrape the progressive rates of income taxation through the simple expedient
' _ Gross Gift, Current ! 13)0(X
way of splitting his income among numerous donees.
Less: Exemptions/Deductions Current ! 1)000
Elements of Taxable Donation Net Gift, Current ,l PXXX
I. Capacity of the donor to transfer property Add: Prior Net Gift ! XXX
2. Donative intent (not an absolute requiremioti required only in direct gift) Aggregate Net Gift . I MX
Multiply: Rate . : xxok
, Delivery !-------
EU The transfer of the property is completed by the delivery, either actually or Donor's Tax _
._ __.._._ ! ' PX)0(
constructively, of the donated properbe to the done. Tax Paid— Prior Gift 1 .S>903_
00(
Tax Credit .
Acceptance of the gift by the donee Donor's Tax Due/Payable P)0(X
LLI The transfel- of property bY gift is perfected from the moment the donor
knows of the acceptance by the donee. Note: The computation of the donor's tax is on a cumulative basis over a period
of one calendar year.

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 D otter's 74 Dfittler ).3

6) Transfer for insufficient consideration

Donor's 'fax Rate
EXCEPTION: Real property classified as capital asset.

FOR DONATIONS MADE PRIOR-TO JANUARY 1r2018 FMV at the time of sale PXXX •
,) Less. Selling Price (XXX)
1.1 'If given to relatives: 1., , Taxable Gift P/00C
Over , But not over 1 The tax shall I Plus 1 Of the excess over
1.
, be . neoMPONENTS OF GROSS GIFT
t
- PlOOT I Exempt: 1 ! RP 1 TPP PP
-r-
PlOOT 1 200T . 0 r 2% 4 P100T Donor ja tr/2_, jw/n j, j
200T • 500T r 2,000 1' 4% I 200T • RC/NRC/RA _ N/ 1V V 1V H' V
, ,NRA w/o Reciprocity_ LI/ JX • V 1. X .41/ . ' x
500T 114 1 14,000 1 6%i SOOT
111 , 3M j 44,000 i 8% 1 im NRAw/Reciprocity H'. X V 1 X . IX ix
3M l 5M L 204,000 j_ 10% L, 3M
5M 1 10M 1 404,000 ! 12% 1 5M e Gift from Common Property — the.9ift iS taxable one-half to each donor
spouse.
10M ! I 1,004,000 i 15% r 10M ,
4, Donation between husband and wife during the marriage
2). If given to strangers — 30% . GENERAL RULE: The gift is not taxable, OS iris declared void by law.
NOTE: A strangeris a person who is NOT: ' EXCEPTION: Moderate gifts between the spcitises are- valid.
, Brother or Siseer_(Whether wholeOr half.....blood);
,
Spouse; 1. „. ..
Husband and wife are considered as: separate and distinct taxpayer's for
Ancestor; 't„ ' - - purposes of the donor's tax. Howerier, 'if whet ikrasdrinated is a conjugal or
Lineal descendant; . , . . community property and only the husband -signed the deed of donation, there
Relative by consanguinity in the collateral line within 4" Civil degree, is only one donor for donor's tax purpoSes, Without prejudice to the right' of
of relationship:, • ,
the wife to question the validity of the donation without her cOnsent pursuant
to the pertinent provisions Of the Civil Code of the Philippines and the Family
- FOR DONATIONS MADE ON OR AFTER JANUARY 1, 2018 Code of the Philippines.

Regardless of the relationship of the donor and donee, the donor's tax EXEMPTIONS OR DEDUCTIONS FROM GROSS GIFT
rate is 6% in excess of P250,000 exempt gifts. •
1) Dowry Exemption

GROSS GIFT NOTE: Applicable only to donations made prick- to January 1, 2018. This
C- Transfers subject to donor's tax: particular deduction/exemption was repealed by RA No. 10963, otherwise known
Direct gift; as the TRAIN Law.
Gift through creation of a trust;
Condonation of debt; Requisites: •
Repudiation of inheritance if: Gift made-on account of marriage;
Specifically and categorically done A favor of identified heirs; and Given before its celebration or within 1 year thereafter;
To the exclusion or disadvantage of other co-heirs. Given to legitimate, recognized natural or adopted children;
Renunciation by the surviving spouse of his/her share in; the conjugal partnership Amount of exemption is P10,000 per donor per child.
or absolute community after the dissolution of the marriage in favor of the heirs
of the deceased spouse or any other person/s;

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 /.27llar's 74 Dwr's ra6
2) Gifts to the Government - gifts made to or for the use of the National TAX CREDIT FOR DONOR'S TAX PAID TO A FOREIGN COUNTRY
Government or any entity created by any of its agencies which is not conducted Only resident or citizen can claim tax credit .
for Orofit.
Amount Deductible:
3) Gifts to educational, charitable, religious corporation etc. Actual estate tax paid abroad
whichever is
ReguiSifes: Limit -
lower
1) Gifts in favor of the following entities:
Educational Limit:
Charitable 1) Only one foreign country is involved
Religious
Cultural Net Gift, foreign Philippine Donor's Tax
X
Social welfare World Net Gift
Accredited non-government organization;
Trust or Philanthropic organization; . . 2) Two or more foreign countries are involved (whichever is lower
Research institution or organization; of the following.):

2) Not more than 30% of the said gift shall be used for administration purposes. Limit 1 or A - Per Foreign Country

4) Encumbrances on the property donated assumed by the donee Net Gift, per foreign cOuntry Philippine
5) Diminution of gift provided by the donor World Net Gift Donor's Tax
6) Exemption under Special Laws
-International Rice Research Institute- Limit 1 or B By Total
Ramon Magsaysay Aunciation- ' Philippine
Integrated Bar of the Philippines Net Gift all foreign countries Donor's Tax
Development- Agademy of the Philippines World Net Gift
National Museum ,
National Library
Archives of the National Historical Institute DEADLINE FOR FILING OF RETURN - within 30 days from date of donation.
Museum of Philippine. Costumes
Intramuros Administration NOTE: No allowed extension.

NOTE: DEADLINE FOR PAYMENT - pay as you file.

For purposes of the donor's tax, "NET GIFT" shall mean the net economic benefit
from the transfer that accrues to the donee. (RR No. 2-2003) PLACE OF FIUNG

Exemption or deduction RCLNRC/RA ! a Except in cases where the Commissioner otherwise permits, the return
EDowry shall be filed and the tax paid to the following where the donor was
I
domiciled at the time Of the transfer, or if there be no legal residence on
Gifts to the Government • V the Philippines, with the Office of the Commissioner:
! Gifts to educational, charitable, religivis etc. V :
i V An authorized agent bank
! Encumbrances on gift assumed by donee l V
1 Diminution of gift_ provided by donor J VI:, V i
Revenue District Officer
Revenue Collection Officer or
Duly authorized treasurer of the City or municipality

446 447
 Dmurc c74 Deitar's 7ad
t
It In the case of gifts made by a nonresident, the return may be filed with:
Philippine Embassy or _consulate in the country where he is domiciled at QUIZ ZER
sit the time of the transfer, or Directly with the officer of the Commissioner.
Choose the letter of the correct answer.
' TABLE 6-2: CcCPISONS BETWEEN ESTATE TAX AND DONOR'S TAX
NIRC as amended by RA 10963 otherwise known as TRAIN Law) 1 An act of liberality whereby one disposes gratuitously a thing or right in favor of another
who accepts it
ESTATE TAX , DONOR'S TAX succession c. donation
Concept Involved Succession Gift or donation occupation d. tradition
Donation inter vivos
Donation mortis causa • C. Answer: C
Requisites or Death of the decedent 1.. Donative intent of the donor;
Elements Heir or successor is alive at the Capacity-or authority of the donor; 2. It is a tax imposed on the exercise of the. donor's right during lifetime to transfer property
time of the decedent's death and is Delivery of donated property; to.others in the form of gift
not disqualified to inherit. Acceptance by the donee; Estate Tax c. Property Tax
2.1 compulsory heir Additional requisite: Donor's Tax d. Income Tax 4.
2.2 voluntary ,heir Donation must be M proper form
3.Estate/Inheritance othervilse,.void (Refer to Page 443)
e, Answer: B
Accrual Period upon r the 'date of, death of the at the time the gift or donation is made or
decedent , perfected „ 3. -Which of the following statements is correct? . . .
A transfer is gratuitous or without consideration and accordingly qualifies as a .
Governing Law statute iii forA at the time ofdeath statute in force at the time of the donation, if nb economic. benefit measurable in money or money's-worth flbwed to
of decedent perfactionfoompletion of donation the transferor from thetransferee. •
A gratuitous tranSfer is always subject to donor's tax, ,
Tax Rate 6% net estate - 6% net gifts in excess of P250,000 , A donation on which the donorls tax was no! paid isnot a valid donation.
Filina 8. Payment Within one (1) year from death Within 30 days from donation • Title tci the donated real property thn be transferred to the donee inthe Register of
extension to file: „ Deeds even if the donors tax on the donation had not been paid. •
not more than 30 days no extension to file
pay as you file or
with extension to pay: pay as you file C. Answer: A
•
2 years (extrajudicial) no extension Mr payment
5 year Of judicial) 4. Which of the following constitutes "Gift' for Gift Tax purposes?
Transfer of property without consideration.
Scope RC, NRC, RA - on estate within RC, NRC, RA -on gifts within and without Sales, exchanges and other dispositions of property for a consideration to the extent
and without NRA - on giftsiwithin that. the value of the property transferred exceeds the value in money or money's
NRA - on estate within worth of the consideration received therefor.
Both "a" and "b"
Neither "a" nor 'If

.• Answer: C

448 449
 Dall,ovis ).5 74
Donors tax is: 9 The common characteristic of transfer taxes is that the transfer of property:
a. A property tax C. A business tax Is onerous.
b, personal tax d. An excise tax Takes effect during the lifetime of the transferor.
Takes effect upon the death of the transferor.
4 Answer: D Is gratuitous.

Donors tax is a(n) C. Answer: B

Excise tax
Direct Tax 10. A tax imposed on the gratuitous transfer of property between two or more persons who
Personal Tax are hying at the time the transfer is made
- IV. Property tax estate tax .c. income Tax
land II only I, II and IV only donors tax d. transfer tax
1,11 and III only 1,11,111 and IV
C. Answer: B
4 Answer: A
11. One of the following is not a distinction between donation inter vivos and donation mortis
7. Statement 1: A gift occurs when the donor surrenders control over the property. causa.
Statement 2: If the donor retains an unlimited power to revoke the gift, ills clear that gift Donation inter vivos takes effect during the lifetime of the grantor while donation
has occurred. morbs cause takes effect after the death of the grantor.
Only statement 1 is correct - - Donation inter vivos is subject to donors tax while donation mortis cause' is subject to
Only statement 2 is chrrect estate tax.
Both statementi are &Sired Donation inter vivossequires a public document While donation mortis causa may hot
Both statements are inborrect require a public document.
Donation inter vivos is valued at fair -market value at. the time the property is given
4 Answer: A while donation mortis causa is valued at the fair market value at the time of the death
0 The gift in statement 2 a revocable gift, an incomplete gift, not subject to of the grantor.
donors tax.
4 Answer: C
8 A gift that is incomplete because of reserved powers, becomes:complete when either:
I. the donor renounces the power; or 12. The following are the requisites of a donation for purposes of the donor's tax, except one.
11: his right to exercise the reserved power ceases because of the happening of some Capacity of the donor
event or contingency or the fulfillment of some condition, other than because of the Capacity of the donee
donor's death. Delivery of the subject matter or gift:
Only 1 is correct Donative intent
Only II is correct
Both land II are correct 4 Answer: B
Both land Hare incorrect
13 Statement 1: Donor's tax shall be levied, assessed, collected and paid upon the transfer
Angwer: A of property by any person, resident or non-resident, as a gift.
Statement 2: The donor's tax shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect, and whether the properly is real or personal, tangible
or intangible.
a. Only 1 is correct

450 451
 Dimor)_, r Dniter's r/(76
Only II is correct 17. Which of the following statements regarding donation of an immovable property is
Both I and II are correct correct?
both I and II are incorrect The donation must be made in a public document specifying therein the property
donated.
4 Answer:
, C The acceptance may be made in the same Deed of Donation or in a separate public
instrument, but it shall not take effect unless it is done during the lifetime of the
14. Statement 1: "Consideration" means money or equal value or some goods or service donor.
capable of being evaluated in money. It the acceptance is made in a Separate instrument, the donor shall be notified
Statement 2: Donative intent is required only in indirect gift.. thereof in an authentic form, and this step shall be noted intoth instruments.
Only I is correct d All of the above
Only II is correct
Both I and II are correct it• Answer: D
Both I and II are incorrect
18 For the donation to be considered valid, acceptance of the donation must be made:
Answer: A During the lifetime of the donor only. •
0 Donative intent is required only in direct gifts During the lifetime of the donee only.
Duringthe lifetime of the donor and the donee.
- 15 Which of the following donations inter vivas may not require:that it be in writing?. None of the choices.
Donation of personal (movable) properly, the value of which exceeds P5,000.
Donation of personal (movable) property, the value of whiCh is P5,000. Answer: C
Donation of real (imfAevable) property, the'value of whictlis less than P5,000.
Donation'of real (immcNrable) property, the value of whichexteeds P5,000. 19 When is the donation perfected?
The moment the donor knows of the acceptance by the donee
02. Answer: B •• The moment Me thing donated is detiVered,• either actually or constructively, to the'
donee
- 16 Which of the following statements is correct? Upon payment of the donor's tax
Donation of immovable property may be made orally or in writing. Upon execution of the deed of donation
If the value of the real property donated exceeds P5,000, the donation and the ,
acceptance shall be made in writing,•otheiwise, the donation shall be void. C• Answer: A
An oral donation requires the simultaneouS delivery of the thing or of the document
representing the right donated. - 20. Which of the following statements is correct?
All of the above Donation is perfected not from the time of acceptance but from the time of knowledge
of the donor that the donee has accepted the donation.
Answer: C Acceptance must be made during the lifetime of the donor and of the donee.
0 Choices "a" and "b" are incorrect. Donation of immovable property shall be Donations made to conceived and unbom children may be accepted by those
made in a public documenilgardless of amount. persons who would legally represent them if they were already born.
All of the above

C' Answer: D

452 453
 DOlithe' .5' giufr's .7itt .
21 Which is not true? 25. Which of the following is subject to donor's tax?
;a. The donation is perfected only from the moment the donor knows of the Those made between persons who were guilty of adultery or concubinage at the time
acceptance by the donee. of the donation. •
b. Vitiated consent renders the donation voidable. Those made 'to conceived and unborn children.
G. , vAcceptance may be made after the lifetime of the donor. Those made to a public officer by reason of his office.
d. The donee must accept the donation personally or through an authorized Those made between husband and wife during their marriage.
person; otherwise the donation shall be void.
Answer: 8
Answer: C
26 Statement 1: In all cases, void donations are not subject to donor's tax.
22. Which of the following transactions is deemed a taxable gift? Statement 2: Every donation between the spouses during the marriage shall be void.
Condonation or remission of a debt Only I is correct
Sale of residential house and lot for less than adequate and full consideration in Only II is c,orrect
money or moneys worth Both land II are correct
Both (a) and (b) Both land II are incorrect
Neither (a) nor (b)
Answer: A
Answer:A -Op Moderate gifts between husband and wife during family rejoicing Or family
13" is a bona fide sale or valid sale, not a gift. mouming is a valid gift, subject to donors tax.

23. Who is not subject to the dkors tax? 27 Which of the following Statements is correct?
An individual making adonabon. Donation is perfected not from the tine of acceptance, but from the time of knowledge
A corporation making a donation, of the donor that the donee has accepted the donation.
A partnership making a donation. Acceptance must be made during the lifetime of the donor and of the donee.
An employer who pays premiums on the life insurance of its employee. Donations made to conceived and unborn children may be accepted by th6se
persons who would legally represent them if they were already born. ;
Answer: D All of the above
0, The employer-corporation shall treat the premium payment n letter "0" as
operating expenses, not a gift., Answer: D

24. Which of the following is false? 28 A non-resident citizen donor is taxed oh his donation of properties:
Donors tax applies also to juridical persons Situated in the Philippines only.
For purposes of donors tax, second cousins are strangers to each other Wherever situated. •
Encumbrance on the property donated, if assumed by the' donor IS deductible ;for Situated outside the Philippines only.
donors tax purposes - Situated in the Philippines only Subject to the rule of reciprocity.
As a rule, donation between husband wife during the marriage is void
Answer: 8
Answer: C
i() To be deductible, the encumbrance or obligation shall be assumed by the 29. Statement 1: Resident alien would be subject to donor's tax only on their donations of
donee. property located in the Philippines.
Statement 2: A donation by a foreign corporation of its own shares of stock to resident
employees is not subject to gift tax but may be subjected to income tax.
a. Only the first statement is correct

454 455
 DO-11:01; - Dew/is 7:1

b Only the second statement is correct. g. P200.000 receivable,50% condoned by Juliet

c Both statements are correct.
d Roth statements are incorrect. She has also transferred the following properties
Selling Price FMV
4.,‘ Answer: B • Car, Makah P200,000 P300,000
0 Citizens and resident donors are taxable on their donation within and Car, Malaysia • 300,000 200,000
without the Philippine. - Rest house, Tagaytay 1,000,000 2,000,000
Rest house, Malaysia 1,500,000 2,500,000
.30 There is reciprocity, When the donor and the donated propertY is:
Donor Property •-• 33. How much is the gross gift?
Non-resident alien Intangible Personal.Pronerty P5,200,000 c. P4,100,000.
Non-resident citizen. Unmovable • • • P4,200,000 d. P3,200,000
Non-resident alien Tangible Personal Property
Resident alien Any kind of property Answer: C

4. Answer: A 34. If she is a non-resident Alien, her gross gift is:

P3,200,000 • c. P1,100,000
31 Which of the following is .taxable only with respect to properties. donated within ,the ;21,200,000 d. P850,000
Philippines?
a. Resident citizen 4. Answer: C
b: Non-resident citizen -
Resident alien 35. If she is a non-resident alien, and there is reciprocity law, her gross gift is
Non-resident alien' a. P850,000 c. P1,050,000 ,
b: P050,000 d. P700,000
4. Answer: I)
4. Answer: A
32 If a donor is a non-resident alien and the rule of reciprocity applies, which of the following .Citizen NRAdecedent NRA decedent
properties will not form part of his gross gift?' decedent (w/o reciprocity) (W/ reciprocity)
Real properties in the Philippines To Nick P450,000 P450,000 P450,00Q
Tangible personal properties within the Philippines To Rosalee 100,000
Intangible personal properties within'the Philippines To Adafind P150,000 P150,000
Al] of the choices • To Renard 1,600,000
To Drew 300,000- 300,000 a 300,000
Answer: C To Hank 300,000
To Juliet (50%) 100,000 100,000
Next three (3) questions are based on the follow, data: Insufficient consideration 100,000 100,000 100,000
Juliet, a Filipina made the following donations. (car Mla). •
To Nick, a land worth P450,000 in Manila. Insufficient consideration 1,000,000
To Rosalee, jewelry worth P100,000 in Japan. (Rest House Mla)
To Adalind, PLOT shares amounting to P150,000. Total Gross Gift P4,100,000 P1,100,000 P850,000
To Renard, a building in Italy P1,600,000 mortgaged for P 50,000 aSsumed by the-donee.
To Drew, land in Davao worth P300,000. 0 As a rule, reciprocity is never assumed.
R300.000 cash, PNB New York to Hank

456 457
 Daft,ar's
() The sale of rest house in Tagaytay was for insufficient consideration.
However, such sale is subject to CGT (capital asset + real properly + 39. For donor's tax purposes, one of the following is a stranger.
Philippines), not donor's tax. Brother or Sister c. Uncle
90 The sale of rest house in Malaysia was for insufficient consideration. Spouse d. Son in law
However, such sale is not subject to CGT because the property is located
abroad, hence, subject to donor's tax. Answer: D

36. Statement 1: Regardless of the relationship to the donee, donations made by the donor 40. Donations made to an adopted child by common donation shall be considered as
are subject to the scheduler rates of 2% to 15%, if such donation was made prior to the donations made to a relative.
effectivity of the TRAIN Law. .
Statement?: A relative by consanguinity in the collateral•fine within the fourth degree of. Statement 2: For donor's tax purposes, the children of the first cousin of the donor are
relationship is not a stranger. considered strangers.
Only the first staternent is correct Statements 1 & 2 are false
Only the second statement is correct Statement 1 is true but statement 2 is false
Both statements are correct. ' Statement 1 is false but statement 2 is true
Both statements are incorrect. Statements 1 and 2 are he

Answer: B Answer: C
0 Statement 1 is wrong. Prior to 2018, only donations made to a relative is
subject to §cheduler. rates. Donations to strangers are subject to 30% tax 41, Statement 1: Donations made to'a legally adopted Child shall be considered as donations
on net gifts:tki made to a relative. •
Statement 2 For donor's tax purposes, the children of the first cousin 'of the donor are
37 For donations made prior to 2018, where the donee or beneficiary; is a stranger, the tax considered strangers.
.• payable by the donor shall be: - Only the first statement is correct
30 % of the gross gifts. Only the second statement is correct.,
30% of the net gifts. Both statements are correct.
Based on the graduated rates with the first P 100,600 net gift exempt or30 %. if
Both statements are incorrect.
Based on the graduated rates with the first P100,000 *gift exenipt or 30% of
the net gifts whichever is higher. Answer: C

Answer: B 42. When an indebtedness is cancelled without any. service rendered by the.debtor in favor of
the creditor, the forgiveness of debt will result to: .
38 Statement 1: Regardless of the relationship to the donee, donations made by the donor taxable income
beginning January 1, 2018 shall be subject to 6% donor's tax rate in excess of P250,000 distribution of dividend
exempt gifts. taxable donation
Statement 2: Donations made by or in favorrafjundical persons beginning January 1, taxable estate
2018 shall be subject to 6% donor's tax rate ar excess of P250,000 exemptgifts.
Only the first statement is correct Answer: C
Only the second statement is correct. •
Both statements are correct. 43. If an individual performs services for a creditor who in consideration thereof cancels the
Both statements are incorrect. debt, the cancellation of indebtedness may amount to a
Gift
Answer: C Capital contnkution

458 459
 Daiwris 74 Dotwr's 74
C. Donation inter vivos b. I and II are not correct
d. Payment of income C. Only I is correct
Only II is correct
Answer D
4 Answer: A
44. Which of the following renunciations shall be subject to donor's tax
Renunciation by the surviving spouse of his/her share in the conjugal 47. If the gift is made in properties, it shall be appraised at its: -
partnership or absolute community after the dissolution of the marriage in favor a. Fair market value as of the time the donor's tax retum is filed.
of the heirs of the deceased spouse teeny other persbn(s). . b: Fair market value as of the time of donation:
General renunciation by an heir, including the, surviving spouse, of his or her c. Historical cost at the time the donated 'property was acquired.
share in the hereditary estate left by the decedent. : d. Value in the hands of the donor.
General renunciation by an heir, including the surviving spouse, of his or her
share in the hereditary estate left by the decedent categorically in: favor of C. Answer: 8
identified heir(s) to the exclusion or disadvantage of ether co-heir(s). •
I only c. land lll.only 48. Every donation or grant of gratuitous advantage, direct and indirect, between the spouses
land II only d. I, II and III during the marriage, shall be void, except:
Moderate gifts which the spouses may give each other on the occasion of any family
Answer: C rejoicing.
Donation mortis causa
GUIDE: : Donation propter nuptias which are given before the marriage. •
RENUNCIATIdOF INHERITANCE All the choices are correct exceptions.
Taxableonl/if it.wasmade expresslyei faiorof en heir, to the exclusion or
disadVantage of anotherheir. Otheni/ise, non-taxable gift: C. Answer: D

RENUNCIATION or SHAE'IS THE COMMON PROPERTY 41 A thic minimization scheme which is done by spreading the gift over numerous calendar
Always treated as taxable donation. years to avail of lower tax liability - • •
Spread-out method
45. Which of the following events is not subject to donor's tax? Donation of life insurance
A Filipino citizen donated a parcel of land located in the United States to B, non- Splitting of gift
resident alien. • Void donation •
A resident alien made a gift of P200,000 to his daughter on account marriage.
A non-resident citizen gives his girlfriend a diamond ring worth P100,000 as a Answer: C
birthday gift.
A and B are the onlY heirs af C. A renounces his share ofinheritance in favor of B. 50. The spouses Ma and Pedro wanted to donate a parcel of land to their son Loma who is
getting married in December, 2018: The parcel of land has a zonal valuation of
Answer: D P420,000.00. What is the most efficient mode of donating the property?
The spouses should first donate in 2016 a portion of the property valued at P20,000,
ix
46. A gift that is incomplete because of reserved powers, becomes complete when: then spread the P400,000 equally for 2017, 2018,2019 and 2020.
The donor renounces the power Spread the donation over a period of 5 years by the spouses donating P100,000 each
The right of the donor to exercise the reserved power ceases becauee of the year from 2016 to 2020.
happening of some event or contingency or the fulfillment of some condition, The spouses should each donate a P110,000 portion of the value of the property in 2016
other than because of the donors death ' then each should donate P100,000 in 2017.
a. I and II are correct

460 461
 Dotter's ri,6 /)otters 7;6

d. The spouses should each donate a ploozo

portion of the value of the property in GUIDE - INSUFFICIENT CONSIDERATION
2016, and another P100,000 each in 2017. Then, in 2018, Pedro should donate the Cs SALE OF MOVABLE OR PERSONAL PROPERTY
rerhaining R20,000. Where donor's tax had been paid— not to be included anymore in the
determination of gross estate upon death.
, Answer: C Not yet subjected to donor's tax — to be included in the determination of
SPLITTING OF GIFT- GUIDE: gross estate upon death. •
BEFORE TRAIN LAW.
Applicable only if the donor and the donee are relatives. • SALE OF REAL PROPERTY .
Not applicable to strangers Capital Asset located in the Philippines = 6% CGT only. However, upon '
death of the seller, .abyexcess of ,FMV at the time of death aver
UPON EFFECTIVITY OF TRAIN LAW • consideration received at the time of transfer shall be included.in the gross
Applicable regardless of the relationship of the donor and the donee estateof the decedent.
because the 1st P250,000 donation is exempt. Splitting the gift may Capital Asset located abroad = subject to donor's tax (excess FMV over
therefore eliminate payment of tax or result to a lower tax due. over proceeds)
• Ordinary Asset — Donor's tax
51. Jay sold his car to Jana for R200,000. Jay's car. costs P500,000, and had e fair market
value of P400,000 at the time of sale. What is the tax consequence of the sale? DONATION
There is a taxable gift of P300,000 Personal or Real properly (regardless of classification) — subject to donor's
There is a taxable gift of P200,000 tax.'
The transfer is for insufficient consideration, hence;not subject to doncr's tax , •
The transfer involved'a, personal property, hence, not subject to donors tax 53 Pedro, an individual, sold to his friend .Ana, his residential lot with a market value of
wow'
P1,000,000 for P600,000. Pedro's cost- in the .fot. is R1 Ana is financially capable
, t* Answer: B of buying the lot. What tax should be imposed and collected from Pedro as a result of the
•
transaction?
52. Statement 1: Where a property that has been Subjected.to the .final capital -gains tax is a. Capital gains tax
transferred for less than an adequate and full consideration in money or money's worth, b.. Donor's Tax
the amount by which the fair market value of the properly at the-time of transfer exceeded Real property Tax
the actual consideration shall be deemed gift and shall be included in the computation of Capital gains tax and Donors Tax
gifts made during the calendar year.
Answer: A •
Statement 2: A dohafion inter-vivos by the husband and the Wife jointly during the 0 The real property sold is classified as' capital asset located in the
marriage is a donation of each spouse to the extent of one-half that will require separate Philippines. The applithble tax is CGT. Refer to the guide presented in
computations for two donor's taxes, under whichever property relationship exists between the preceding paragraph.
the spouses..
Statements 1 & 2 are false 54 Pedro, an individual, donated to his friend Ana, his residential lot with a market value of
Statement 1 is true but statement 2 is se R1,000,000. Pedro's cost in the lot is P100,000. Aria is financially capable of buying the
Statement 1 is false but statement 2 is rue lot. What tax should be imposed and collected from Pedro as a result of the transaction?
Statements 1 and 2 are true Capital gains tax
, Donor's Tax
t Answer: C Real property Tax
Capital gains tax and Donor's Tax

Cs Answer B

462 463

55. In 2017, Caroline donated P110,000.00 to her friend ,Vicky who was getting married.
Caro44ie gave no other gift during the calendar year. What is the donors tax implication on
Caroline's donation?
a. Tfip P100,000 portion of the donation is exempt since given in consideration of
Marriage.
A $10,000 portion of the donation is exempt being a donation in consideration of
marriage.
Caroline shall pay a 30% donors tax on the P110,000 donation.
The donation is exempt under the revised donor's tax rate (TRAIN Law).
Answer: C
56: Assume the donation in the preceding number was made in 2018 calendar year, what is
the donor's tax implication on Caroline's donation?
a. The P100,000 portion of the donation is exempt since given inconsideration of
marriage.
AP10,000 portion of the donation is exempt being a donation in consideration of
marriage.
Caroline shall pay donors taX,on the P110,000 donation:
The donation is exem4 under the reviseddonor's tax rate (TRAIN Law).
Answer: D
57. Mr.Putiis a Russian national residing in Ukraine.. He donated some properties located in
the Philippines and curious as to what can be deduct in arrivinoat His rietgifts. subject to
donor's tax. Which of the following cannot be claimed as deduction?-:
Gifts made to or for the use of the National Government
Gifts in favor of an educational institution
C. Both 'a" and "b"
d. Neither "a" nor If
Answer: D
58. One of the following is an incorrect statement regarding dowiji (for donations made prior
to 2018).
The donor must be the natural or adoplg parent of the child.
The donee must be a legitimate, recognized natural or legally adopted child of the
donor.
C. The dowry or gift on account of marriage must be given 1 year before the celebration
of the marriage
d. The exemption allowed is to the extent of the first P10,000.
IJartar's 771(
Answer: C
0 Shall be before marriage or one year after marriage. The interval between ,
the date of marriage and donation is relevant only if the donation was made
after marriage.
59 One of the following is not an exempt gift or a deduction frqm the gross gift of a non-
resident alien donor.
Dowries or gifts made on account of marriage.
Gifts made to or for the use of the National Government or to any of its political
subdivision.
Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited non-govemment organization, trust or
philanthropic organization or research institution or organization.
Encumbrance on the properbidonated, if assumed by the donee.
Answer: A
60 A married couple donated in 2016 a,conjugal property to their son who is getting married.
Which of the following statements is incorrect in connection with the donation?
The husband is the proper claimant of the dowry, being head of the family.
The husband and Wife shall file two separate dOnoes lax returns:
O The husband and the wife can claim P10,000 dowry each. '
6 The gross gift of the husband shall be one-half of the value of the donated conjugal
property.
AnSwer: A
0 For donor's tax purposes, spouses are treated as separate taxpayers.
Consequently, both of them are entitled to dowry for donations made on
account of marriage prior to the effectivity of the TRAIN Law. .
61. Who of the following cannot claim P10,000 exemption on gifts given on account of
marriage?
resident citizen
resident alien
nonresident citizen
ct. nonresident alien
Answer: D
62 One of the following is not an exempt gift or a deduction from the gross gift of a non-
resident alien donor.
Dowries or gifts on account of marriage
Gifts made to or for the use of the National Government or to any political subdivision
465
 Ogiffir ).5 Dotwr's
difts in favor of an educaftonal and/or charitable, religious, cultural or social welfare 66. In 2017, Ronald gave a property with a fair market value of R2,000,000, with unpaid
corporation, institution, - accredited non-government 'organization, trust or mortgage of P200,000 to be paid by him, to his son Daniel and Daniel's bride Enfily, on
philanthropic organization or research institution or organization account of their marriage 15 months ago.
nicumbrance on the property donated, if assumed by the donee.,
The allowable deduction is:
tlAnswer: A P10,000 c. P40,000
P20,000 d. P0
63. Which of the following is not a deduction from the gross gifts?
Unpaid mortgage on the donated property assumed by the donee Answer: D
Unpaid real estate tax on the propefty donated assumed by the donee 0 The mortgage is non-deductible because it was not assumed by any of the donee&
Diminution on the donated property specifically provided byte donor
d. Unpaid donor's tax on the donated praperty,assumed by the.donee 67 The donor's tax payable based on the above problem is:
a. R300,000 c. P1,000,000.
Answer: D P344,000 d. RO
0 For estate tax and income tax purposes estate tax is not a deduction from
the gross estate and income:tax is not a deduction frdm the gross income C. Answer: 8
(except forincome tax abroad by RCs and DCs opting to treat the income Solution:
tax as part of OPEX). Apply the same rule in donation inter-vivos. Donors _ RONALD
tax is not a deduction from the gross gifts.' , Daniel (R) Emily (S)
Gross gifts = P2,000,000/2 P1,000,000 1,000,000
64. At of the following except ire are exempt from gift tax under special laws Unpaid mortgage (non-deductible; assumed by the donor)
a. Donation to Integrategar of the Philippines Dowry (NA; beyond one year after marriage)
;
Net Taxable Gifts , P1,000,000 P1,000,000
P. Donation to Development Academy. of the Philippines -
DONOR's TAX DUE:
C. Donation to Philippine Institute of Certified Public Accountants
Relative (old fable) P44,000‘.
Donation to International Rice Research Institute , • Stranger @ 30% 300,000
TOTAL Donor's Tax Due
tse Answer: C ,
68 The donor's tax payable based on the above problem assuming 2018 taxable year is:
65 All of the following, except one, are exempt from donors tax R300,000 c. P105,000
Donation to the Philippine National Red Cross R344,000 d. R120,000
•Donation to the Development Academy of the Philippines'
Donation directly given to the victims of the typhoon Yolanda C- Answer: C
Donation to the City of Davao for public purpose Solution:
Gross gifts (relative and stranger) P2,000,000
Answer: C Unpaid mortgage (non-deductible; assumed by the donor)
0 . If the donation was not courses) through the-government or to a charitable Dowry (NA; repealed under TRAIN_Law).__
institution, such donation shallbe subject to donor's tax. Net Gifts P2,000,000
Less: Exempt Gilts (250,000)
Net Taxable Gifts P1,750,000
Donor's Tax Rate (TRAIN Law) 6%
Donoes Tax Due P105,000

466 467
 Datter's 771( at/my ite

Use the following data for the next eight (8) questions:
Mr. and Mrs. Mapagbigay, made the fallowing donations during 2017: 70. The gift tax payable of Mr. Mapagbigay as of May 31 assuming taxable year of 2018 is:
Jan.9,5: P8,000 c. P7,200
To Oliver, their legitimate son, on account of marriage last January 20, 2016, car worth P7,000 d. P6,000
P400,000, with P200,000 unpaid mortgage, 'A was assumed by the donee.
.4 •
C. Answer: 13
May 31: Solution:
To John, brother of Mr. Mapagbigay, his capital property worth P200,000 on account of JAN. 25 , Mr. Mrs.
marriage 6 months ago with a condition that the donee -will pay the:donors tax thereon. Gross gifts = P400,000/2 P200,000 200,000
Mortgage assumed by the donee = (P200k x 50%)/2 (50,000) (50,000)
Dowry (NA; not allowed under TRAIN Law)
July 15:
Net Gifts P150,000 P150,000
To Felicity, daughter of Mrs. Mapagbigay by former marriage, on account of her marriage (250,000) (250,000)
Less: Exempt gifts
12 months ago, Mrs. Queen's paraphemal property worth 12100,000. Taxable Net Gifts (P100,000) (P100,000)
Tax Due (old tax table) Exempt Exempt
Aug. 20 . .
Conjugal car of the couple worth P400,000, with P200,000 unpaid•mortgage, 'A assumed MAY 31
by Felicity and P500,000 worth of land to their four sons on account of their graduation, Gross gifts P200,000 '
20% of which was owned by their closest friend Roy, who agreed to donate his share - Add: ()gar net gift 150,000
through a public document. Aggregate net gifts as of May31 P350,000
Less: Exenipt gifts (250,000)
69 The gift tax payable of Mr1Napagbigay as of May 31,.2017 is Aggregate taxable net gifts'as of May 21 P100,000
P8,000 c. P7,200 . x Donor's Tax Rate under TRAIN Law . 6.4
Donors Tax Payable -.-.May 31 - P6,000,
P7,000 ' d, 06,000

4.• Answer: B 71. The gift tax payable of Mrs. Mapagbigay as of JUly15, 2017 is
Solution: P3,600 c. P2,800
JAN, 25 Mr, Mrs. P2,600 4. P4,000 •
Gross gifts = P400,000/2 P260,000 200,000
Mortgage assumed by the donee = (P200k x 50%)/2 (50,000) (50,000) C. Answer: B
Dowry (NA; beyond one year after marriage) - Solution:
Net Taxable Gifts P150,000 P150,000 JULY 15 Mrs.
Tax Due (old tax table) P1,000 P1,000 Gross gifts P/00,000
Dowry (10,000)
MAY 31 Add: Prior net gifts 150,000
Gross gifts ,P200,000 Aggregate Net Gilts P240,000
Add: Prior net gift 15q000
Aggregate net gifts as of May 31 P350,000 Donor's Tax Due P3,600
Less: Payments, Jan. 25
Donor's Tax Due (old tax table) P8,000 Donor's Tax Payable, July 15 P2,500
Less: Donor's Tax Paid, Jan. 25 (1,000)
Donor's Tax Payable - May 31 P7,000 72. The gift tax payable of Mrs. Mapagbigay as of July 15 assuming xable year of 2018 is:
P1,000 c. P15,000
The agreement between the .donor and donee is irrelevant. It is valid between the P2,600 d. PO
two contracting parties, 'mayor, Os not binding on the point of view of the taxing
authority (BIR).

468 469
 Deal'
Daiwir's
Answer: D 74. The gift taxes payable of Mr. and Mrs. Mapagbigay on AugUst 20 assuming taxable year
Solution:
of 2018:
JULY 15 Mrs.
Gross gifts P100,000 R27,000 & R21,000
Dowry NA R21,000 & P27,000
...‘ Add: Prior net gifts 150,000 R21,000 & R21.000
Aggregate Net Gifts P250,000 R6,000 & PO
Less: Exempt gifts (250,000)
Taxable net gift PO Answer: C
Donor's Tax Due Exempt. Solution:
AUG. 20: • - MR MRS.
73. The getaxes payable of Mr. and Mrs. Mapagbigay on August 20.2017: Gross gifts (To Felicity; stranger) P200,000 P200,000
P69,000 & P18800 Additional gifts (to their sons)P500,00Ox 80%12 200,000 200,000
R17,000 & R18,800 Mortgage assumed by the donee = P100,000/2 (Kap (5o,o00)
Add: Prior Net Gifts 350,000 250,000
o. P54,000 & P15,800 .
Aggregate Net Gifts P704000 P600,000
d. R54,000 & R18,800
Less: Exempt Gilts (250,000) (250,000)
Donor's Tax Due P450,000 P350,000
C. Answer: C x Donor's Tax Rate 6% 6%
Donor's Tax Due P27,000 P21,000
Solution: Less: Prior Tax Payments (6,000)
Donor's Tax Payable- Aug. 20, 2018. P21,000 P21,000
AUG. 20 - MR L. Relative. Stranger
Gross gifts (To FeliciO, P200,000 75. The gift tax payable of Roy on June 20,2017 is: -
Mortgage assumed by the donee = P100,000/2 ' ' (50,000)
P30,000 C. P45,000
Additional gifts (to their sons) P500,000 x 80% /2 P200,000
Add: Prior Net Gifts 350,000 •
P 6,000. d. PO
Net Taxable Gifts P550,000 P150,000
30% Answer: A
Donor's Tax Due P17,000 P45,000 Donors Tax Payable = P500,000 x 20% x 30% = P30,000
Less: Prior Tax Payments (8,000) -
Tax Due (old tax table) P9,000 P45,000 76. The gift tax payable of Roy on June 20 assuming taxable year of 2018 is:
TOTAL P54,000 C. P 30,000 c. P45,000
d. P 6,000 d. PO
AUG. 20-MRS. Mrs.
Gross gifts (To Felicity) . 200,000 Answer: D
Mortgage assumed by the donee = P106000/2 (50,000) Solution:
Additional gifts (to their sons) = P500,000 x 80% /2 200,000 Gross gifts P500,000
Add: Prior Net Gifts 240,000 20%
Net Gifts P590,000 Add: Prior net gifts . P100,000
Less: Exempt gifts (250,000)
Donor's Tax Due P19,400 Taxable net gift (P150,0000
Less: Prior Tax Payments (3,600) Donor's Tax Due Exempt
Tax Due (old tax table) P15,800

470 471
 Dawfir's 7aj Deituir's 74,
77. Pedro gave gifts to the following persons on June 12,2017, his 40th birthday: 79. The donor's tax payable on the donation to strangers is -
A second hand car worth P350,000 to Kaskasero, his trusted driver. The donation a. P9,000 c. P60,000 •
ikas made orally. Since then, the driver had taken possession of the property. b P24,000 d. P120,000
To his Mayordoma, Ms. Mercy, a lot with a bungalow theredn, The value of the
property is P1,200,000. The donation provides that it may be revoked anytime at the 4 Answer: D
pleasure of Mikey. 0 Donor's Tax Due (To Kat) = P400,000 x 30% = P120,000
His flower shop worth P700,000 to Hardinero, his gardener. The donation is provided
in his will. 80. The donor's tax payable on the donation to strangers assuming 2018 taxablayear is -
Cash of P100,000 each to his three king-time friends. P9,000 c. P60,000
R24,000 d. R120,000
How much is the donor's tax due on the above donations?
a. P720,000 c. 'P100,000 C. Answer: A
b: P90,000 d.. P3,000 0 Donor's Tax Due (To Kat) = P400,000 - 250,000 x 6% = P9,000

Answer: B 81. The total donor's tax payable in 2017 is -

0 Donor's Tax Due 7 P100,000 3 x30% = P90,000 P66,000 .c. P160,000
o The donation to Kaskasero is not subject to ,Idnor's tax. The donation is void R100,000 d. P220,000
because the required form was not observed. , • ;•
0 The donation to Mercy iso revocable gift; hence, not Subject to donor's tax. , Answer: D
0 The donation to Hardinero is a donation mortis cause, subject lo estate tax instead Taxable Net Gifts to Relatives:
of donor's tat; ,-
' To Juan, Parents, and Guillermo P1,700,000 '
\
78 How much is the donor's tax due on the above donations assuming the taxable year is Tax Due (old tax table) P100,000
2018? Tax Due (strangers) • - 120,000
P720,000 ..c. P100,000 - Total Donor's Tax Due P220,000
P45,000 ,d. 03,000
82. The total donor's tax payable assuming 2018 taxable year is -
C. Answer: P111,000 'o. P160,000
0 Donor's Tax Due = R0100,000 x 3) - 250,0001 x.6% ; P3,000 P126,000 d. P220,000

The next four (4) questions am based on the following information: . C. Answer: A
Pedro, single, donated the following properties on September 21, 2017: • . To Juan, Parents, and Guillermo P1,760,000
To Kat 400,000
Value Property . . Donee.
Less: Tax exempt gifts (250,000)
100,000 - Juan, brother, on account of marriage P1850,000
Taxable Net„Gift
400,000 JeWelries Kat, girlfriend residing in Korea P111,000
Donor's Tax Due (@6%)
1,500.000 House & lot parents,Iver wedding anniversary gift
75,000 Land Bgy. Markyapa, for use of barangay hall 83 Managayat made donations to John and Ara, son and daughter-in-law, on account of
300,000 Car Fe, sisterNonation is revocable marriage, of real property with a fair market value of P2,000,000, but subject to a
50,000 Cash International Rice Research institute •
mortgage of P300,000 that was assumed by the donee. The donor's tax is
100,000 Cash Guillermo, father of the father of his mother c. P278,140 d. P199,400
a. P283,300 b. P289,400
70,000 Motorcycle Kay, niece, donation is embodied in the will
C. Answer: B

472 473
 Dimm-).S. Doiwr's
Solution:
To John (ft) To Are (S) 86. Assuming taxable year of 2018, Um gift tax payable on April 15 should be:
ci
Gross gift P1,000,000 Gross gift P1,000,000 P45,600 c. R44,000
Dowry (10,000) Mortgage (150,000) P35,000 .d. P36,600
Mortgage (150,00)
Net gift P840,000 Net gilts P850,000 Answer: D
Tax Due (Table) P34,400 r Tax Due (30%) P255,000
Total P289,400 SoArtion
Gross Gilt (P710,000 + 300,000) P1,010,000
84. Donors tax credit is not allowed to a donor who is a: Less: Dowry (no longer albwed) NA
Resident citizen Tax exempt gifts (250,000)
Non-resident citizen Taxable Net GB? P760,000
Resident alien
Non-resident alien Donor's Tax Due (@ 6%) P45,600 ,
Less Tax Credit
Actual = P9,000
t Answer: D vs. Limit = 300/760 x P45,600 = P18,000 69,00
Donor's Tex Payable P36,600
Next tour (4) questions are based on theiollowinq data: •
Mr. Nicklaus, resident alien, made the following donations for the year 2016:
April 15 • • 87 The gift tax payable on July 20, 2016 is:
To Hayley, legally adoptectshild on account of marriage last week, Car .worth P710,000 in P40,000 c. P84,000
Phifippines. P36,009 d. P80,000
To Rebekah, his daughter, car in USA Worth P300,000. They paid $200 donor's lei in the
US ($1 - P 45) .0 Answer: A
July 20 - To Sophie niece in Manila, P200,000 worth of personal property.
To Devine, legitimate daughter on account of marriage, July IS, 2013 car in Manila, worth Sobtion
P400,000 but mortgaged for P200,000, 1/2 of whichwas assumed by the donee. Gross Gilt July 20 (P200,000 + 400,000) P600,000
Less: Dowry (more than 1 year ago)
85. The gift tax payable on April 15, 2016 is: Mortgage assumed by the donee (100,000)
P30,800 c. P44,000 Add. Prior Net Gift 1,000,000
P35,000 d. P33,000 Taxable Net Gift ' P1,500,000

Donor's Tax Due (old tax table) P84,000

Answer: B (35,000)
Less: Prwiousy paid donor's tax
Solution
Tax credit
Gross Gilt (P710,000 + 300,000) P1,010,000 Actual = P9,000
Less: Dowry (10:000) - (0,000)
vs. Limit = 300/1500 x P84,000 = P16,800
Taxable Net Gift P1;000,000 P40 000
Donor's Tax Payable
Donor's Tax Due (old tax table) P44,000
Less: Tax Credit 88 Assuming the taxable year is 2018, the gift tax payable on July 20 should be:
Actual = P9,000 .1440.000 c, R84,000
vs. Limit = 300/1,000 x P44,000 = P13,200 (9,000) P30,000 d. P80,000
Donor's Tax Payable P35,000
0 Answer: 8

474 475
 Daitar 771- • Devu/r );:rit r

Sobtion
Gross Gift July 20 (P200,000 + 400,000) P600,000 Limit 1: Deductible
Less: Donny (not a lbwed under TRAIN Law) USA P300/P1,250 x P64,000 P15,360
Akrtgage assumed by the donee (100,000) Paid 25,000
Add: Prior hkt Gill 1,010,000 Allowed P15,360
Totathet Gifts 1,510,000
Less: Tax exempt gifts (250,000) UK: P100/P1,250 xPS4,000 5,120
Taxable Net Gift P1 260 000 • Paid 12,000
Albwed 5,120
Donor's Tax Due (@ 6%) ., P75,600
Less: Previousir paid donols bx (36,600). Italy P350IP1,250 x P64,000 17,920
Tax Credit Paid 10,000
Actual = P9,000 Arbwed 10,000
vs. Unit =300/1260 x P75,600 = P18,000 (9,000) TotabIJMIT 1 P30,480
Donor's Tax Payable P30 000
• Limit 2: 938,400
89. Mr: Riano made the following gifts to his relatives in 2017; P750/P1,250 x P64,000 P38,400
Actual (25 + 12 + 10). 47,000
Phils. USA UK Italy
Gross gift P750,000 P500;000 . P250,000 P500,000 TAX DUE:
Deductions 250,000 . 200,000 • ' 150,000 150,000 Pl P1,000,000 • .P44,000
Tax paid -25,000 12000, -10;000 • p250,000x 8% ' , '.20,000 .
. • X, Donors Tarr Due P64,000 ,
The gift tax due .after tax credit is: -Less: Tex Credit 00,480) . .
P35,600 C. P33,520 Dorres'Tax Paid/ale 'P331520' •
P25,600 d. P39,000 •
90 Assume the taxable year in' the preceding nUmber is 2018, the donor's tax payable after
Answer: C tax credit is:
Soistion P26,000 C;P33,520
Gross Gilt P2,000,000 P246,000 0, P60,000
Less: 950,000
Taxable Net Gift P1,250,000 L• Answer: B
Soblion
Donor's Tax Due (old tax table) Gift P2,000.000
Tax Credit (30,480)" Less: (750,000)
Donor's Tax Payable P33,520 Net Gift P1,250,000
Less: Exempt gift (250,000)
Taxable Net Gift P1,000000

Donor's Tax Due @ 6% P60,000

Tax Credft (34,000)"
Donor's Tax Payable P26,000

476 477
 Demo{ ).; 74, Miter Is 'be

Limn 1: Deductibk 93. For donations made on or after January 1, 201;4the donor's. tax return shall be filed
N.USA- P300/P1,000 x P60,000 P18,000 within:
Paid 25,000 six (6) months after the dale the gift is made. ;
±(1:ined 1);essoo two (2) months after the date the Oft is made
thirty (30) days after the date the gift Is made::
UK P10091,000 x P50,000 6,000 One year after the date the gift is made .14
Paid 12,000
AlbAed
t Answer: C
Itak P350/P1,000 x P60,000 21,000 • 0 Unlike in estate taxation, the filing of donors tax return was not amended
Paid 10,000 under the TRAIN Law.
•
Albxed 10,8100 ...4
7otal4IMIT 1 P34,000 94. Statement I: A donation can be bath ^a girt Of the Toss gift of the donor and a taxable
income to the donee. -
Limit 2: . P45,000 „ 4
P750/P1,000 x P60,000 P45,000.-
Statement 2: A donation may be exempt from donor's tax but not necessarily.a deduction
Actual (25 12 -• JO) , 47,000
from he donor's gross income. „ -)
Orly statement 1 is true
91 In 2017, Jose made the following gifts: . Onh) statement 2-is true
On June 12017, P150,000 to Anton, his son, on account of his -manage celebrated Both statements are true
. on May 1, 2015; , 1.... - , • - . „ .. • - Both statements are false
On July 10, 2017, a 'fierce! of land Worth P180,006 .1; hiS father, subject to the
.1.0t
e
condition that his father would -assume the' mortgage' indebtedness of Jose in the Answer B '1;" n f_f•
•. 'Eme
' dmount of P40,000; • . Properties received from gretuitous transfets are hot ,considered income.
0
On Septembet 30, 2017, pisosmo demi tothis daighter Crane; on account of her . However, income 'receivedrte.-m-74s aie; lease-or sale.shall be treated as
,
. • and anotherieedrfinggift,wilrlh P20,000 on
scheduled manage on October 25, 2017, taxable income.
November 23, 2017. '
How much was the total net gills?
95: Statement I: Only one return shall be filed for several gills (donations) by a donor to the
a P500,000 o. P450,000 ' , different donees on the same.date. •‘,E,
b P460,000 d. P430,000., • •
Statement 2: If the donation involves conjugalkomniimitiproperty, each spouse shall file
Answer: C separate return corresponding to hisTher respeilth share in the conjugal/community
properly..
92. For donations made prior to 2018. the donor's tax return shall be filed within: True, False c. True, True
six (6) months after the date the gift is made. False, True d. False, False
two (2) months after the date the gift ilmade
thirty (30) days after the date the gift iimade. 0, Answer: C
One year after the dale the gift is made 0 There shall be one return per every date of donation regardless of who are
the donees (relatives or strangers or both) and the number of donees.
Answer: C

478 479
 Detter's
96. Statement 1: If on any one date, there is a donation by one donor to his relative and
another one to a stranger, there will be two (2) separate donor's tax return to be Red.
Statement 2: In donors tax, no extension of time for filling the donors tax return
allowed
Stattment 1 is correct, while Statement 2 is wrong
Statement 1 is wrong, while Statement 2 is correct
C. Bothe Statements are correct
d. Both Statements are wrong
Lbiter'i
100. Statement When a donor's tax return was filed and it was found out by the BIR to have
errors which gave rise to .a defidiency donors tax, the donor might be required to pay the
deficiency although he did not posseas or own the property anymore.
Statement 2: The Government is not bound by any agreement between the donor and the
donee that the latter shall pay the donor's tax instead of the former..
a. Statements 1 & 2 are false
b., Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer: B Answer: D

97. Manolo, a resident of Dagupan City donated to Arturo a property in Laoag City. The
donor's tax is P40,000. The deed of donation was signed in the residence of Arturo in
Baguio City. The donors tax return mdst be filed in
Dagupan City ,c. Baguio City ,
b. Laoag City d. Quezon City

Answer: A

98. When the donor has no Ilgal residence in the Philippines, the donors- tax return 'shall be
filed with: • \
Authorized AgentBank,
Revenue District Officer where the donor is domiciled.
C. Revenue Collection Officer where the donee is domiciled.
d. Office of the Commissioner.

Answer: D

99 Statement 1: Husband and wife are considered ,as separate and distinct taxpayers for
purposes of the donor's tax. •
Statement 2: If what was deflated is a conjugal or community property and only the
husband signed the deed of donation, there is only one, donor for donor's tax purposes,
without prejudice to the right of the wife to question the validity of the donation without her
consent pursuant to the pertinent provisions of the Civil Code 'of the Philippines and the
Family Code of the Philippines.
Statements 1 & 2 are false
Statement 1 is true but statement us false
Statement 1 is false but Statement 2 is true
Statements 1 and 2 are true

Answer: D

480 4E11
 vetthale,

SUMMARY,RULES
PART 11 Annual Gross SalesiReceipts Business Tax Applicable

0t4r P&wthq& ri
tr, roper} More than P8M e1.919,5002nor to 20181

P3M and below (P1,919.000 and below prior to 2018)

_ VAT

VAT or OPT
If the taxpayer opts to pay VAT,
it will be irrevocable for 3
KINDS OF PERCENTAGE TAXES: consecutive year's.
Tax on person exempt from value-added tax (Sec. 116); ,
Percentage tax on domestic carriers and keepers of garages (Sec, 117); „
Percentage tax on international carriers (Sec. 118); . . PERCENTAGE TAX ON DOMESTIC CARRIERS AND KEEPERS OF GARAGES
Tax on franchises (Sec. 119); (Sec. 117).
Tax on overseas dispatch, message or conversation. originating • from
Philippines (Sec. 120); Common Carriers - refers to the persons, corporations, firms or
Tax on banks and non-bank financial intermediaries (Sec. 121); accoriations engaged in the business of carrying or transporting passengers
Tax on other non-bank financial intermediaries (Sec. 122); or goods, or both by land for compensation; offering their services to the
Tax on life insurance premiums (Sec. 123); public, and shall include transportation contractors.
Tax on agents of foreign insurance companies (Sec. 124);
Amusement taxes (Sec. 125); Persons Liable:
Tax on winnings (Sec. 126); • Cars for' rent or hire driven by the lessee (rent-attar);
Tax on sale, barter or exchange of shares of stock listed and traded through Transportation contractors, including persons. who transport ,
the local-stock exchange or through initial public offering (Sec. 127).. i
passengers for hire; . . . .
Other domestic carriers by land for-transport of passengers;
Keepers of garages.
TAX ON RERSONS EXEMPTALOM VALUE-ADDED TAX (Sec.'116).
Exempt Persons:
Requisite Owners of bancas
Not a VAT registered person; and Owners of animal-drawn two-wheeled vehicles
The annual gross soles or receipts do not exceed
(P1,9191500 prior to 2018). Formula:
Tax Base
Exempt Person — Rate
Cooperatives • Common Carriers Tax
Beginning Jan. 1, 2018, Self-employed individuals and
professionals availing of the 8% tax on gross sales and/or Tax Base
receipts and other non-operating income under the TRAIN Actual Gross Receipts Whichever is
Law. Minimum Gross Receipts higher'

Fommla: 0
Tax Base SUMMARY RULES
Rate 10k Business Tax
Type of Domestic ! Transporting
Percentage Tax FT& Common Carrier f Applicable
By Land Persons - OPT
:‘ Tax Base ! CargolGoods VAT
Seller of Goods — Gross Sales By Air J Persons, Goods or Cargoes VAT
Seller of Services — Gross Receipts 1 Persons, Goods or Cargoes VAT
By Sea

482 483
 Pet-ea/rt. c riajeto- PerctwLqe Ifteeo
, -
L-/
PERCENTAGE TAX ON INTERNATIONAL CARRIERS (Sec. 118).
0 Persons Liable: TAX ON OVERSEAS DISPATCH, MESSAGE OR CONVERSATION
International Air Carriers ORIGINATING FROM THE PHILIPPINES (Sec. 120).
International Shipping Carriers *a Requisites:
There is an overseas dispatch, message or conversation;
Formula: It originated from the Philippines;
GrOss Receipts PXXX It was made through a telephone, telegraph, telewriter exchange,
Rate 3% wireless and other communication equipment.
Cordnon Carriers Tax PXXX
C. Person Liable — the user of the facility
Gross Receipts — shall include, but shall not be limlted to, the total amount
of money or its equivalent representing the contract, freight/cargo fees, mail Formula:
fees, deposits applied as payments, advance payments and other service Payments for Services PXV
charges and fees tactually or constructively recejved during the taxable Rate • 10%
quarter from cargo and/or mail, originating from the Philippines In a Overseas Communications Tax PX,V
continuous and uninterrupted.fligh4 irrespective of the-place of sale or issue
and the place of payment of the passage documents. (RA No. 10378, RR No. Exempt Persons:
15-2013) Diplomatic Services
International Organizations
SUMMARY RULES News Agencies or Services
Airline/Shipping Co. Business Tax Applicable Government
Domestic Corp. VAT '
TAX ON BANKS AND NON-BANK FINANCIAL INTERMEDIARIES
Resident Foreign Corp. OPT [ I
• • PERFORMING QUASI-BANKING FUNCTIONS,(Sec. 121). •
TAX ON FRANCHISES (Seca19).•
Banks or Banking institutions — refer to those entities as defined under
4. Persons Liable: \
Section 3 of Republic Act No. 8791, -otherwise known as the General Barilting
Franchises on Gas and Water Utilities
Franchises on Radio and/ or Television Broadcatting Companies Law of 2000, or more specifically, to entities engaged in the lending of funds
obtained in the form of deposits. The term "banks" or "banking institutions"
Requisites for franchises on Radio and/ or Television Broadcasting are synonymous and interchangeable [and specifically include qniversal
banks, commercial banks, thrift banks (savings and mortgage banks, stock
Companies:
savings and loan associations, and private development banks), cooperative
Not a VAT regidtered person; and
banks, rural banks, Islamic banks and other classifications of banks as may
Annual gross receipts of the preceding year do not exceed P10,000,000.
be determined by the Monetary Board of the-BSP.IRR No. 8-08)
SUMMARY RULES APPLICABLE TO RADIO AND/OR TELEVISION BROADCASTING
COMPANIES Non-bank Financial Intermediaries — refer to persons or entities whose
Annual Gross Receipts Business Tax Applicable principal function include the lending, investing or placement of funds or
More than P10 00(000 P.Y. VAT eVidences of indebtedness or equity deposited with them, acquired by them
P10,000,000 and below P.Y. VAT er OPT or otherwise coursed through them, either for their own account or for the
If the taxpayer opts to pay VAT, it will be account of others. This includes all entities regularly engaged in the lending
irrevocable. of funds or purchasing of receivables or other -obligations with funds
obtained from the public through the issuance, endorsement or acceptance
Formula: of debt instruments of any kind for their own account, or through the
Gross Receipts PkNot issuance of certificates, or of repurchase agreements, whether any of these
Rate xoto means of obtaining funds from the public is done on a regular basis or only
Franchise Tax PX>C( occasionally. (RR No. 8-08)

4. Rate: Quasi-banking Functions — shall refer to the borrowing of funds from

Gas and Water — 2% twenty (20) or more personal or corporate lenders at any one time, through
Radio and/or Television Broadcasting Companies — the issuance, endorsement or acceptance- of debt instruments of any kind,

484 485
 oren fit 74,V.ed-
•
other than deposits, for the borrower's own account or through the issuance if any tax on such premiums is imposed by the foreign country where
of certificates of assignment or similar instruments, with letourse, or of the original insurance has been issued or perfected;
repurchase agreements for purposes of relending or purchasing receivables Portion of the premiums collected or received by the insurance
or other similar obligations. Provided, however, that commercial, industrial companies or variable contracts in excess of the arnotints necessary to
and other non-financial companies, which 'borrows funds through any of insure the lives of the variable contract workers (as defined in Sec.
thy.se means for the limfted purpose of financing their own needs or the 232(2) of Presidential Decree No. 612).
needs if their agents or dealers, shall not be considered as performing quasi- Premium collected by a purely cooperative company or association..
banking functions.
TAX ON AGENTS OF FOREIGN INSURANCE COMPANIES (Sec. .124).
,GRT OF BANKS & NON-BANK FINANCIAL INSTITUTIONS .- - *- O Persons Liable:
PERFORMING QUASI-BANKING OPERATIONS = Fire, Marine or Miscellaneous Agents. of Non-resident Foreign
Gross receipts or income derived from Tax Rate Corporations engaged in insurance business; and
Interest, commissions and discounts from tending activities and Owners of property directly- obtaining insurance from Non-resident
Financial leasing: Foreign Corporations engaged in insurance business.
Remaining maturity period in 5 years or less
Remaining maturity period is more than 5 years Agents of Non-resident Foreign Corporations engaged in insurance
Dividends and equity shares in net income of subsidiaries .
business
Royalties, rentals of property, real or personal, profits from exchange
Formula:
and all other items treated as gross income under the Tax Code
Premiums Collected
Net trading gains within the taxable year on foreign currency, debts
securities derivative and other similar financial instruments 7% Rate 4% (twice the rate of Sec. 123)
Premiums Tax PXXX
r..GRT ON OTHER NON-BANK FINANCIAL INSTITUTIONS NOT
.PERFORMING QUASI-BANKING OPERATIONS Owners of property directly. obtaining insurance-to Non-resident
Gross receipts or income derived froth • ' 'A Tax Rate, Foreign Corporation engaged in insurance business
Interest, commissions, discounts, and all other items treated as Formula:
.grosslincome under the** code ' -, • :5% - Premium Payments PXXX •
Rate 5%
Interest, commissions and discounts froth Lending
, activities and • Premiums Tax P)00(
Financial leasing: . • •
, (a) Remaining maturity period in 5 years qrless 5% AMUSEMENT TAXES (Sec. 125).
b Remainin. Maul .eriod is more than.5. 2'ars 1% Persons Liable — Proprietor, lessee or operator of cockpits, cabarets, .night
or day clubs, boxing exhibitions, professionaltasketbalf games, Jai-Alai and
TAX ON LIFE INSURANCE PREMIUMS (Sec. 123) racetracks. '"
Formula:
Premiums Collected MOO( Formula:
Rate . * 2% Gross Receipts PXX)(
Premiums Tax PX)0( Rate X0/0
Amusement Tax MOCX
O The following premiums are exempt from tax:
Premiums refund within six (6). months after payment on account of Gross receipts - embraces all the receipts (such as from television, radio
rejection of risk or returned fos.9ther reason to a person paid the tax. arid motion picture rights, if any) of the proprietor, lessee or operator of the
premiums paid upon re-issuan* by a company that has already paid amusement places.
the tax
Premiums collected or received by any branch of a domestic Rates:
corporation, firm, or association doing business outside the Philippines Amusement Places Tax Rate
on account of any life insurance of the insured who is a non-resident, if Place for Boxing Exhibition
any tax on such premium is imposed by the foreign country wherethe Place for professional Basketball games
branch is established. Cockpits, Cabarets, Night or Day Clubs
4) Premiums collected are received on account of any reinsurance, if the Jai-alai and Racetracks
insured, in case of personal insurance, resides outside the Philippines,

486 , 487
 Percy/that& ?ti (n Pcrctw ji& rlars
*Requisites for Exemption of Boxing Exhibitions: Tax on Shares of Stock Sold or Exchanged through Initial Public
World or Oriental Championships is at stake; Offering
One of the contenders is a citizen of the Philippines; and
Promoted by citizens of the Philippines or by a . corporation or Requisites:
association at least sixty percent (60%) of the capital of which is Sale is made through the LSE; and
liwned by such citizen. It is an initial public offering of a "dosely held corporation".

TAX ON WINNINGS (Sec. 126). Formula:

PersonVLiable: Gross Selling Price PXXX
- 1) Owners of the winning horse; and Rate Xolo
2) Bettor in a horse race or jai-alai Stock Transaction Tax PX)0(

Owner of the winning horse Rate:

Formula: RATE WILL DEPEND ON THIS RATIO
Prize/Winnings PX)0( (SHARES SOLD/OUTSTANDING SHARES AFTER THE SALq____
Rate 10% ,RATIO ___ ____
Tax on Winnings PXXX 25% and below . _1 4%
More than 25% but not more than 33 10% 2% -4
C. Bettor in a horse race or jai-alai More than 33 1130/0 1%
Gross Winnings PXXX
Less: Cost of the Winning Ticket (X)0Q "Initial Public Offering (IP0)" refers to a public offering of Shares of stock
Net Winnings P)O0( made for the first. time in the Local Stock Exchange.
.Rate .X0/0'
Tax on Winnings MC< • "Closell Held Corporation" means any corporation at least 50% in value of
the outstanding capital stock or at least 50% of the totalcombined voting
Rate: \• - power o(all classes of stock entitled to vote is owned directly or indirectlYby

1) Ordinary Winnings — "10% or fornot more than 20 indit4dtial§.. •

2), Special Winnings
(Double, Forecast, Quihella, Trifecta)-- 4% Person Liable:
Primary Offering — Issuing Corporation
TAX ON STOCKS TRANSACTIONS (Sec. 127). Secondary Offering — Seller
• • Kinds of Stock Transaction Tax:
Tax on Sale, Barter or Exchange of Shares of Stok Listed and Traded "Primary Offering" refers to the original sale made to the investing public by
through the Local Stock Exchange - the issuer corperation of its unissued Shares of Stock.
Tax on Shares of Stock Sold or Exchanged through qnitial Public
Offering "Secondary Offering" refers to an offer for sale to the investing public by the
existing shareholders of their securities which is conducted during an IPO or
Tax on Sale, Barter or Exchange of Shares of Stock Listed and a follow-on/follow-through Offering.
Traded through the Local Stock Exchange
Requisites: • "Po/low-on/Follow-through Offering of Shares" refers to an offering of shares
Seller is not a dealer in securities; gid to the investing public subsequent to-an- IPO. - -
Shares sold is listed and traded throLgh the LSE.
I '
Formula:
Gross Selling Price PX)0C
x Rate .005 prior to TRAIN Law, .006 TRAIN Law
Stock Transaction Tax PX)0(

488 489
 n,
Percotth ad:xi Percottege, Itzec

RETURN AND PAYMENTS OF PERCENTAGE TAXES

Choose the letter of the correct answer

Section I PRIOR TO TRAIN LAW TRAIN LAW Principles

116 Monthly; 20 days end of the month 1. Statement 1: Other percentage taxes are indirect taxes lhat can be -passed on by person
117 Monthly; 20 days end of the month required to pay to another person•whO shall bear the burden of paying The tax.
118 Monthly; 20 days end of the month Statement 2: Persons and transactions that are 'subject to the elherpercentage taxes are
119 Monthly; 20 days end of the month no longer subject to the value-added tax butmay bisubject to excise tax.
Only statement 115 correct
120 QUARTERLY; 20 days end of the Only statement 2 is correct
quarter QUARTERLY . Both statements are correct
Both statements are incorrect
121 Monthly; 20 days end of the MOnth
122 Monthly; 20 days end of the month 25 Days end of Answer: C
123 Monthly; 20 days end of the month
124 Monthly; 20 days end of the month the after
2 Statement VAT-exempt taxpayers shan be Subject to other percentage taxes.
QUARTERLY; 20 days end of the Statement 2. A taxpayer who is subject percentage tax on his gross receipt will also be
125
quarter subject to income tax on his het income. -
Only statement 1 is correct
126 20 days from the date the tax was Only statement 2 is Correct
deducted '1„. . • • Both statements are correct
Both statements are incorrect
127A 5 banking. days from date of 5 banking days naM gate of
collection collection Answer: B

. 127 B Primary Offering-. 30 days from
date oflisting in the LSE -
127 B Secondary Offering - 5 banking
days from date of collection
Primary Offering -30 days
from date of listing In the
LSE
Secondary Offering -
banking days from date of
collection
3. Which of the following is not correct? The percentage.tax:{
Is a tax on sale of servites.
May be imposed on sale of goods.
May be imposed together with the value-added tax..
May be imposed together with the excise tax. • '
Answer: C

4. VVhich of the following statement is not correct about percentage tax? .

a It is a business tax.
b. It is a transfer tax.
e. It is an ad valorem tax.
d. It is not a progressive lax.

Answer: B
0 Transfer tax is applicable to gratuitous transfers (donation or inheritance)
while percentage tax and vat are applicable to onerous taxes.

490 491
 Percenfr Percotth, 7-
5. VVhich statementis wrong? Refer to the explanation in the preceding number.
Percentage taxes are basically on sales of services. 0 Salle of Poultry Feeds is vat exempt, but the reason for vat exemption is
Percentage taxes are paid quarterly. not simply because the seller's gross sales did not exceed the vat
Percentage taxes are not allowed by law to be shifted to the customers or clients. threshold of P3,000;000 (previously P1,919,500) but because poultry
O. M isolated transaction not in the course of business will-not result in a liability for a feeds are intended for poultry animals.
peitentage tax 0 SIMPLE GUIDE: If the transaction is in the list of vat exempt sales or
transaction AND not in the fist of transactions subject to vat, such
;.4pswer: C transaction is exempt both from Vat and OPT

Section 116- OPT on vat exempt sales and transactions 9. One of the following is subject to three percent (3%) percentage tax
6. A seller of agricultural food products is vat-exempt. His annual gross sales in 2018 a. Establishments whose annual gross sales or receipts exceed P3,006,000 and who
amounted to P3,000,000. To what business tax is he liable? are VAT registered.
3% tax on vat-exempt persons b Businesses whose annual gross sales or receipts exceed P3,000,000 and who are
12% value-added tax not VAT registered.
3% common carriers tax c VAT registered establishments whose annual gross sales or receipts do not
d none of the above exceed P3,000,000
d Estabtishments whose annual gross sales or receipts do not exceed P3,000,000
Answer: D and who are not VAT registered.

7. Which of the following is subject to 3% percentage tax under Section 116 of the Tax 4 Answer: D
Code?
a Fruit dealer whose gross receipts for 2018 amounted to P2800,000 only, 10 Floyd (self-employed) is a non-vat registered taxpayer .who operates -a convenience
M individual taxpayer whose gross sales for the year amounted to P100,000. store. The following were proVided for 2018:
School bus operator Milne gross receipts for 2018 amounted to P2500,000 Sales of processed food items . p280,000
d. None of the above Sales of non-food items 220,000
Purchases of processed food items 100,000
,1• Answer: D Purchases of non-food items 80,000
Section 116 shall apply if: . Salaries of helpers 48,000
1. The transaction is vat exempt and the 'reason for vat-exemption is .
simply because the taxpayer's gross sales or receipts did not exceed The percentage tax (tax due) is (above amounts are net of taxes)
the vat threshold of P3M (previously P1,919,500); and P15,000 c. P50,000
2 The taxpayer is not vat registered. P32,000 d. P27,200

i() If the reason for vat exemption is not because of #s 1 and 2 above, the Answer: A
transaction is not subject to Section 116. 0 The taxpayer is non-vat registered + his gross sales did not exceed the
vat threshold + the transactions are not exempt from vat. Consequently,
0 The taxpayer in item 'B' is known-as Marginal Income Earner (MIE), an he is subject to 3% OPT under Section 116 of the Tax Code, as amended.
individual whose gross sales or receipts during the year is not more than 0 OPT = (P280,000 + 220,000) x 3% pispoo
P100,000. MIE is not subject t4business tax (Vat and OPT).
11 Assume Floyd opted to be taxed at 8% on his gross sales and receipts, his applicable
8. The taxpayer is a trader of poultry feeds. Determine his applicable business tax. business tax is:
Subject to 12% vat Subject to 12% vat
Vat exempt but subject to 3% OPT under Section 116 Vat exempt but subject to 3% OPT under Section 116
12% valor 3% OPT, at his option 12% vat or 3% OPT, at his option
Exempt from 12% vat and OPT None of the above

4 Answer: Answer: D

492 493
 j

Percothd 0 r1etj6es
Pentaldie/ f "en-C
,
0 The 8% optional tax under TRAIN Law is in LIEU of Graduated income tax Section 117- Common Carriers Tax on DomesticCammon Carriers
and Section 116 of the Tax Code. Obviously, if the taxpayer is subject to
Section 116, he is no longer subject to vat 16. cTali
rryi
srnegferosf to apns
ers
poorns
lin, corporations, firms or
' j. in me business of
g passengers or goods7,6snrcitc
atim
°7 by
emaged
land, water, oaritra,tifoort.:.
12. Ma has' the following data for 2018 the taxable year compensation, offering their .serviCes to the Paoic zand '- shall include
contractors. ,
Grttss sales P2,850,000
Collections 1,420,000 Common carriers;
Dealers in securities;
ft Ms. Ma is a seller of goods, her business tax for the year should be Lencting investors; •
P42,600 OPT c. P170,400 vat • Franchise grantees.
P85,500.0PT • d. P342,000 vat
G Answer: A ,
Answer B .
0 OPT = P2,850,000 x 3% =.1085,500 17. A person whose businesSis to,keepautontobiles for hire oekeeplheni stored for use or
,
0 The basis of business tax for sale of goods is gross sales. order. , .• -•-
Keepers of garage: .•
13., If Ms. Ma is a seller of service, her business tax for the year should be Common carrier •'
a. P42,600 OPT c. P170:400 vat Taxicab operator
b: P85,500 OPT • d. P342,000 vat Tourist bus operator • ,
"
G Answer A Answer: A .
.•
0 OPT = P1,420r000 x 3% = P42,600
0 ' The basis of usiness tax for sale of service is-gross receipts or collection 18. 'A keeper of garage whose grosileceiptslor zula -19frflaid:P.Moccobb is subject to:
Value-added tax .•
Garage sales lax
14. If Ma is vat registered
Commoncarriers tax 4.•••
She is subject to 12% vat
Franchise tax.
She is subject to'OPT under Sedan 116
She is subject to 12% Val or 3% OPT, at her option • -
C Answer: C • ft, ta:
She is exempt from OPT under Section 116 if She opted.to be taxed at 8%
• 0 A keeper Or garage is5SUbject to common'dirtier'sreg. dI thee.
C:
amount of its gross receipts..
G Answer: A
0 The 8% optional tax is not appliCable to vat registered taxpayers.
19. Which of the following is subject to the 3comm0n carrier's tax? '
Transportation contractors on theityansport of goods or cargoes.
15. If Ma is a taxi operator Common carriers by air and sea relative to their transport of Passengers
She is subject to 12% vat
- d. Ownerssotca anaimal-drawn
i by hvo.whaeled yehicle.
b. She is subject to common carrier's lax under Section 117
Domestic carriers land for the ifatreort of passengers.
c. She is subject to 12% vat or 3% common carrier's tax, at her option
d. She is exempt from OPT if is she gated to be taxed at 8%
, G Answer. D
G Answer: B The gross receipts of conimoicianiers derived from they incoming and
20 Statement t
0 The 8% optional tax is not applicable to taxpayers who are subject to OPT freight shall be subject' to the local laie,S imposed under the Local Government
• oTuaxtgoing
code
other than Section 116 of the Tax Code, as amended.
.

Statement 2: The 3% common carriers tax i6lbisethon

:the .aCtuarrrgiiatterlysgross ,
.. <: .. .
receipts or minimum queried)/ receipt whichever is laseer-...';. E. ..
Only statement 1 is correct i''
Only statement 2 is correct

494 495
 - Pet-coda e Wezeo-
c,
Pet?4
Both statements are correct
Both statements are incorrect 25 Assume the annual gross receipts in the preceding number exceeded the revised vat
threshold of P3,000,000 during 2018. To what business taxes is it liable?
Answer: D 12% value-added tax
3% Ofrr under Section 116
21 A non-tet registered transportation contractor is engaged in the trantportof passengers, 3% common carrier's tax under Section 117
goods and cargoes. What business taxes is he liable? Not subject to business tax.
12% falue-added tax;
3%tommon carrier's tax; Answer: A
3% tax on VAT-exempt persons on gross receipts from transport of goods and
cargoes and 3% common carriers tax on gross. receipts from transport of 26. A domestic carrier by sea is engaged in the transport of passengers, goods and cargoes'.
passengers; It is not VAT-registered and its annual grosS receipts do not exceed P3,000,000 during
12% VAT on gross receipts from transport of goods and cargoes and 3% common 2018. To what business taxes is it liable?
carrier's tax on gross receipts from transport of passengers. a 12% value-added tax
3% OPT under Sechon 116
Answer: C 3% common carriers tax under Section 117
Not subject to business tax.
22. Using the same information in the preceding number, except that he is a vat-registered.
What business taxes is he liable to? ' Answer: B
12% value-added tax;
3% common carriers tax; • 27. Assume the annual gross receipts in the preceding number exceeded the revised vat
3% tax on VAT-exempt persons on gross receipts from transport of goods and threshold of P3,000,000 during 2018. TO what business taxes is it liable? .
cargoes and 3% common carriers tax on gross receipts 'from transport of a. 12% value-added tax
passengers. b 3% OPT under Section 116
12% VAT on gross receipts from transport of goods and cargoes and 3% common 3% common carriers tax under Section 117
carriers tax on gross receipt from transport of passengers.' Not subject to business tax..

Answer: D Answer A

23. One of the following statements is wrong: Operators of transport facilities are 28. A domestic carrier by .land is engaged in the transport of passengers. It is not VAT-
a.. Subject to the value-added tax on gross receipts from transporting passengers. registered and its annual gross receipts do not exceed P3,000,000 during 2018. To what
Subject to the value-added tax on gross receipts from transporting goods and business taxes is it liable?
cargoes. a 12% value-added lax
Subject to percentage tax oh gross receipts from transporting passengers. 3% OPT under Section 116
Subject to the value-added tax on gross receipts from renting out its transportation 3% common carriers tax under Section 117
facilities. Not subject to business tax.

Answer: A Answer: C

24. A domestic carrier by land is engaged in the -mood of goods. It is not VAT-registered 29 Assume the annual gross receipts in the preceding number exceeded the revised vat
and its annual gross receipts do not exceed P8,000,000 during 2018. To what business threshold of P3,000000 during 2018. To what business taxes is it liable?
taxes is it liable? 12% value-added tax
12% value-added tax 3% OPT under Section 116
3% OPT under Section 116 - 3% common carrier's tax under Section 117
3% common carrier's tax under Section 117 Not subject to business tax.
Not subject to business tax.
Answer: C
Answer: B

496 497
 Parottet e, kiees
SIMPLE GUIDE:
0 If it involves transport of passengers by land by domestic carriers, it is
subject to Common Carrier's Tax under Section 117 of the Tax Code,
regardless of the amount of annual gross receipts. Otherwise, vat On
general, but it may also be subject to Section 116 if the taxpayer is non-
\ vat registered + the annual gross receipts do not exceed the vat
threshold)
.t,
30‘. VVhich °Me following is subject to the 3% common carrier's tax?
Transportation contractors on their transport of goods or cargoes.
Common carriers by air and sea relative to their transport of passengers.
Owners of animal-drawn two-wheeled vehicle.
Domestic carriers by land for the transport of passengers.
Answer: D
'A' and '8' are subject to valwhile is exempt frombusiness lax.
31. Maharlika Airlines, a domestic corporation 'plying domestie ratites, had the 'following
gross receipts for the month ended April 2018: carriage of passenger, P4,500,000;
carriage of cargo, P7,000,000. The correct amount of business tax for the month ended •
April 2017 is:
120 . c. 12345,000
R135,000 d. R1,380,000
tr, Answer:Li
0 Business Tax (vat) = (P4.5M + P7M)x 12% = P1,380,000 • e Answer: B; Choices 'a, c and cr are subject to vat.
0 Domestic airline.companies are not subject to common carrier's tax
Use the following data for the next (2) two gUestions:.
Rianne is an operator of ten (10) biges with' rOutes from Manila to Subic arid is likewise a
transportation contractor with three (3) freight trucks. For the taxable year 2018, he reported
gross receipts from his bus operations of P36,000,000. His gross receipts, however, from his
freight of goods or cargoes amounted only to P800,008 for the year. • • received.
32. Assuming Rianne is non-vat registered, how much is his total business tax due?
P1,080,000 c. P1,176,000
P1,104,000 d. P4,416,000
Per
. cozy Litres
Common carrier's tax = P36M x 3% P1,080,000
VAT= P800,000 x 12% 96,000
Total business taxes 1,/ 76 000
34. Pedro is a jeepney operator. He is also engaged in the business of leasing residential
units. His gross receipts from his jeepney operation amounted to P5,000,000 for the
year. The monthly rental of the residential units is P14,000 with a total annual gross
receipts of P3,500,000 for 2018. Which of the following is correct?
Pedro is required to register under the vat system
Pedro may apply for optional vat registration
Pedro is exempt from business and income tax
None of the above
Answer: D
0 He is not required to register under the vat system nor wily for optional
vat registration because his business activities are not subject to vat.
0 He is not exempt from business tax. He is subject to common carrier's tax
under Section 117 of the Tax Code.
35. All of the following, except one, are not subject to common carrier's tax
owner of a parking lot/building
rent-a-car companies
common carriers engaged in carriage of goods or cargo
domestic airline companies •
36 lsarog is a vat registered common carrier with passenger buses and cargo trucks. For
the month of June 2018, it had the following data on revenues and receipts, taxes not
included: •
For transporting passengers, gross revenues and receipts of P330,000.
For transporting cargoes, gross revenues of P220,000, of Which P200,000 was
For renting out to the MMDA its towing trucks, gross' receipts of P50,000,
representing P10,000 from gross revenue of the quarter ending March 31 and
P40,000 for the month of June.

Answer: B The percentage tax is:

Common earner's tax = P36M x 3‘
9t P1,080,000 P1,500 c. P15,900
Section 116 = P800,000 x 3% 4. 24,000 P9,900 d. P17,400
Total bushes& taxes 1,104,000
e Answer: B
33. Assuming Rianne is vat registered, how much is his total business tax due? 0 Common Carrier's Tax under Section 117: = P330,000 x 3% = P9,900
P1,080,000 c. P1,176,000 0 The basis of business tax if from sale or service is collections or receipts,
.
P1,104,000 d. P4416,000 regardless of when the it was earned.

.0, Answer: 8

498 499
 •
-) ,eic
Parettlet e, (-tr. Percouy& riettes
Solution:
37. The value added tax is: OPT (refer to the preceding number) P10,770
a P24,000 • c P28,800 VAT:
b. P30,000 d. P25,000 Carriage of goods (P18,000+ 13,500) 31,500
Cargo truck 45,000
Okt Answer: B Sea vessel 250,000
() 12% Vat = (P200,000 + 50,000) x 12% = P30,000 Total P326,500
12% 39,180 •
.t
Total Business Taxes P49,950
38 Milagroaines, a VAT-registered person, has the following gross receipts in February:
Bus 1 (carriage of goods, P18,000) 100,000 .
Bus 2 (carriage of goods, P13,500) 165,000 40. is a pool of land transportation vehicles whose accessibility to the riding
Taxi 90,000 public is facilitated through the use of common point of contact which may be in the form
Jeepney 35,500 of text, telephone and/or cellular calls, email, mobile applications or by other means.
Cargo truck 45,000 Domestic common carriers
Sea vessel 250,000 • International carriers .
Transportation network vehicle services (TNVS)
Additional Information: Partners
Salaries of drivers and conductor 125,000 .
V. Cost of oil and gasoline 175,000 Answer: C

During the month, Bus 1 was bumped by another bus owneckby Mandaon Lines and 41 The owner(s) of the vehicles, other than the TNVS, used in transporting passengers
paid Milagros Lines P120,000 for the damage. and/or goods in TNVS, shall be referred herein as
Domestic common carriers
The percentage tax due on Milagros Line in February • International carriers
• c. P11,715 Transportation network vehicle services (TNVS)
P10,770
P14,370 d. nil . Partners

'Answer: D
Answer:- A
Solution:
Bus 1 = P100,000- 18,000 P82,000 42 Statement 1: Under RMC 70-2015, transport network vehicle services, such as but not
151,500 limited to the likes of UBER, GRAB TAXI, their Partners/suppliers and Similar
Bus 2 = P165,000- 13,500
Taxi 90,000- arrangements, Which are holders of a valid and current Certificate of Public Convenience
35,500 for the transport of passengers by land, shall be subject to 3% common carriers tax
Jeepney
P359,000 under Sec. 117.
Total
3% Statement 2. Transport network vehicle services, such as but not limited to the fikes,of
USER, GRAB TAXI, their Partners/suppliers and similar arrangements, which are not
OPT CCT P10,770
holders of a valid and current Certificate of Public Convenience for the transport of
passengers by land, shall also be subject to 3% comlnon carriers tax under Sec. 117.
0 Ignore income and expenses for business taxation purposes.
Only statement 1 is correct
Only statement 2 is correct
39. The total business taxes in the preceding num er should bef
Both statements are correct
P10,770 c. P49,950
Both statements are incorrect
P39,180 et nil
Answer: A
Answer: C
0 Statement 2- shall be subject to 12% vat.

500 501
 Percet 74,e;
Section 118— Common Carrier's Tax on International Carriers 2,15. Determine the carrier that is subject to the Percentage Tax: .
a Resident foreign corporation operating as an international shipping carrier
43 The 3% percentage tax on international carrier is imposed upon: Non-resident foreign corporation operating as an international air carrier'
International air carrier' International shipping Domestic corporation with international flights
doing business in the Philippines doing business in the Philippines Domestic corporation with international voyages
a.\ Yes Yes
No No Answer: A
Yes No (), Nonresident foreign corporations operating as international carriers are
No Yes not subject to CCT under Section 118 of the Tax Code because they are
not operating in the Philippines.
t Answer: A 0 Domestic carriers on their international flights and shipments originating in
in the Philippines are subject to 0% vat, not CCT.
44 Statement 1: Domestic common carriers are subject to 0% on its flight originating from
abroad to the Philippines. 46 Statement 1: International air carriers and international shipping carriers shall not be
Statement 2: Resident international carriers are subject to the 0% VAT on its gross subject to 12% value added tax but to 3% common carrier's tax based on gross receipts
Philippine billings on flight originating from the Philippines to a foreign destination. derived from their transport of passengers and goods from Philippines to other countries.
Statement 1 Statement 2 Statement 2: In cases when the Gross Philippines Billings Tax of 2.5% for international
a True True carriers Is not applicable (i.e., tax exempt based on reciprocity or treaty), the common
True False carrier's tax under Section 118 of the NIRC, as amended, shall still apply.
False False A. B. C. D.
False True Statement 1 True True False False
Statement 2 True False True False •
Answer: C
GUIDE: k
4* Answer: C
Dothestic Common Carriers • 0 Statement 1: Gross receipts from transport operations shall beexcluded.
0 On their transport of passengers by land a- Sec in
47. Statement 1: Banks are subject to the VAT on its interest income. --
4 On their transport of goods or cargoes including Mai; hy land 12% vat • •
0 On their domestic transport from and to the Philippines of passengers, Statement 2: Resident international carriers are subject to the 0% VAT on its gross
goods/cargoes, and mails by airor by sea = 12% vat. ' Philippine billings on flight originating from the Philippines to a foreign destination.
0 On their international flights and shipments dnginafing from the Philippines Statement 1 Statement 2
to a foreign country = 0% vat True True
0 On their international flights and shipments originating from abroad to the True False
Philippines = exempt from business tax: c. False
d. True
International Carriers
0 On their transport of passehgers on their international fights and + Answer: C
shipments originating from thyhilippines to a foreign country = exempt
from business tax 48 The Republic of Korea, as an act Or gOodili, doeS not impose business taxes to
0 On their transport of goods/carves and mails on their international flights Philippine carriers. Korean Air is operating in the Philippines having two flights a week. If
you were engaged by Korean air as its tax consultant and asked you whether it is liable
and shipments originating from the Philippines to a fcireign Country =
Section 118; Common Carriers tax on International Carriers. to percentage tax, which of the following will be your advice?
Korean Air is liable to percentage tax based.on gross receipts from
0 On their intemational flights and shipments originating from abroad to the
Philippines = exempt from businees tax. passengers, goods, cargoes and mails.
Korean Air is liable to percentage tax based on gross receipts from passengers
only.

502 503
 ri j
Perceitth //acres Perratut e• t etcr4;

Korean Airs liable to percentage tax based on gross receipts from goods, 52 Statement 1: Radio and/or television broadcasting whose gross receipts in the preceding
year did not exceed P10,000,000 shall have an option to be registered as value-added
cargoes and mails only.
taxpayer.
Korean air is not liable .to percentage based on the principle of reciprocity.
Statement 2: Once a radio and/or television broadcasting franchise grantees registered
as value-added taxpayer, the registration shall not be revoked.
a Answer: C Both statements are correct.
•
0, Unlike in income taxation for International carriers, reciprocity is not applicable Both statements are incorrect.
to Section 118 (common carrier's tax on international carriers) of the Tax
Only the first statement is correct.
, Code.
Only the second statement is correct.
Section 119- Franchise Tax
Answer: A
49. A right or Privilege granted by the State to a person, individual or corporation, to operate
a public utility such as radio broadcasting, television station, 'electric fight system,
53. A franchisee, had the following data on revenues and receivables in 2017:
telephone company, gas, and water utilities. Revenues AR, beg. , AR, end
Quarter ended, March 31, 2017
Franchise c. Dealers in securities P4,000,000 • P600,000 P800,000
Covered by the franchise
Common carriers d. Lending investors • • 160000
Not covered by the franchise 1,200,000

.Answer: A
If the franchisee is generating and selling electricity, the correct amount of business
taxis:
50 Statement 1: A franchise is a privilege to serve the public acquired' by spedal grants
P200,800 c. P580,800
from private organizations. d. P238,800
P456,000
Statement 2, There are franchise holders whose gross receipts are subject to 12% vat
even if not vat registered. •
Answer: C
Both statements are correct.
Solution.: .
Both statements arnconect.
Covered by the franchise:
Only the•first statement is correct. P4,000,000
Revenues
Only the second statement is correct. 600,000
Add: AR, beg.
Less: AR, end - (800,000)
Answer: 0• P3,800,000
= Collections
•
Not Covered by the franchise:
51 Which Of the following franchise grantees is subject to the franchise tax?
Revenues P1,200,000
Franchise on radio and/or television broadcasting companies the annual gross
Add: AR, beg.
receipts in the preceding year exceed P10,000,000. (160,000)
Less: AR, end
Franchise on gas and water utilities. P1,040,000
Franchise on toll road operations. = Collections
Total collections P4,840,000
d PAGCOR and its licensees and franchisees
x VatRate 12%
Value Added Tax P580,800
Answer: B

Radio and/or television broadcaling whose gross receipts in the preceding 0 Sale of electricity is subjectto vat indeed of franchise tax under Section 119
0
year exceed P10,000,000 shall betsubjed to value added tax. of the Tax Code
0 Although there are other franchise's granted by:the government such as but
not linited to electric companies, cable companies and telecom companies, 54. if the franchisee is a gas and water utilities, the correct amount of business tax is:
the term "Franchise Tax" shall pertain only to franchise tax levied under P200,800 c. P580,800
Section 119 of the Tax Code, as amended. P456,000 d. P238,800

Answer: A

504 505
 Pertothe e 749 '7"

Solution. • 56. Bulwagan ng Katotohan Broadcasting Company,a. non-va P lr. off ae'frani
hoeldfefi
et rC ca
hid
s:et:
Covered by the franchise: operate a radio and/or television network provided the following data (net of any tax):
Revenues P4,000,000 Year Gross Receipts
Add: AR, beg 600,000 2016 P9,000,000
Less: AR, end (800,000) 2017 12,000,000
= Collections P3,800,000 2018 10,000,000
x Franchise Tax Rate 2% P76,000
it The business tax liability is
Not Covered by the franchise: 2016 2017 2018
Revenues P1,200,000 P270,000 P360,000 P1,200,000
Add: AR, beg. 1,080,000 1,440,000 1,440,000
Less: AR, end (160,000) C' 270,000 360,000 300,000
= Collections P1,040,000 d. 1,080,000 360,000 360,000
x Vat Rate ' 12% 124400
Total Business Tax P200,800 Answer: A
0 2016 = P9,000,000 x 3% =P270,000
0 The gross receipts from those covered by the franchise is subject to the 0 2017 = P12M x 3% = P360,000; .
applicable franchise tax rate, regardless of the ammint of the gress receipts. Gross receipts preceding years P10M; apply 3% Franchise Tax
() The gross receipts not covered by the franchise is subject to vat•because the 0 2018 = P10,000,000 x 12% = P1,200,000
gross receipts for the taxable year will obviously exceed the vat threshold. Gross receipts preceding year > NOM; 'subject to vit
55, if the franchisee is a radio television broadcasting company,. the correct amount of 57. Gallant Transport Corporation is a holder of franchise from the government to offer
business tax is: passenger and cargo transport operations by land. Its gross receipts 'from passenger.
P200,800 c. P580,800 operatiOns amounted to P10,000,000 while its .gross receipts from cargo operations
P456,000 d. P238,800 amounted to P2,000,000. How much is the franchise tax due for the month?
.
P360,000 c. P1,440,000
Answer: D P540,000 . d. PO
Covered by the franchise.
Revenues P4,000,000 Answer: D
Add' AR, beg. 600,000 0 The gross receipts from passenger operations by land is subject to CCT
Less AR end (800,000)
under Section 117, not Franchise Tax under Section 119. of the Tax Code.
= Collecbons P3,800,000. 0 The gross receipts from cargo transit operations is subject to vat, instead
x Franchise Tax Rate 3% • P114.000
of Franchise Tax under Section 119 of the Tax Code.-
Not Covered by the franchise: 58. Using thesame data in the preceding paragraph, how much is the total business taxes
Revenues P1,200,000 due for the month?
Add: AR, beg. P300,000 c. P1,440,000
Less: AR, end 160,000) P540,000 d. PO
= Collections P1,040,000
x Vat Rate 12% 124,800 Answer: 6
I
Total Business Tax P238,800 Passenger operations (CCT) P1OM x 3% P300,000
Cargo operations (Vat) = P2M x 12% 240,000
Total Business Taxes P540,000

506' 507
 Percale/tie, Para& reo
Section 120- Overseas Communications Tax

59 A telephone company, VAT-registered, provides services for domestic and overseas Solution:
calls. VVhat business taxes are due from thaservices offered? Outpul vat (135M x 12%) P600,000
I. Value-added tax for domestic calls. Input vat:
R.N. Overseas communications tax for overseas calls. Directly attributabb = I300,000 x 12% (36,000)
a I only c. Both I and II Allocated= P800,000 x 12%* WS (60,000)
b. ITSply d. Neither I nor II Vat Payable P504,000

Answer: C 63 VVhich of the following statements is false? ,

GUIDE: BBC, an international news agency; is required to pay 10% percentage tax from
0 Local communications = 12% vat messages originating from the Philippines by'ffilephone or telegraph. .
0 Overseas originating in the Philippines= 10% 'OCT under Section 12Q Amounts paid for messages transmitted by an embassy and consular offices of a
0 Overseas originating abroad = not subject to business tax foreign governrnent is not subject to 10% oVelaeaS communications taxi
Overseas communications initiated by a resident citizen not engaged in trade or
60 One of the following is subject to overseas communications tax: business is subject to oversees communitation tax. -
Long distance call by a son from Manila to hisfather in Iloilo City. d None of the above
Monthly telephone bill from PLDT.
Telephone bill on a call by a mother in the Philippines toter son in London. CP Answer: A
Telephone call by Magda in Hongkong to her friend in Manila. EXEMPT from OCT: •
Diplomatic Services
le Answer: C International Organizations
, News Agencies or Services
0 V and V, stipjectto vat:
. Government
0 V not subjectio business tax
-
64 One of the following statements is incorrect. _ ,. ",
61. Smart-Globe Telecommunications has the following data for a particular month:
Overseas communications tax is imposed on.oversaas. coininunications originating
Gross receipts, domestic calls ' P5,000,000
3000,000 from the Philippines. .
Gross receipts, overseas calls (originating inthe Philippines)
The person liable to overseas communications tax mayor may not be engaged in
Purchase of supplies used in connection with domestic Calls net 360,000
any trade or business. . . .
of VAT
The • overseas 'communications tax is imposed whether the overseas
Purchase of equip. used in connection with both domestic calls 800,000
communications are made in the course of trade or business or not.
and overseas calls, net of VAT
The overseas communications tax is imposed on the owner of the communication
Business expense 1,000,000
facilities used to make overseas communications.
How much is the overseas communications tax collected from persons who used
Answer: D
the communications facilities?
c. P800,000 0 'D is wrong. It is imposed on the user of the facility
P300,000
P500,000 d rtil
65 Moon Telecom Inc. has the following collections for the month of April 201,8:
Overseas call originating abroad P1,120,000
4. Answer A
Overseas call originating in the Philippines 860,000 .
0 OCT = P3,000,000 x 10% = P300,000
Local calls - 2,240,000

62 Using the same data in the preceding number, how much is the vat payable?
How much is the overseas communications tax to be remitted by Moon for the month?
P420,000 c. P504,000
P220,000 - c. P200,000
P470,000 d. nil
P88,600 d. P80,000
iRt. Answer: A
Answer:

508 509
 73erceath e 77fires ZJercetz ad:es

Section 121 and 122 —Gross Receipts Tax

Solution. 67. Which of the following is subject to Other Percentage Taxes?
Collections P880,000 Banks
100/110 Financing/ credit Companies
Revenues exclusive of OCT P800,000 III, Pawnshops
10% IV. Duly registered Credit Cooperatives
x OCT %
P80,000 I and II only c. I, II, III and IV
OCT
I, II and III only d. None of the above
Journal Entry
Dr. Cr. Answer: B
Cash P880,000 .,
OCT Expenses , 80,000 68., Banko Natin sold a repossessed car to JJ at .P1,000,000, Banko Nein is
Revenues - P880,000 Subject to value added tax -
OCT Payable 80,000 Subject to gross receipts tax of 7%
Subject to regular corporate income tax
NOTE. Percentage Taxes, except Stock 'Transaction Taxes under III only a. II and III only
0
Sections 127(A) and (B) of the Tax Code are classified as oPerating I arid III only d. None of the above
expenses for income taxation purposes.
Answer: C
0 The overseas calls originating abroad is. not subject te lAsineSs tax in the'
69. Maharlika Bank purchased machineries from a VAT supplier. What is -the treatment for
Philippines
.• VAT purposes of the sale transaction considering that banks are, subject to percentage
taxes under Sec. 121 of the Tax Code? •
66 Based on the preceding number, how much is the output tag?
.
0% vat c. exemptfrom vat
P240,000 P360,000
12% at d. percentage tax '
P454,286 • b. P268,800
• Answer: 13 ,
Answer: A
0 Although banks and other financial institutions are not subject to value
Solution:
• P2,240,000 . added fax but to gross receipts tax under Section 121 of the Tax Code, it
Collections
• A00/112 does not follovi that sale of vatable goods to them is no longer, subject to
x
coo,opo vat. Sale of machineries are subject to vat.' Consequentiy, sale of such
Revenues exclusive of vat
12%, items to a banking institution is subject to vat.
x OCT %
OCT P240.000
70 Which of the following is subject to Gross-Receipts Tax?
Pawnshops/money changers
Journal Entry
Credit cooperatives
Dr. Cr.
Lending activities of multi-Purpose cooperatives.
Cash P2,240,000
P2,000,000 A. B. C. D.
Revenues
Output vat 240,000 - .I Yes Yes Yes No
II Yes No No No
a
0 Unlike percentage taxes, vat on sale (output vat) is not classified as III Yes No Yes No
operating expenses. It is a tax credit against output vat.
Answer: 8
0 Other non-bank financial intermediaries, such as money changers and
pawnshops, are subject to percentage tax under Sections 121 and 122,
respectively, of the Tax Code. [Sec. 4.109-1 (B)(w), RR 4-2007]

510 511
 Perceillar rittr,es Pere01,61, 74,CS
74 Pedro executed On January 1,2014, a long term loan from PRTC Bank in the amount of
71 A pawnshop, for business tax purposes
Is treated as a lending investor liable to 12% vat on its gross receipts from interest R6,000,000 payable within ten (10) years, With an annual interest of 2%. However, on
income and from gross selling price from sale of unclaimed properties. January 31, 2018, the loan was pre-terminated. Assuming PRTC Bank declared correctly
Is not treated as a lending investor but liable to 5% gross receipts tax under Section the interest from 2014 to 2017 and the applicable gross receipts taxes were paid, how
122 of the Tax Code on its gross receipts from interest income and from gross much gross receipts tax should be paid for the year. 2018?
telling price from sale of unclaimed properties. • P100
P24,500 ] cd159
l P 0070
Is exempt from 12% vat and OPT
Is2upject to 12% vat and OPT
Answer: C
-if• Answer: 8; (Sec. 4.109-1 (B)(w), RR 4-2007] GRT payment from Jan. 1, 2014 to Dec. 31, 2017 (P4,800)
(P6,000,000 x 2% x 4 years) x 1%
72. Piggy Bank has the following data for the,menth of January 2018: Adjusted CRT (P6M x 2% x 4 x 5%) 24,000
Interest income, the remaining maturity of the instrument.is P100,000 Adjustment (deficiency) P19,200
Add) GRT for January 2018
5 years
Rentals (gross of 5% expanded withholding tax) • • 50,000 (P6M x 2% /12months)x 5% 500 •
Net trading loss oo,00dj. Total Gross Receipts Tax, Jan. 31, 2018 P19,700-

How much is the gross receipts tax on the collections of Piggy for January 2018? 75 December 1, 2013, Rianne borrowed P1,000,000 torn BDO payable within 10 years.
P5,000 C. P7,800 The loan pays an annual interest of P100,000 payable every December 1 'beginning
P3,500 d P8,500 DeCember 1,2014. On December 1,2018, Riannne pre-terminated the loan by, repaying
the principal in full. The gross receipts tax still due from BOO due to the pre-termination
Answer: D . in 2018 is:
Interest income - from short term ban = P100,000 x 5% • P5000 , a.- P5,000 c. P21,000
Rental income -4P50,000 7% 3,500 - • b. P16,000 d. P25,600
Gross receipts fait • P8,500
+ Answer: C
731 In addition to the information in the preceding numberc Ftiggy sank has the following GRT payment fromDec. 1, 2014 to Dec. 1, 2017 (P4,000)
information for the month of February 2018: - (P100,000 x 4 years) x 1%
Interest income, the remaining maturity of the instrument le 6 years -10,000 Adjusted CRT (P400,000 x 5%) 20,000'
Rentals (gross of 5% eXpanded withholding tax) ] • - 50,000 Adjustment (deficiency) P16,000
Net trading gain 20,000 Add: GRT for 2018 = P100,000 x 5% 5v0
Gross Receipts Tax Due, Dec. 1, 2018 P21,000
How 'much is the gross receipts tax on the collections of Piggy for February 20182
a P5,200 c. P9,200 76 DU30 Bank extended loans to its debtors during tha year, with real properties of the
b. P5,900 d. P9,900 debtors being used as collateral to secure the loans. When the debtors failed to to pay
the unpaid principal and interest after several demand letters, the bank foreclosed the
Answer: A same and entered into contracts of lease with tenants. The bank is subject to business
Interest income - from brig term ban = P100,000 xi% P1,000 tax as follows:
Rental income - P50.000 x 7%1 . 3,509 I, 12% vat
Net trading gain = (P20000-10, 0)x 7% 700 II. 7% gross receipts tax
ei . P5,200 a I only , a. Both land II
Gross receipts tax
b. II only d. Neither nor It
Apply cumulative rule as to net trading gain
Answer:

512 51.3
 Perceit& Witr,es,
t_ Pert:eglar- -
I;cra
Section 123- Premiums Tax on Life Insurance 81 A domestic insurance company gave the following information for the month:
Section 124- Premiums Tax on Agents of Foreign Insurance companies Gross receipts from its insurance policies
77. Statement 11 The tax on insurance premiums applies to every person, company or Premium on life insurance P2,100,000
corporation doing fife insurance business of any sort in the Philippines, except,purely Premium on non-fife insurance 1,500,000
cooperative companies and associations. Gross receipts as agent of a non-resident foreign insurance co.
Statemfnt 2: A person engaged in non-life insurance business is subject to value-added Premium on non-life insurance P4,000,000
tax. Premium on property insurance .1,000,000
a Bothtstatements are correct.
b. Both ttatements are incorrect. The percentage tax due for the month is:
C. Only the first statement is correct. - P355,000 c. P242,000
d. Only the second statement is correct. P430,000 d. P605,000

Answer A C. Answer: C
Solution:
78 Statement 4: The tax on life insurance premiums is 2% based upon the total premiums Gross receipts pm its insurance policies
collected whether such premiums are paid in money, notes, credits, or any substitute for Premium on life insurance (P2,100,000 x 2%) P42 000
money. Gross receipts as agent of a non-resident foreign insurance-
Statement 2: The tax on agents of foreign insurance companies is 4% based upon the company
total premiums collected. Premium on non-life insurance (P4,000,000 x 4%1 160,000
• Both statements are correct. Premium on property insurance (P1,000,000 x 4%) 40,000
Both statements are incorrect. Percentage Tax for the month ..P242,000
. Only the first statement is correct.
Only the second statement is correct. 82 Pro-Life Insurance is engaged in business„ It also serves as an agent of,a marine
nonresident foreign insurance company. It has the following data for the current month:
4, Answer: A . Total premium collected as an agent of a fereighinsurance 'company P2,000,000
Total premiums collected from non-fife insuraricein. the Philippines 500,000
79. Statement 1.: All insurance premium collected by lifkinsurance company is subject to 2% Purchase of supplies for use in non-fife business in thePhifippines 300,000
gross receipt tax.
Statement2: A life insurance premium refunded within six (6) months is not subject taa How much is the tax for total premiums dollected as an agent Of eforeign insurance
2% percentage tax. - company?
Both statements are correct. P80,000 c. P40,000
Both statements are incorrect. P100,000 d. P20,000.
Only the first statement is correct.
Only the second statement is correct Answer: A . .
0 Tax on Agents of Foreign Insurance Co. = P2,000,000 X 4% =P80,000
Answer: A
• 83. Using the same data in the preceding problem, how much is vat payable?
80 Section 124 of the Tax Code, as amended, provides that every fire, marine or P24,000 c. P40,000
miscellaneous insurance agent authorized evicler the Insurance Code to Procure policies P52,800 d. •P20020
of insurance as he may have previously bten legally authorized to transact on risks
located in the Philippines for companies St authorized to transact business in he Answer: A
Philippines shall pay a tax equal to: Output vat (P500.000 x 12%) P60,000
a2% c.5% Less input vat (P300,000 12%) (36,000)
b.4% d.10% Vat payable 24,000

AnsWer A
0 The tax rate, as provided in the Tax Code, is twice of Section 123.

519 515
 Percottit ;eta ercethrie,I;es
84. Mabuhay Insurance Corporation furnished us its data shown below: Section 125— Amusement Taxes
Insurance Premiums collectible is P3,750,000
The breakdown of the above premiums is as follows: 88. A tax on the right or privilege to entetp ant
Life Insurance Premiums, 75% value added tax c, tit
Non-life insurance premiums 25% franchise tax djnitketakt
„.•• .
Bitring the month, 70% of collectible fife insurance premiums and 50% of collectible
non-life insurance premiums were collected. Answer C

The Premiums Tax payable is: 89. The operator of one of the following places isnot Subject to amusement lax.
P39,375 C. P94,437.50 Cockpits
P78,750 d. P196,875 Racetracks
Bowling alleys
Answer: A KTV Karaoke joints
Insurance premiums collectible P3,750,000
. .,75% Answer: C
70%
Bowling alleys are subject to vat, not amusement lax. •
Total premiums collected on fife insurance P1,968,750
2%
90. One of the following is a correct amusement tax rate:
Premiums Tax Payable P39,375
30% on jai-alai and racetracks -
15% on cockpits, cabarets, night and day clubs
85. Using the same data in the preceding number, the total business taxes should be:
18% on boxing exhibitions
P39,375 c. P95,625
10% on,professional basketball games
P56,250 d. P120,000
, •
• Answer A • .
4- Answer: c 0 cockpits, cabarets, ,nightand day clubs still be 18%
PienurnS Tax Pdyable (preceding number) P59,375
Output Vat (P3,750,000 x 25% x.5056 x 12% • 56;250 boxing exhibitions shall be 10%
Total business taxes for the month • • P95,625 • 0 professional basketball games shall be 1,5%
•
86 Pedro wants to procure fire insuranbe for his Mansion in Forbes Park Makati from 91. One of the following is an incorrect amusement tax rate:
Gallaxy Insurance Company, a non-resident foreign corporation, through its agent in the a. Jai-alai and racetracks — 30% ,
Philippines, al. Joe. He paid premiums in 2018 amounting to R500,000. How much is b: Cockpits, cabarets, night and day clubs —18%
the premiums tax payable on the transaction? - Professional basketball games — 15%
P10000 c: P25,000 Boxing exhibitions — 12%
P20,000 d. P50,000 •
+ Answer: D
Answer: B
) Premiums Tax on Agents of Foreign Insurance Co 92. One of the following is subject to amusement tax on gross receipts
= P500,000 x 4% = P20,000 Owners of winning racehorses.
Proprietors of karaoke..KWthouses_
.ut as ming Pedro directly obtained the insurance
87. Using the same information above, lo Owners of winning cocks in the cockpits
policy from Gallaxy Insurance Company, hew rhuch is the premiums tax payable on the Lessees of bowling alleys
transaction?
P10,000 t P25,000 Answer
P20,000 • d. P50,000 0 Owners of winning racehorses are subject to percentage tax on winnings
under Section 126 of the Tax Code, not amusement tax.
Answer: C 0 Owners of winning cocks in the cockpits are subject to income tax only
0 Premiums Tax = P500,000 x = P25,000 0 °Ir is subject to vat

516 517
 / Ora lit et Percatta e, tjtves
k_
98. &kohl, a comedy bar, had the following data during the month of March 2018
93. Gross receipts for amusement tax shall include all the following except one. Which one Net income during the Month :P160,000
is it? Collections during the month:
a Income from television, radio andMetier) picture rights. From seryices rendered in January: ,' . .200,000
.
Income from sale of tickets. From services rendered in FebruarY '. , 1 ,
Idioms from sale of food and refreshments within the amusement place. From services to be performed in March ' 40,000 •
Income from sale of food and refrethments outside the amusement place. - : z.' •
How much is the amusement tax for the .mOrith?. , 1,200,000
+';'Arknswer: D P218,000 c. P259,200 .. '...
P252,000 d. P288,000
94 Statement 1: All boxing exhibitions held- in the Philippines shallbe subject to amusement
'tax. Answer: C
Statement 2: Admission charges to amusement places are required .for the imposition of Solution'
amusement tax. . Collections during the month:- i„ ,
Both statements are correct. From services rendered in January • 400, 006
Both statementsaie incorrect. From services rendered in February; i.. 1,200,000. „
Only the first statement is correct. From services to be performed in March :L 40,000
ti Only the second statement is correct.. Total collections y1,440,000;
18%
Answer: B Amusement Tax P259 200
. .
95. Apol B., a Filipino citizen, promoted a world boxing championship bout-in thffiphilippine For business tax purposes, ignore income' and eXpenses. •
. Arena in Bocaue, Bulacan featuring Manny Pacquiao, a Filipino chamPion, and Lucas If it pertains to sale of services;•thelbasIsciguSinesslax is gross receipts
Matthysse, dubbed as 'Fight of Champions'. Gate. receipts amounted to .13.30,00.0600 or collections, regardless Of when The seNig:evasiendered. , • -
and:additional receipts frodijelevision Coverage was .P201300,000. The enysement lax •
duels:
0 A comedy bar, for business taxation purpcieeffi is is subject to amusement
tax:
a„ P2,000,000 • c P5,000,000 .
b. P3,000,000 d nil - 'Night and Day ClubS° as provided in Rmd :4200 Pid" drinking, danding and
entertainment venues which oftentimes 'setae' food ...end provide entertainment.
Answer: D :Cabarets', on the.otheri hand, are restauriati.oriclubs.where liquor and food are
served, vdth a stage provided for performances bymUsicians, dancers or coniedians,
96. Assuming the bout above will be held in Malaysia, how much is the amusement tax? including a venue for dancing by patronsicustoMeri,:similar to-that of nightclubs. With
P2,000,000 c. P5,000,000 : the advent of modem interactive entertainment, along wfth.recorded .music• (and/or
P3,000,000 d. nil music video) using a microphone and public address-system, the proprietorsIlessees or
operators of these aniusement places have pursued a new form of lounge and club
entertainment. Most of these establishments Provide facilities to avow patrons losing •
Co Answer: D
with the expectation that sufficient revenue will be made' selling food. and drinks to
customers. The 'terms° nigh and day clubs and 'cpbarets have become - passe'.
97. Assuming the bout is in the Philippines but the promoter,.Apol B., is a foreign natiOnal, Amusement places which offer the same pleasurable diversion entertainment and
how much is the amusement tax? ffinction now include- videoke barsrkaraoke-bars, karaoketelevisions,. Rama° boxes
P2,000,000 . c. PS, 0,000 - and music lounges. As such, the proprietors, lessees, or operators of the
P3,000,000 d. nil 4 aforementioned establishments are deemed also subject to 18% amusement tax under
Section 125 of the Tax Code, and not to the 12% value added tax.
Answer: C
0 Amusement Tax = (P3OM + P2OM ) x 10%' P5M 99 Based on the preceding number, if it is a racetrack, how much is the amusement tax
payable for the month? .
How much is the amusement tax for the month?
P60,000 c. P432,000
P360,000 d. P480,000

518 519
 Percet racres
Solution:
Answer: C PBA: Gross receipts, PBA = P9.8M x 15% OPT - P1,470,000
Solution: Bryan: Gross receipts, restaurant = P2,950,000 x 12% vat 354,000
Collections during the month:
From services rendered in January 200,000
bi Bryan is subject to vat, not to amusement tax.
From services rendered in February 1,200,000
From services to be performed in March 40,000
102. Ana is the operator of Tanghalan Coliseum. During the month it had the following gross
Total collections 1,440,000
receipts from various activities:
30% . Concert by Loma P2,500,000
Amusement Tax P432,000
Professional basketball game 1,240,000
Boxing Exhibition 1,780,000
- 100. Philippine Basketball Association (PBA), a 'professional basketball league in the
Philippines, opened its own coliseum during April 612018 and held all its games for the
The boxing. exhibition is a world championship fight between G.I. Joe and Lucas
month in the newly built, state of the art facility in Bulacan. PBAiProvided The following i
Matthysse, both foreign nationals and the bout was promoted by Trillanes promotions.
data during the month: How much is the amusement tax payable?
P1,78,000 c. P364,000
Receipts from Entrance Fee P9,800,000 P186,000 d. P664,000
Gross Receipts from Restaurant operaticins: -
Sale of food and beverages 2,200,000 C. Answet: C
- Sale of wines & liquor 750,000 Solution:
Expenses 3,800,000
Professional basketball (P1,240,000 x 15%) P186,000
Boxing Exhibition (P1,780,000 x 10%) 178,000
How much is the amusement tax for the month? • Total Amusement Taxes P364,000
P1,210,000Li c. P1,762,000
P1,320,000 d. P1,912,500 103. How much is totalbusiness taxes?,
a. P1,78,000 c P364,000
Answer: D ib. P186,000 ' d P664,000
Solution:
Gross receipts from entrance fee • P9,800,000
C
Sale of food and beverages 2,200,000
Solution:
Sale of wines and liquors 750,000
Concert (P1,240,000 x /5%) ,P300,000 .
Total gross receipts 12,750,000
Professional basketball (P1,240,000 x'15%) 186,000
15%
Boxing Exhibition (P1,780,000 x 10%) 178,000
Amusement Tax P1,912,500
Total Business Taxes P664,000
101. Based on the preceding number but suppose the restaurant is owned and operated by Efil Persons liable to amusement taxes areithe proprietors, lessees or operators
Bryan, a vat-registered person, the amusement taxes of Bryan and the PBA is of amusement places.
Bryan PBA ,
P354,000 1,320,000 •
104. Boxing exhibitions shall be exempt from amusement tax when the following conditions
P1,320,000 354,000 are present:
P354,000 f#354,000 .
Involves World or Oriental championships in any division.
P- P1,470,000 One of the contenders is a citizen of the Philippines.
Promoted by citizens of the Philippines or by a, corporation or association at least
Answer: D 60% of the capital is owned by Filipino citizens.
d All of the conditions above must be satisfied

• Answer: D

520
521
 Perceitth I ars
Leo purchased horse racing tickets amounting to P6,000. Fifty percent (50%) of the
Section 126— Tax on Winnings tickets purchased won double, entitling him a prize of P60,000. How much cash will be
given to Leo by the operator?
10a. The Percentage Tax on Winnings is imposed on the winnings of bettors in: a. P57,720 C.. P54,300
Cockfighting b. P54,720 d. P51,300
Horse race C. Answer: A
• C. Jai-alai Gross winnings P60,000
d. boxing Less: Tax on winnings
Gross winnings P60,000
Answer: 8 Cost of winning tickets (P6,000 x 50%) - (3,000) .
Net winnings P57,000
106. The following shall always be subjectto 10% percentage tax, except? . x 4% 527, 75200)
Overseas call made by Mr. X, resident of Manila, to his mother in Libya Amount to be paid to Pedro
Winnings from horse races by a bettor ,. • i() The cost of the winning tickets shall not-be deducted from the amount to
Oriental Championship match in the Philippines between a Filipino and Mexican be paid to Pedro because the purchase of -ticket and receipt of dividends
promoted by Bob Arum. . or winnings are separate transactions.
Winnings from horse races by a horse owner.
Pedro, a horse bettor, had the following records of his horse races for the month of May
Answer: 8 • of 2018:
0 A bettor of horse races may be subject to 10% o14% tax based on net Type of Gross Cost of .
winnings. Horse Winnings Winnings winning.fickets
0 Basis: Net winnings = Gross winnings or dividends less cost or the
Winning ticket(s) Ana Khan Trifecta P100,000 • P40,000
0 % Lor Naden Ordinary 250,000 I". 50,000
• trdinary winnings: 10% • Fe Licidad Double 325,000 75,000 . •
Special winnings (forecast double, trifecikgtilnela): 4%
0 Norse owner(s) are aubject to 10% tax based on grOal!Witinings. . How much is the business tax on winnings?
p32,400 c P49,000
107. Statement 1: The 10% tax on winnings is based on actual" amount paid to the winner.. P35,750 d. P68,000
Statement 2 The rate of tax on winnings in case of double, foracsittigUinella and trifecta
shall be four percent (4%). Answer: A
Both statements are correct. Type of
Both statements are incorrect. Horse Winnings Net winnings % Tax
Only the first statement is correct. Ana Khan Trifecta P60.000 4% P2,400
Only the second statement is correct. Lor Naden Ordinary 200,000 10% 20,000
Fe Licidad Doubt& 250.000 4% .10000
Answer D TOTAL P32,400

108. Mang Jose, a horse-owner, receives gross winnings of P120,000 during the current 111. Mike Ong received P100,000-winnings from cockfighting. Determine his tax liability.
month. His tax on winnings should bl Subject to 10% OPT (tax on winnings) under Section 126 of the Tax Code
P6,000 a P18,000 Subject to income tax
P12,000 d. P24,000 Subject to 10% OPT (tax on winnings) under Section 126 of the Tax Code and
20% final tax on passive income I
e'• Answer: 8 I only c. Ill only
0 Tax on winnings = P120,000 x 10% = P12,000 II only d. I and III ,

C. Answer:

523
522
 Parotid kir:es Percen e, tiees
Section 127 - Stock Transaction Tax
112. Mannu Gal received P100,000 winnings from horseracing. Determine his tax liability.
I.. Subject to 10% OPT (tax on winnings) under Section 126 of the Tax Code The next four (4) questions are based on the following data:
IL Subject to basic income tax Galaxy Corporation, a closely-held corporation, has an authorized capital stock of 20,000,000
III. Subject to 10% OPT (tax on winnings) under Section 126 of the Tax Code and shares with par value of P5.00/share..
20% final tax on passive income Of the 20,000,000 authorized shares, 5,000,000 thereof were subscribed and fully paid Up by
I only c. Ill only the following shareholders:
H only d. I and III Pedro 1,000,000
Ana 1,000,000
Answer: A Loma 1,000,000
Fe 1,000,000
113. A race track bettor won the folbwing bets: . Juan 1,000,000
On double, a bet of P200 and dividend of P200 per P20 ticket. Total Shares Outstanding 5,000,000
On winner take all, a bet of P500 and a dividend of P1,000 per P50 ticket
On forecast, 'a bet of P1,000 and dividend of P100 per P20licket On February 2018, Gallaxy. decided to conduct an initial public offering (IPO) and initially
offers 5,000,000 of its unissued shares to the investing public for P7.50/share. •
The total percentage tax due front the winnings is: During the IPO period, one of its existing shareholders, Lorna, has likewise decided to Sell her
a P682 c. P1,280 - entire 1,000,000 shares to the public for P7.50/share.
b. P1,182 d. P1,530 •
114. How much is the percentage tax due on the primary offering?
Answer: B P375,000 . c. P750,000
Solution: P1,500,000 d. nil
'0 ON DOUBLE -
= P200 belP20 per bet = 10 tiCkets Answer: A .
= Net winninbs per ticket = P200-20 = P180 Solution:
OPT = P180 x 10 tickets x 4% =' P72.. 0. Tax on 'primary offering', refers to percentage tax due of the issuing
corporation during its initial public offering (IPO).
0 ON Winner Take All (Ordinarywinnings)
= P500 bet/P50 per bet = 10 tickets 0 RATIO = shares issued@ /PO over outstanding shares after IPO
= Net winnings per ticket = P1,000 - 50 = P950 5/150%
OPT = P950 x 10 tickets x 10% = P950 • IPO Rate =1%
0 OPT on IRO = Proceeds x Tax % = 5M shares x P7.5 x 1% = P375,000
0 ON FORECAST
= H .boo bet/P20 per bet = 50 tickets 115. How much is the percentage tax due on the secondary offering (Lorna)?
= Net winnings per ticket = P100-20 = P80 P75,000 c. P150,000
OPT= P80 x 50 tickets x 4% = P160 P300,000 'd. nil

0 TOTAL Tax on Winnings s • Answer: B

= P72 • P950 * 160 = P1,18t Solution-
0 Tax on 'secondary offering' refers' to percentage tax due of The
shareholder who sold his/her share at the lime the corporation is
undergoing initial public offering (IPO).
0 RATIO = shares issued @ (PC over outstanding shares after (PO •
=1/1(k10%
0 [PO Rate =4%
0 OPT on IPO = Proceeds x Tax % = 1M shares x P7.5 x 4% = P300,000

524 525
 Petrol ; ty,-
7re: Pty'reithave, 7;;d:es
116. If in May 2018, Gallaxy again decides to increase capitalization by offering another 118 Issuance of shares by a closely held issuing corporation shall be subject to:
6,600,000 of unissued shares to the public at P1.0.00/share, how much is the percentage a. Percentage tax- % of 1% based on gross selling price or gross value in money.
tax due? ' b. Capital gains tax - 5% on first P10,000 capital gain; 10% on excess of P100,000.
P600,000 c. P2,400,000 Percentage on IPO - 4%, 2%,; 1% based on gross selling price or gross value in
P1,200,000 d. nil money.
ci No business tax but subject to documentary stamp tax (DST)
+ Answer: D
Issuance of shares by the issuing corporation after !PO is known as Answer:
'follow-on-follow-through issuance'. The issuing corporation. is subject
'only to one (1) type of Percentage Tax, the Percentage Tax on IPO under 119. Primary offering of shares by the issuing' corporation (issuance during initial public
Section 127(B) of the Tax Code, as amended. offering) shall be subject to: •
0, The issuing corporation is not subject to Percentage Tax before and after Percentage tax - % of 1% based on gross selling price or gross value in money.
IPO. However, it is liable to documentary stamp lax (DST) on the Capital gains tax - 5% on first P10,000 capital gain; 10% on excess of P100,000.
issuance of stock certificate to shareholders. • Percentage on IPO - 4%, 2%,; 1% based on gross selling price or gross value in
money_
117.11 in August 2018, Juan decides to sell his entire, stock ownership to he public at No business tax but subject to documentary stamp tax ps-0
P10.00/share, how much is the percentage tax due?
a. P50,000 c. P400,000 4 Answer: C
P60,000 d. nil
120. Follow on follow through issuance of shares by the issuing corporation (issuance after
do Answer B !PO) shall be subject to:
0 SALE of shares by a shareholder after IPO is known asloilow-on4ollot • a. Percentage tax - % of 1% based on gross setting price or grdss value in money.
through sale" Under Section 127(A) of the Tax Code, as amended, subject b. Capital gains.tax - 5% on first P10,000 capital gain; 10% on excess•of P100,000.
to Percent* Tax as follqws: . • c. Percentage on IPO - 4%, 2%,; 1% based on gross,selting price or gross value in..
-Salb prior to 2018:1A. of 1% of Gross: Selling Price' ; money.
Sale on or after Jan. 1,2018:- 6/10.of -1% of GrdiS Selling Pace .. d. No business tax but subject to documentary stamp tax (DST)
0 OPT = 1,000;000 shares x P10 x 006 '
4 Answer: D
ADDITIONAL GUIDE: •
-SUMMARY OF APPLICABLE TAXES IN THE ISSUANCE OR SALE OF SHARES OF STOCK* 121. Shares of stock held as investment when sold drectly to a buyer prior to January 1, 2018
TERM, USED APPLICABLE TAX , shall be subject to.
Issuance of shares before IPO Not subject .to. VAT, OPT:A:
Percentage tax - 4 of 1% based on gross selling price or gross value in money.
intone tax but subject to-
OST• , Value-added tax - 10% based on gross income.
ISSUING
CORPORATION Capital gains tax - 5% on first P10,000 capital gain; 10% on excess of P100,000.
Issuance of shares during Ipo Primary Offering OPT: 4% 2%, 1% Percentage on IPO - 4%, 2%,; 1% based on gross setting price or gross value in
money.
Issuance of shaies after IPO Follow , on follow Not subject to VAT, OPT and Answer: C
through income tax but subject to
0 Also known as sale of shares of closely held corporation (DC). •

Sale of shares before IPO
SHAREHOLDER
Sale of shares during IPO
Sale of shares after IPO
Capital gains tax 5% 10% 122. Shares of stock held as investment when sold directly to a buyer on or after January 1,
TRAlN Law = 15% 2018 shall be subject to:
Percentage tax - 6/10 of 1% based on gross selling price or gross value in money.
Value-added tax - 10% based on gross income. -
Primary Offering OPT: 4% 2% 1%
Capital gains tax - 15%.of capital gain
Follow on follow OPT: 1/2 of 1%of GSP cf. Percentage on IPO - 4%, 2%,; 1% based on gross selling price or gross value in
through OP,T:6/10 of 1% of GSP (It) money.
Answer: C

526 527
 4 U:3 Percoith ey tr,e0-

123. Secondary offering of stock held as investment when sold dbring IPO period shall be 128. Assum . ing the shares were not listed in the local stock exchange and that Trillanes sold
subject to: the shares to Cayatano, the percentage tax on the sale is:
Percentage tax - 1/2 of 1% based on gross selling price or gross value in money. -- a P15,000 C. P30,000
Value-added tax - 10% based on gross income. b. P25,000 d. PO
Capital gains tax - 5% on first P10,000 capital gain; 10% on excess of P100,000.
Ptcentage on IPO - 4%, 2%,; 1% based on gross selling price or gross value in + Answer: B
money. 0 Subject to COT, not percentage tax

Answer: D 129. One of the following statements is incorrect.

124. Shares of stock held as investment when sold through the local stock exchange prior to
January 1 2018 shall be subject to:
Percentage tax - 'A of 1% based on gross selling pric.e or gross value in money:
Value-added tax -10% based on gross incame.
Capital gains tax - 5% on first P10,000 capital gain; 10% on excess of P100,000.
Percentage on IPO - 4%, 2%,; 1% based on gross selling price or gross value in
money.
The 1/2 of 1% tax shall be collected by the broker who made the sale and shall be
remitted within 5 banking days from the date of collection
The tax paid on sale of shares through local stock exchange 'and initial public
offering (IPO) and secondary offering shall not be allowable deduction or income tax
purposes
The 'A of I% stock transaction tax is a final withholding tax on income.
The % of 1% stock transaction tax is collected whether there is an income or a loss
and is a percentage tax.

Answer: A + Answer: C
0 The sale is also known as 'follow-on-follow-through sale'.
0 Assume the shares held were from a domestic cdirpoafion. 130. 1til Statement: Sale by a stock dealer. of shares of stocks through the .local stock
exchange is subject to the stock transactions tax.
125. Shares of stock held as investment when sold through theilocal stook eichange on or 2nd Statement: Sale by a Stock dealer of shares of stocks directly to a buyer is subject to
. . -.. .
after January 1, 2018 shall liksubject to: . . . the capital gains tax
. -
Percentage tax - 6/10 of 1% based on gross selling price Or gross Value in _money. Both statements are correct.
Value-added tax - 10% based on gross income. ' '. • . ' .•' Both statements are incorrect.
Capital gains tax -5% on first P10,000 capital gain; 10% on excess of P100,000. Only the first statement is correct.'
Percentage on IPO - 4%, 2%; 1% based be gross selling price or gross value in Only the second state statement iS correct.
money.
Answer: B
+ Answer: A 0 Sale of shares by a stock dealer is subject to basic income tax and vat.

126. In 2016, Trillanes invested P5,500,000 in the shares of stock of 0u30 Corporation. The 131. All of the following except one are liable to 'A of 1% stock transaction tax. Which one is.
corporation's shares are listed and are traded in the local stock .exchange. Trillanes not?
subsequently sold the shares in 2017 for P5,000,000 through the locarstock exchange. Individual taxpayers, whether citizens or alien
The percentage tax on the sale is: Corporate taxpayers, whether domestic or foreign
P15,000 c. P30,000 Estates and Trust
P25,000 d. P50,10 Dealers in securities
Answer: B
0 Stock Transaction Tax = P5M 4005 = P25,000 Answer: D

127. Assume Trillanes sold the shares in 2018, the percentage tax on the sale is 132. Gallery Corporation issued 10,000 shares, with par value of P100 per share, to Mr.
P15,000 c. P30,000 Apolinario Bobadilla for R150 per share. The transaction did not pass through,* the
P25,000 d. P50,000 Philippine Stock Exchange. How much is the capital gains tax on the sale?
Answer: B P45,000 c. P50,000
0 Stock Transaction Tax = P5M x .006: P30,000 P25,000 d. zero

528 529
 n,
.Percenfitf e- I dep- Percete- 74-stres
Answer: D .
0 CGT is applicable only if the seller is a shareholder or investor, not issuer 137. Statement 1: Prior to the effectivity of the TRAIN Law, payment of stock transaction tax
0 The transaction is not subject to any business lax except DST . of 'A of 1% is within five (5) banking days from the date withheld by the broker.
Statement 2: Payment of stock transaction tax of 4%, 2% and 1% on primary offering
133. Using the data in the preceding number, how much is the percentage tax assuming Mc should be within thirty (30) days from the date of listing in the local stock exchange.
Mr. Bobeidilla subsequently sold his shares for P200 per share?' Both statements are correct.
P45,000 c. P10,000 Both statements are incorrect.
P25,000 d. zero Only the first statement is correct.
Only the second state statement is correct.
4 Answer: D
0 The sale will be subjected to capital gains-lax (an income tax) but not 4 Answer: A
subject to percentage tax
138. Statement 1: Upon the effectivity of the TRAIN Law, payment of stock traniaction tax of
134. Statement 1' The buyer of shares under primary offering Shall be the' one liable for the 6/10 of 1% is within five (5) banking days from the date withheld by the broker.
payment Of stock transaction tax to be-withheld and remitted by the stock broker. Statement 2: Payment of stock transaction tax of 4%, 2% and. 1% on primary offering
Statement 2: The seller shall be the one liable for the stock transaction tax of shares should be within thirty (30) days from the dale of listing in the local stock exchange.
sold under secondary offering offering. Both statements are correct
A Both statements are incorrect.
s. Only the first statement is correct.
Statement 1 True True False False
d. Only the second state statement is caned.
Statement 2 True False True False
Answer: A
4 Answer:?
, 13y Prior to 2018, the following percentage taxes arepaid on a monthly.basis, except?
135. Which of the following-perce4age taxes is paid on a quartedy,basis Viet toleffectivitY of . Franchise tax
the TRAIN Law? Tax on winnings .
Tax on overseas. disPatch, message, or conversation originating from the 111. Percentage' tax on international carriers
Philippines • •,-
Overseas communication's tax .
Amusement taxes Percentage tax on banks and nonbank financial intermediaries
111. Stock transactions tax land It only c. L land HI only
IV. Percentage lax on.intemational carriers II and IV only d. All of the above
land II only c. I, II and IV only
Ill and IV only d. I, II, Ill and IV Answer: B

4 Answer: A 140. Assume the taxable year is 2018, which of the percentage taxes in the preceding number
is paid on a quarterly basis?
136. Assume the taxable year is 2018, which of the percentage taxes in the preceding number I and II only c. I, II and III only
is paid on a quarterly basis? II and IV only d. All of the above
I and II only c I, II IV only
III and IV only d I, II, I and IV Answer: D
a
Answer: C

530 531

PART 12
C. EXEMPT TRANSACTIONS
A. BUSINESS TAXES
Business taxes are those imposed upon onerous transfers,such as sale,: barter,
exchange and importation. It is called as such because without 'business,
pursued in the Philippines (except importation) by the taxpayer, business taxes -
cannot be applied. Business taxes are in-addition te income and other taxes
paid, unless specifically exempted.
EXCEPTION: . .
Any business pursued by an individual - where, the • aggregate gross sale ,or ;
, ,receipts do not exceed I2100,000 during the any 12 month , period shall be
considered principally for shbsistence or livelihood and not in the-ordinary course
. of trade or business. Hence, not subject to business taxes. ' , _
TYPES:
Value Added Tax
Other Percentage Taxes
Excise Taxes
Documentary Stamp Taxes
B. NATURE AND CHARACTERISTICS OF VAT
It is a business tax levied on the value-added on certain goods, prOperties
and services in the domestic market and/or importer of goods. • NOTE: Such goods must be exempt from customs duties.
It is imposed not on the goods or services as such but. on the privilege of
selling or importing goods or rendering services for a fee, remuneration or
consideration. • household effects, provided.
It is an indirect tax and the amount 4:if tax may be shifted or passed on to
the buyer, transferee or lessee of the goods, properties or services.
The party directly liable for the payment of the tax is the seller, importer or
the service provider, although the burden of the tax may be shifted or
passed on to the consumer. .
532
]%,/, 74,77,7/74
This means the sale of goods, properties or services and the use or lease of
properties are not subject to VAT (Output Tax) and the seller or lessor is not
allowed to any tax credit on VAT (Input Tax) on purchases.
The following are VAT-Exempt transactions (under TRAIN Law): .
1) Sale or importation of:
agricultural and marine food product in their original state;.
livestock and poultry used as, or producing foods for human human'
consumption;
breeding stock and genetic materials.
Products considered in their original state:
products which undergone simple processes of preparation or
preservation for the market (freezing, drying, salting, broiling,
roasting, smoking or stripping)
polished or husked rice
corn grits
raw cane sugar and molasses
ordinary salt
copra
NOTE: Livestock or poultry does not include fighting cocks race horses,
zoo animals and other animals generally conSidered as pets.
2) Sale or importationof:
Fertilizers
Seeds, seedlings and fingerlings.,
- Fish, prawn, livestock and boUttry feeds
d.. Ingredients used in the manufacture of finished feeds (except
'specialty feeds for race horses, fighting cocks, aquariurn fish, zoo
animals and other animals generally considered as pets).
3) Importation of personal and household effects belonging to-the:
residents of the Philippines returning from abroad; and •
Non-resident citizens coming to resettle in the Philippines.
4) Importation of professional instruments and implements, tools of trade
occupation or employment, wearing apparel, domestic animals, and personal
a. It belongs to persons coming to settle in the Philippines, or Filipinos or
their families and descendants who are now -residents or citizens of other
countries such parties herein referred to as overseas Filipinos;
b In quantities and of the class suitable to the profession, rank or position
of the persons importing said items;
c For their own use and not for sale, barter or exchange;
d Accompanying such persons, or arriving within a reasonable time.
533
 late-AiLl71;11

12) For agricultural cooperatives:

Provided, that the Bureau of Customs may, upon the production of
Sales to their menibera -
' satisfactory evidence that such persons are actually coming to settle in
Sales to non-memteis.if the copPeratNe is the producer ,(If not,
the Philippines-and that the goods are brought-from their fonther.place of
subject to VAT). • ;' „(04': •"
abode, exempt-such goods from payment of duties and taxes:-Provded,
Importation of: • ' r '9 '7 • ••
\further, vehicles, vessels, aircraft And Machineries and other -similar
- direct forth inputs; MadlIfieriest eirei equipment, including spare ,
goods for use in manufacture, shall riot fall within_this classification and•
Skiall therefore be subject to duties, taxes and other charges.. to be used directly' and: SuWely:ln the production and/or
processing of their proeded.:t •
5) Services subject to percentage tax
' SALE TAX.
Services by agricbitural contract growers and milling for others of play-into
rice, corn into grits and sugar cane into raw sugar;
. Sale of cooperative's,'OW n; lpfogy.ct
, , , .,.. ite. its. .. + Exempt
. members.
• Sale of cooperative's •-r.,,OWil 'phigLice • to Exempt
AGRICULTURAL CONTRACT GROWER': •
Refer to those persons producing for others' po ' ultry, livestotk or other nonmembers ' :''''-'-';:j-k..1-',
.: • '.:'
• Sale to its members of•gdgc1S.,other.thaii the: Exempt
agricultural and Marine food produds.in their original state such as contract
for a package of senices of receivihg eggs. from breeder . farm,. sorting, k
cooperative's own produce !?--‘-.!27-..•'•
• Sale to nonmembers of good other ;than the Subject to Vat
fumigating, setting, hatching; sexing of day;oid • broilers. .sorting.and .
. delivering them to other crintract grower. . cooperative's own produce :"..±A- ..i"?...ch .

7) Medical, dental, hospital and veterinary services "except.those rendeied. .-

professionals; . . -• , .• 13) Gross receipts froth lending activitiest, bi,i'credit or mulii-purlose
cooperatives
••••„ '. • ". •

NOTE:
. . . '. • . ....
. Laboratory services are'exempted.' if the: hcispital et- clbit.operates.a. GROSS RECEIPTS TAX .
pharmacy or dhigitote, the sole of .drugs and' medicines'•are-subjed • Gross Receipts from tendingaethatleS<Icrits -"Exempt
- members • - - „ . 0 ii- *.:4141fIr' .,-
VAT.
Hospital •billi- Atenstitute medical services: ..The• sale's- Made by the • t
Gross Receipts from - tapthriMi Aiiiiiiittel'. to. ' Exempt
drugstore ter the inapatients which are IndudeclIrt.tti<hostirtal; bills are • nonmembers
' part of medical bills (not subject to vat). • •••• •• ' Gross Receipts from Non-Lending ,AeliVitiesqo Subject to Vat
.The safes of the drug store to the out-patientS are taxable.becadse
. they • its members and non-members :. •
art NOT PART of medical services of the hospital.

8) Educational servicestendered by: - '14) Sales by non-agricultural, non-electric. and norktedit Cooperatives,
a: private educatibnal institutions, duly accredited by: provided, that the share capital contribution of -each member does not
Department of EducatiOn (DepEd) exceed P15,000
ii Commission on Higher Education (CHED) • • NOTE:
Technical Education and Skills Devebpment Authority (TESDA) Importation by non-agricultural, non-electric and noncredit cooperatives
of machineries and equipment including spare parts thereof, to be used
b. Government Educati6Tiallittitut4 by-thern-are-subject-to-VAT..

9). Services rendered by individual# pursuant to an employer-employee 1. CONTRIBUTION TAX

relationship Contribution • er member 5 P15 000
Contribution • er member > P15 000
10) Services rendered by regional or area headquarters

11) Transactions which are exempt under international agreements to which-

the Philippines is a signatory or under special laws

535
534
 vaite Agivi 7/tAt /411-17eirlite;

as may from time to time be determined by HUDCC and the NEDA

15) Export sales by persons who are not VAT-registered and other related laws.

. EXPORT SALE , 'Socialized housing' raters to housing programs and projects covering houses
By a Vat Registered Exporter By a Non Vat Registered EXporte and home lots only that are undertaken by the government or the
(Subject to 00/a Vat) . (Exempt from Vat), private sector for the underprivileged and . homeless citizens, which shall
include sites and services development, long-tern financing, liberalized terms
FORMULA: on interest payments, and as such other benefits in accordance with the
Output Vat (@ 0%) • PO Output Vat . None' provisions oi Republic Act 7279, otherwise known as the 'Urban Development
Input Vat Input Vat*** N/A and Housing Act of 1992' and RA No. 7835 and RA No. 8763. 'Socialized
Dal
Excess Input Vat" Vat Payable None Housing' shall also refer to projects intended for the underprivileged and
homeless wherein the housing package selling price is Within the lowest
**MAY BE: ***may be closed to expense or - interest rates under the Unified Home Lending Program (UHLP) or any
Refunded cost equivalent housing program of the Government, the private sector or non-
Used as Tax Credit against governnient organizations,
output vat in relation to sales
subjected to 120/0 vat (local d Real properties primarily held for sale to customers or held for
sales) lease in the ordinary course of trade or business, if:
May be converted into a tax i. Residential lot valued at:
credit certificate for payment Prior to Jan. 1,2018: P1,919,500 and below;
of any internal revenue taxes Beg. Jan. 1, 2018 (TRAIN Law): P1,500,000
BIR taxes
i(. House and lot, and other residential dwellings valued at:
16) Sale of: Prior to Jan. 1, 2018: P3,199;200 and below;
.a. - Real propertres• not primarily held,for sale to custOthers cirheld for Beg. Jan. 1, 2018 (TRAIN Law): P2,500,000
lease in the ordinarY thurSe of trade or. business. However, even if
the real property is not primarily held for sale tor cifstomers pr held NOTE:'
for lease in the ordinary conrseof trade or-business but the same IS If two or more adjacent residential lots ale sold or disposed in
used in trade or business of the seller, the ,sale thereof shall be favor of one buyer, for .the purpose of utilizing the lots as one
subject to vat being a transaction incidental to the taxpayer's Main residential lot, the sale shall be exempt from vat only if the
business. aggregate value do not exceed P1,506,000 (as amended).
Adjacent residential lots, although coVlered by separate titles and/or
Real property utilized for low-Cost housing as defined under RA No. separate tax declarations, when sold to'one and the same buyer,
7279, otherwise known as the "Urban Development and Housing whether covered by one separate Deed of Conveyance, shall. be
Act of 1992" and other related laws. presumed as sale of one residential lot.

'Low-cost housing' refers to housing projects intended for" homeless low-
income family beneficiaries, undertaken by the Government or private
developers, which may either be a subdivision or a condominium, registered
and licensed by the Housinglatid Land ,Use Regulatory Board/Housing
(HLURB) under BP Big. 220, Pig 957, or any other similar law, wherein the
unit selling price is wghin the sellkag.price per unit asset by the Housing and
Urban Development coordinating Council (HUOCC) pursuant to RA 7279,
otherwise known as the 'Urban Development and Housing Act of 1.992' and
other laws.
Real property utilized for "soeialized housing" as defined by
Republic Act No. 7279, and other related laws such as RA No. 7835
and - RA No. 8763, wherein the price ceiling per unit is P450,000 or
Provided, that beginning January 1, 2021, the vat exemption shall
only. apply to sale of real properties not primarily held fro sale to
customers or held for lease in the ordinary course of trade or
business, sale of real property utilized for socialized housing as
defined under - RA No. 7279, sale of house and lot and other
residential dwellings with selling price of not more that two million
pesos (P2,000,000); Provided, further, that every three (3) years
thereafter, the amounts state herein shall be adjusted to its present
value using the Consumer Price Index, as published by the
Philippine Statistics Authority (PSA).

536 537
 14 4,6 Agtliir
17) Lease of a residential unit with a monthly rental not exceeding P15,000
20) "Sale, importation or lease of passenger or cargo vessels and aircraft,
(P12,800 prior to Jan. 1, 2018), regardless of the amount of aggregated
. rentals received by the lessor during the year.
NIQTES:
LFASE of RESIDENTIAL UNITS where the monthly rental per`unit -
exceeds P15,000 (previously P12,800) but the aggregate of such rentals
..tbf the lessor during the year do not exceed P3,000,000 (previously
pI,919,500) shall likewise be exempt from VAT, however, the same .
shall be subjected to three (3%) percentage tax (RR 16-2011; RR-13-
2018).
In cases where a lessor has SEVERAL RESIDENTIAL UNITS for LEASE,
some are leased out for a monthly rental. per -unit of not excee'clipg
P15,000 beginning Jan. 1, 2018 (previously P12,800) while others are
leased out for more than P15,000 or P12,800,- as thecase may be, per
unit, his tax liability will be:
The gross receipts from rentals not exceeding P15,009 (previously
P12,800) per month per unit shall be exempt from VAT regardless
of the aggregate annual gross receipts.
The gross receipts from rentals exceeding P15,000 (preViously
P12,800) per month per unit shall be subject to VAT If the annual
. disabilities, as provided under RA No. 9994 (Expanded Senior Citizens Act of
gross receipts (from said -units only not • includjng. the ,moss
receipts -from, units leased out for not - more--thanP.15,000
. (previously P12,8130) exceed - P3,000,000 (P1,919,500- prior to
2018). Otherwise, the gross receipts shall be subject to three
pet:cent (3%) percentage tax under section 116 of the tax code (PR.
16-2011; RR 13-2018).
18) Sale, importation,. printing or publication of books and am/ newspaper,
magazine, review or bulletin: .
Appears at regular intervals; • condominium corporations established under RA No. 9904 (Magna Carta for
With fixed prices for subscription and sale;
Not devoted principally to the publication of paid advertisements., •
19) Transport of passengers by international carriers doing business in the
Philippines. The same shall not be subject to Other Percentage Taxes as
amended under RA10378 and Transsort of cargo by international carriers
doing business in the Philippines, a4 the same is subject to 3% common
carrier's tax (Other Percentage Taxesas amended under RA10378 and (RR
15-2015).
538
416,(7+
including engine, equipment and spare parts thereof for domestic or
international transport operations, provided, that the exemption from vat on
the importation and local purchase of passenger and/or cargo vessels shall
be subject to the requirements on restriction on vessel importation and
mandatory vessel retirement program of MARINA (RR 15-2015).
21) Importation of fuel, goods and supplies, by persons engaged in
international shipping or air transport operations, provided that:
Fuel, goods and supplies shall be exclusively or shall pertain to the
transport of goods and/or passenger from a port in the Philippines
directly to a foreign port without stopping at any other port in the
Philippines.
Fuel, goods or supplies is used for the purposes other than -that
mentioned in the preceding paragraph, sudi portion of fuel, goods
and supplies shall be subject to 12% vat.
"Services of banks, non-bank financial intemiediaries. performing quasi-
banking functions, and other non-bank finandal intermediaries such as
money changers and pawnshops, subject to percentage tax under Sections
121 and 122, respectively, of the Tax Code.
Sale or lease of goods and. services ,to senior citizens: and persons with
2010) and RA No. 10754 (An Act Expanding-the Benefits and Privileges of
Persons with Disability (PWD), respectively.
Transfer of property pursuant to Section 40(C)(2) of the Tax Code, as
amended (Upon effectivity of RA10963-TRAIN Law only; new provision). •
Association dues, membership fees, and other assessments and charges
collected on a purely reimbursement basis by homeowners' associations and
Homeowners' and Homeowners Association) and RA - No.. 4726
(Condominium Act), respectively. This provision shall take effect only
beginning January 1, 2018 or upon the effectivity of FtA10963-TRAIN Law
(new provision).
Sale of Gold to the Bangko Sentra' ng Pilipinas (BSP). This provision shall
take effect only beginning January 1, 2018 or upon the effectivity of
RA10963-TRAIN Law (new provision).
Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension beginning January 1, 2019 (new provision)
"Sale or lease of goods or properties or the performance of services other
than the transactions mentioned in the preceding paragraphs, the gross
annual sales and/or receipts do not exceed the amount of P3,000,000, as
amended (previously P1,919,500).
539
 1721:6
'Viii,e741/4( -1/g.471/Z17411}
- ,

3) CANCELLATION OF VAT REGISTRATION

D. VAT REGISTRATION
Instances when a VAT-registered person may cancel his VAT
1) MANDATORY REGISTRATION • registration:
Any person or entity who, in the course of his trade or business, sells, 1. If he makes a written application and can demonstrate to the
barters, exchanges, leases goods or properties and renders services-subject . commissioner's satisfaction that his gross sales or receipts for the
to VAT, if the aggregate amount of actual gross sales or receipts exceed following twelve (12) months, other than those that are exempt under
P3,000,000. (as amended) for the past 12 months (other than those Section 109 (A) to (U), will not exceed P3,000,000, as amended; or
that art. exempt) OR there are reasons to believe that the gross sales or
receipts for the next 12 months will exceed P3,000,000. 2. If he has ceased to carry on his trade or business, and does not expect to
recommence any trade or business within the next-twelve (12) months. .
Radio and/or television broadcasting companies whose annual gross receipts V The cancellation for registration will be effective from the first day of
of the preceding year exceeds P10,000,000. - the following month the cancellation was approved.

A person required to register as VAT taxpayer but failed to register. POWER OF THE COMMISSIONER TO SUSPEND BUSINESS OPERATIONS:
t The Commissioner of the Internal Revenue or his authorized
Penalty for non-registration of those required to .registeres VAT? representative may order suspension or closureof business
He shall be liable to pay the tax as if he were a VAT-registered person but establishment for a period of not less than 5 days for any of the
he cannot avail the benefits of input tax credit for the period he was not following violations:
properly registered. Failure to issue receipts or invoices
Failure to file vat return .•
2) OPTIONAL REGISTATION Understatement of taxable sales or receipts by 300/vor
more of the correct taxable sales or receipts for the taxable
Any person who is VAT-exempt'or not required to register for VAT quarter.
may, in relation to D.1.a above, elect to be VAT-registered by 'registering Failure of any person to register as required under the law. .
with the ROO. that has jurisdiction over the head office:of that person, and
pay the annual registration fee of P506.00 for /every.separate and distinct E. VAT FOR SELLER OF GOODS, PROPERTIES AND SERVICES
establishment. Any person who elects to register under optional registraticin
Shall not be allowed to cancel his registrabbn for the next three (3) years. PERSONS LIABLE - Any person who, in the course of his trade or business:
Sells, barters or exchanges goods or properties (Seller of Goods or
Kny person who is VAT-registered but enters into transactions which are Properties)
exempt from VAT (mixed transactions) may opt that the VAT apply to his Leases goods or properties (Lessor)
transactions which would have been exempt under Section 109(1) of the Renders services (Service Provider)
Tax Code, as amended [Sec. 109(2)1.
MEANING OF "IN THE COURSE OF TRADE OR BUSINESS" — the regular conduct
Fienchise grantees of radio and/or television broadcasting whose or pursuit of a commercial or economic activity, including transactions incidental
annual gross receipts of the preceding year do not exceed ten million pesos thereto, by any person regardless of whether or not the person engaged therein
(P10,000,000.00) derived from the NJAiness covered by the law granting the is a non-stock non-profit private organization (irrespective of the disposition of
franchise may opt for VAT registraeon. This option, once exercised, its net income and whether or not it sells exdusively to members or their
shall be irrevocable. (Sec. 119, Taxiode). guests), or government entity.
•
The above-stated taxpayers may apply for VAT registration not later than FORMULA:
ten (10) days before the beginning of the calendar quarter and shall pay the
registration fee unless they have already paid at the beginning of the year. Output Tax PXXX
In any case, the Commissioner of Internal Revenue may, for administrative Input Tax a.L1
(
reason deny any application fo( registration. Once registered as a VAT VAT Payable (Excess Input Tax) PXXX
person, the taxpayer shall be liable to output tax and be entitled to input tax
credit beginning on the first day of the month following registration.

540 511
 74444%67742 Va/ ,A 177
,eir
, fre

Gross Selling Price — means the total amount of money or its equivalent which the
F. OUTPUT TAX OF SELLER OF GOODS OR PROPERTIES purchaser pays or is obligated to pay to the seller in consideration of the sale, barter
or exchange of the goods or properties, excluding VAT. The excise tax, if any, on
C. KINDS OF SALE OF GOODS OR PROPERTIES SUBJECT TO VAT: such goods or properties shall form part of the gross selling price.
1. Actual Sale
2. Transactions deemed sale: NOTE: The following shall be allowed as deductions from gross selling price;
Transfer, use or consumption not in the course of business of goods or Sales discount indicated in the invoice at the time of sale, the grant of which
Aroperties originally intended, for; sale or for ,use in the course of is not dependent upon the happening of a future event; and •
business. Transfer of goods or properties not in the course of business Sales returns and allowances for which a proper ci it Or refund was made
can take place when VAT-registered person withdraws goods from his for sales previously recorded as taxable sales. "
business for his personal use;
Distribution or transfer to: DEFINITION OF GROSS SELLING PRIG? EXPRESSED IN A FORMULA:
i. .Shareholders or investors share in the Profits- of VAT-registered
person; Gross Sales PX)IX
R. Creditor§ in payment of debt; Less: Sales discount
Consignment of goods if actual sale is not made within 60 days Sales returns & allowances XX
following the date such goods were consigned; and Net Sales PXXX
Retirement from or cessation of business with respect to all. goods on ; Add: Excise tax XX
hand, whether capital goods, stack-in-trade; supplies or Materials as of Tax Base ROM
the date Of such retirement or cessation, whether orria the businessis
continued by the new owner or successor. -Fair Market Value — means fair market value as shown in the schedule of values of
the Provincial and City Assessors (real property tax declaration).
FORMULA IN COMPUTING OUTPUT TAX
Zonal Value— means fair market value as determined by the BIR Ccimmissioner.
Tax Rase PXXX
Rate ' XX% Deferred Payment Basis - means sale of real property,, the initial payments- of which
Output Tax PXXX in the-year of sale exceed 25% of the gross selling price. '

TAX BASE Installment Plan — means sale of real property, the initial payment of which in
the year of sale do not exceed 25% of the gross selling price:
; Actual Sale
I ;,..; l_Persona_l_prop_er i GSP COMPONENTS OF INITIAL PAYMENT:
________.;_.„ PM<
1.lash i GSP vs. FMV vs. ZV w/c ii Down payment
_ ...... ..........,Sale
. : Other collections in the year of sale ; XXX
2. Deferred Payment ; ever is the highest
! Excess of unpaid mortgage over cost XXX
i Basis 4 Initial Payments I3)00( • -
3. Installment Plan [(Collection/6SP) x GSP'
Vs. FMV vs. ZV w/c ever is
.........
Transaction Deemed Sale
..2._.1....(a),_(h) and (c) above L FMV
'2. (d) above I AC vs. FMV (w/c ever is
I

GSP — Gross Selling Price

FMV — Fair market value
ZV — Zonal Value
AC— Acquisition Cost

542 543
 fige(74 iL4141-17;(6.
3. EXPORT SALE Items 1(b), 1(c) and 1(d) above are now subject to 12% vat under
RATE- As a general rule, the rate of value-added tax for the sale of goods or Sec. 31 of kfion953 (TRAiN Law) upon satisfactionof the following
properties is 12% (Local Sales). However, the following transactions are subject
to 0% (ZERO-RATED SALES): Successful establishment and implementation of an enhance refund
system that grants refunds of creditable input tax within 90 days
1) Export Sales: from the filing of the vat refund application with the BR; Provided
Sale and actual shipment of goods from the Philippines to a foreign that, all applications filed from January 1, 2018 shall be processed.
.zIcountry, paid for in acceptable currency, and . accounted for. in and decided within 90 days from the filing of the vat refund
accordance with the rules and regulations of the BSP; application.
Sale of raw materials or packaging materials to a non-resident buyer for
delivery to a resident local export oriented enterprise to be used in The ninety (90) day period to process and decide, pending the
manufacturing, processing, packing or repacking in the Philippines of • establishment of the enhanced VAT Refund System shall only be up
the said buyer's goods, paid for in acceptable currency, and accounted to the date of approval of the Recommendation Report on such
for in accordance with the rules and regulations of the BSP; . application for VAT refund by the Commissioner or his duly
Sale of raw materials or packaging materials to an export-oriented authorized representative; Provided; that all claims for refund/tax
enterprise whose export sales exceed 70% of total annual production; credit certificate filed prior to January 1, 2018 will be governed by
the one-hundred (120)-day processing period. and
Transactions considered export sales under E.O. No. 226; All pending vat refund claims as of Dec. 31, 2017 shall be fully paid
in. cash by Dec. 31, 2019.
ART. 23 EO 226
That without actual exportation the following shall be considered Sale of gold to 1351' (Vat exempt beginning Jan. 1, 2018) .
constructively espoited for purposes Of this-provision: -
sales to bonded manufacturing warehouses of export-oriented Sale of goods, supplies, equipment and fuel to persons engaged in
manufacturErs; . intemabonal shipping or international air transpore operations.
sales to export processing zones;
sales to registered export -traders operating bonded. trading Foreign Currency Denominated Sale (repealed Under TRAIN Law) 7
warehouses supplying raW materials used in the. manufacture-of means the sale to a non-resident of goods, except automobile and non-
export products under guidelines to be • set by the Board in- essential goods, assembled or manufactured in the Philippines for delivery to
consultation with the Bureau of -Internal- Revenue- and the Bureau a resident in the Philippines, paid for in acceptable foreign currency and
of Customs; accounted for in accordance with the rules and regulations of the BSP.
sales to foreign military bases, diplomatic . missions and • other
agencies and/or instrumentalities granted tax immunities, 'of locally Sales to Persons or Entities Deemed Tax-exempt under Special Law Or
manufactured, assembled or repacked products whether paid for in International Agreement (Also Known as Effectively Zero-Rated Sale):
foreign currency or not: Provided, further, that export sales of Sales of goods or property to persons or entities who are tax-exempt
registered export traders may include commission income: :and under special laws, such as: •
Provided, finally, that exportation of goods on consignment shall Subic Bay Metropolitan Authority (SBMA)
not be deemed export sales until the export products consigned are Philippine Economic Zone Authority (PEZA)
in fact sold by the consignee.
Sales of locally manufactured or assembled goods for household Sales of goods or property to persons or entities who are tax-exempt
and personal use to Filipinot.abroad and other non-residerits of the under international agreements to which the Philippines is a signatory,
Philippines as well as returning Overseas Filipinos under the such as:
Internal Export Program of the government and paid for in - Asian Development Bank (ADS)
convertible foreign currency inwardly remitted through the - International Rice Research Institute (IRRI)
Philippine banking systems shall also be considered export sales.
NOTE: A zero-rated sale of goods or properties is a taxable transaction Mr VAT .
purposes, but shall not result in any output tax. However, the input tax on purchases
of goods, properties or services, related to such zero-rated sale, shall be.available as
tax credit or refund.

544 545
 yr iatafort, a %At 46:67-6)(
STATUS QUO ON VAT ZERO-RATING OF SALES TO PEZA.ENTITIES •
NOTE:
,DOF Memorandum Circular No. 2018-003 declared "status quo" on vat-zero For Dealer in Securities, the term "gross receipts" means gross Selling
rating incentive on the sale of goods/service, to sepaiate custom§ territeries.. It price less cost of securities sold.
further prbVes that Section 8 of • the PEZA Law, which provides :that special
economic zones are to be operated and managed as a .separate ctistdms territory; "Constructive receipt" occurs when the money consideration or its equivalent
was not amended or repealed by TRAIN Law. Consequently, until a laW.6r,..revenue- is placed at the control of the person who rendered the service without
regulation is passed orissued contrary to or incompatible with the.prohouncement by restrictions by the payor. The following are example of constructive receipts:
the DOF, the vat zero-rating incentive being enjoyed by PEZA locators or entitiesShall Deposits in banks which are made available to the seller of services .
remain in full force and effect • • without restrictions;
Issuance by the debtor of a notice to offset any debt or obligation and •
acceptance thereof by the, seller as payment for services rendered; and
G. OUTPUT TAX OF SELLER OF SERVICES AND LESSOR OF GOODS .DR Transfer of the amounts retained bythe payorto the account of the
PROPERTIES cOntractor.
.1. FORMULA IN COMPUTING OUTPUT TAX 4. RATE - As a general rule, the rate of value-added tax for the sale of services
and lease of goods or properties is 12%. However, the following transactions
Gross Receipts PX)0( are subject to 0% (ZERO-RATED SALES):
Rate XX0/u
Output Tax NOM -Processing, manufacturing or repacking goods far other persons dbing
business outside the Philippines, which goods are subsequently exported,
Gross Receipts — refers to the total amount of money or its equivalent where services are paid for in 'aeceptable foreign' currency and accounted for
representing the contract price; compensation, service.fee, 'rental or royalty, in accordance with the rules and regulations of the BSP;
including the amount charged for materials supplied with :the services and. •
. deposits applied as payncecits 'far services rendered and ,advance payments 2 Services performed by subcontractors and/or cOntractort in PrOcessing,
actually br• mngtructively.: received for the servicelperformedtr:to te'pOrformed converting; or manufacturing goods for an enterprise -whose export sales
for another person, excluding- VAT.. exceed 70% of the total annual production;
. . . , ' ., „
Advance Payments. In a lease contract, advance payment by the lessee may be: Transactions #I and #2 above, are already subject to 12°A; vat from the
efft.Uvity of RA10963 upon satisfaction of the following:
1. A loan to the lessor from the lessee. • a Successful establishment and implementation of an enhance refund
2. An option money for the property. system that grants refunds of creditable input tax within 90 days
3. A security 'deposit to insure the NOT - from the filing of the vat refund application with the- BIR; Provided
faithful performance of certain subject tb that, all applications filed from January 1, 2018 shall be processed
obligations of the lessee to the lessor. VAT and decided within 90 days froni the filing of the vat refund
application.
4 Prepaid rental Subject to
VAT The ninety (90) day period to process and decide, pending the
establishment of the enhanced VAT Refund System shall only be.up
to the date of approval of the Recommendation Report on such
DEFINITION OF GROSS RECEIPTS EXPRESID IN A FORMULA: application for VAT refund by the Commissioner or his duly
• authorized representative; Provided; that all claims for refund/tax
Cash received (actually and constructively) 1:9C<X credit certificate filed prior to January 1, 2014 will be governectby
Advance payments YJCX the one-hundred (120)-day processing period. and
Materials charged for services XXX
Gross receipts PXXX All pending vat refund claims as of Dec. 31, 2017 shall be fully paid
in cash by Dec. 31, 2019.

546 - 54L. -

Services other than processing, manufacturing or repacking goods for other
persons engaged in business who is outside the Philippines •When the
services are performed:the consideration for which is paid for inacceptable
foreign currency and accounted for in accordance with the rules and •
regulations of the BSP;
• Amount Deductible = Input Tax/Amortization period
Services rendered to persons or entities whose exemption under special laws
or-ihtemational agreements to which the Philippines is a signatory effectively
subjects the supply of services to zero percent (0%) rate;
Services rendered to persons engaged in ,international shipping or air
transport operations, including leases of property for use thereof;
, 100% deductible).
Transport of passengers and cargo by domestic air or sea carriers from the
Philippines to a foreign country; and
Sale of, power or fuel generated through renewable sources of energy such
as, but not limited to:
Biomass
Solar
Wind
Hydropower
Geothermal and Steam
Ocean energy
Other emerginwources using technologies Such as fuel .cells and
hydrogen fuels.
INPUT TAX •
REQUISITES:
H 1. The taxpayer is a VAT-registered person; and
2. The input tax is related to business subject to VAT (12% and 0%).
KINDS OF INPUT TAX
Input tax on local purchases of goods or properties other than capital goods;
Input tax on importation of goods or properties other than capital goods;
Input tax on local purchases or importation of capital goods;
Input tax on local purchases of services;
Creditable withholding VAT
Transitional input tax
Presumptive input tax 1 Rate
a PXXX
INPUT TAX ON LOCAL PURCHASES OR IMPORTATION OF CAPITAL GOODS
Capital Goods - refer to depreciable properties in which the useful. life is more
than one (1) year.
548
iL44,‘.174
When is amortization required?
Purchases or importation of capital goods, the aggregate acquisition cost of '
which (net of VAT) in a calendar month exceeds P1,000,000. regardless of the
acquisition cost of each capital good: shall be amortized.
NOTE:
1. Amortization period is the shorter period of the following:
60 months
Useful life in months
2. If the 1M threshold is not breached, no need for amortization (Input Tax is
3. If the CAPITAL GOOD IS SOLD within the five (5) year period or prior to
exhaustion of Input Vat thereon, the ENTIRE UNAMORTIZED INPUT TAX on
the capital goods sold can be claimed as input tax credit during the month
or quarter when the sale is made.
4 Construction in Progress is a purchase of services. Input taxes will be
carted in the month payment was made on the progress billing. In the
case Where labor will be furnished by the contractor and materials will be
purchased by the contractee from other suppliers, input taxes will be
recognized on labor when payment is made on the progress billings while
input taXes will be recognized on materials at the time the. •materialsare
purchased.
- 4* CREDITABLE WITHHOLDING VAT
Non-resident persons Who perforta services in the Philippines are deemed -to be
making sales in the course of trade or business, even if the performance of
services is not regular.
The recipient of the service is the one required to withhold and remit the VAT to
the BIR. Such VAT can be claimed by the recipient as input tax.
TRANSITIONAL INPUT TAX
Persons Covered.
Taxpayers who became VAT-registered persons (previously non-VAT) shall be
entitled to a transitional input tax.
Amount Deductible:
Beginning Inventory PXXX
2%
Actual Input VAT, Inventory beg. XXX
Transitional Input Tax (Higher Amount) PXXX e
NOTE: Beginning inventory will include all inventories related to business subject
to VAT regardless of whether or not it was purchased from VAT or non-VAT
supplier.
549
 LfL7ziatleir: Agirbff,,
PRESUMPTIVE INPUT TAX
PersonS Covered: FINAL WITHHOLDING VAT
Persons or firms engaged in:
Processing of sardines, mackerel and milk; and The government or any of its political subdivisions, instrumentalities or
Manufacturing refined sugar, cooking oil and packed noodle-based instant agencies, inci, GOCCs shall, before making payment on account of-each
meals. purchase of goods and or services taxed at 12% VAT, deduct and withhold a
Final VAT due at the rate of five percent (5%) of the gross payment. -
Amount :Deductible:
The 5% final VA1 shaft represent the net VAT payable to the seller. The
Purchases of Primary Agricultural Products PXXX remaining 7% effectively accounts for the standard input VAT of the seller,
Rate 4% " in lieu of the actual input VAT.
Presumptive Input Tax MO( "
The difference between actual input VAT and standard input VAT must be
I. VAT ON IMPORTATION closed to expense or cost. •

PERSONS LIABLE: • MIXED BUSINESS TRANSACTIONS

Any person who bring goods into the Philippines, whether or not made in ,
. ,
the course or his trade or business. Refer to a situation wherein the taxpayer is engaged in transactions subjwect to
It includes non-exempt persons or entities who acquire tax-free imported VAT (12% and/or 0%) as well as not subject to VAT (exempt). The main concern
goods from exempt persons, entities or agencies. • . in such a case is the determination of input tax that can be claimed for VAT
purposes.
NOTE: In case of goods imported into the Philippines by VATrexeMpt persons;
entities oragencies 'Which are subsequently sold, transferred or exchanged in the . A Vat registered person who is also engaged in transactions not subject to Vat
4
Philippines to non-exeninpersons or entities, the latt4r shall be considered the shall be allowed of Input tax credit as follows: •
importers thereof and shall be liable for VAT due on such importation Total input tax which can be directly attributed to transactions subject to
vat (except vat taxable sales of goods and services to the government or
FORMULA: GOCCs); and
, Q:stomscluties is ad valorem (based on value): . 2. Ratable Portion of any input tax which cannot be directly attributed to either -
Dutiable Value PXXX . adivity. (allocation shalt be on the basis of sales volume.)
Customs duties XXX
acts° tax XXX EXCESS INPUT TAX
Other charges Win BOC XXX •
Tax Base PXXX KINDS OF INPUT TAX TREATMENT
Rate 12%
Related to sales subject to Carry-over
'VAT on Importation PXXX
12% VAT
b) Customs duties is specific (based on quantity or volume):_
Invoice amount PXXX Related to 0010 VAT Carry-over
Customs duties XXX Refund
Freight )XX Convert into tax credit
Insurance X certificate
Other chargesivtin BOC X
Landed Cost PAX In case of cancellation of Convert into tax credit
Excise tax XXX VAT registration certificate
Total PXXX In case it has no other tax
Rate. ' 12% liability, refund.
VAT on Importation PXXX

550 551
 Vaite. Aileiricji 741,, 446,174
Dine in, take-out, take-home, drive-thru, delivery orders (excluding
bulk orders), called-in or phoned-in orders. Bulk orders are within the
context of pre-contracted or prearranged group meals or packages,
M. VAT and DISCOUNTS FOR SENIOR CITIZENS and hence, not entitled to 200/D discount and VAT exemption.

Senior citizen or Elderly - refers to any Filipino citizen who is a resident of .the • Set meals, group meals or group walk-ins ineluding purchase of a
Philippims, sixty (60) years old or above. It may apply to senior citizens with whale cake and pizza orders.
"dual cidzenship" status provided they prove their Filipino citizenship and have at
least six (6) months residency in the Philippines (RA 9994 otherwise known as "Pasalubong" food items which are single-serving/solo meal for the
"Expanded Senior Citizens Act of 2010" and its related revenue regulations/ personal and exclusive consumption of the Senior Citizen. However,
„circulars RR7-2010, RR 8-2010, RMC 38-2012). • other "pasalubong" food items (e.g. box of •biscocho, bottles or jars of
ginarnos, several packets of mango preserves, etc) which are not for
Resident Citizen a Filipino Citizen with permanent/ legal residence • in the the personal and exclusive consumption of the Senior Citizen are NOT
Philippines, and shall include one, who, having migrated to a foreign country, has entitled to 20% discount and VAT exemption. This limitation extends to
returned to the Philippines with a definite intention to reside therein, and whose "novelty items" or-non-consumables sold in restaurants.
immigrant visa has been surrendered to the foreign government.
FORMULAs:
VAT Exempt Sales to Senior Citizens (Section 4, RR 7-20101 Disct. = (Total Billing Amount - VAT) x 20%

The following items sold to a senior citizen are vat-exempt and will entitle the Amount Due:
latter to a minimum discount of 20°./G: Total bill inclusive of vat Pxx
a) Medicine and Drug Purchases including influenza and pneumococcal Less: vat 040
vaccines and such other essential medical supplies, accessories- and Total bill exdusive of vat 13,Joi
equipment. Less: 20% discount 000**
Professional fees of attending physicians in all private hospitals, Medical Total Amount Due • Pielt
facilities, outpatient clinics and home health care services:
Professional fees of licensed health. workers Proyiding' home health care Total Billing Amt.
services in all private hospitals, medical facilities, outpatient 'clinics, and **Dsct.= No. of customers Less VAT x 20%
home health care services
Medical and dental services, diagnostic and laboratory fees • **Use the above formula in the following cases •
On actual fare for land transportation travel • The bill is for.a group of individuak involving non-senior citizen's
In actual fare for domestic air transport and sea shipping 'vessels and [h._ and a senior citizen
like In case of set meal(s) not limited to a single serving and is shared
On the utilization of services in hotels and similar lodging establishments, with Non-Senior Citizens. •
restaurants, recreation centers For group of diners composed of Senior Citizens who ordered, for
On admission fees charged by theaters, cinema houses and concert halls, group meals or food items for sharing in restaurants and not all the
circuses, carnivals and other similar places of - culture, leisure and Senior Citizens have their valid Senior Citizen's ID cards (including.
amusement. purchase of whole cake and pizza).
.i) On funeral and burial services of senidr citizens.
Grant of 50/s Special Discount (Section 6, RR 7-2010 as amended by
RULE FOR RESTAURANTS RR 8-2010 and RMC 38-2012).
•
The discount shall be for the sale of food, drinks, dessert and other consumable A special discount of five percent (5%) of the regular retail price of basic
items served by the establishments, including value meals and promotional necessities and prime commodities as defined under Section 2 of the
meals, offered for the consumption of the general public. Condiments and side joint DTI-DA Administration Order No. 10-02, series of 2010, shall be
-products fall within the ambit of "other consumable items served by the granted to Senior Citizens on their purchases thereof, taking into
establishments". consideration that said purchases shall be for the personal and exclusive
consumption and/or enjoyment of the Senior Citizen (Section 3, Joint DU-
The 20% discount and vat exemption for restaurants shall apply to: DA Administrative Order No. 10-02, Series of 2010).

552 553
 74,4e, /1/(417tijd;

a) Basic Necessities NOTE:

Rufe The input tax attributable to the exempt sale shall not be allowed as an
Corn input tax credit and must be closed to cost or expense account by the
• Bread excluding pastries and cakes seller (Sec. 10, RR 7-2010).
Fresh, dried and canned fish and other marine products
Fresh pork, beef and poultry meet While RA 9994 expressly provides -for the VAT exemption of Senior
Fresh eggs Citizens on their purchase of certain goods and services, the law does
Fresh and processed milk not include exemption from theo payinent of Percentage Tax.
Fresh vegetables including root crops
Coffee and coffee creamer In .the purchase of goods and services which are on promotional
• Sugar discount, the Senior Citizen shall avail-Of eitherthe promotional dikount
Cooking-oil or the 20%/5% discount, whichever Is higher. However, the dikount
Salt • that roust be given to the Senior. Citizen shall in no case be less -than
Powdered, liquid, bar laudry and detergent soap 20%/5%. Moreover, the sale Oficods and services on Promotional
Firewood discount is still exempt from VAT (except sale of basic necessities and
• Charcoal prime commodities)...
Candles •
Meals primarily prepared and intentionally marketed for children and-not
b) Prime Commodities for Senior Citizen's personal clonal-motion are not entitled to 20%
Fresh fruits discount. (Rule IV, Article 7, Section 3(d) of the Rules and Regulations
Flour . implementing RA No. 9994; SectIOn.6`of RR No. 7-2010). •
Dried, processed and canned pork, beef and poultry meat • •
Dairy clsoduds not falling under basic necessities Generally, alcoholic beverages are -not subject to the 20% discount and
Canned lardines, tuna VAT exemption especially If -purchased:No bulk", "in buckets" or "in
Noodles . cases". However, if served as a single:serving:drink, its purchase by a
Onions Senior Citizen is entitled to Atte ,2(K'diScOghtc and VAT, exemption.
Garlic HoweVer, alcoholic beverages purchaSed. In a- bar, dub or cabaret are
Geriatric diapers exempt from VAT but subject to amusement tax of 18% under Section
Herbicides . 125 Of the NIRC, as amended. A Senior Citizen may still, avail of the
Poultry, swine and cattle feeds 20% discount on the purchase of an alcoholic drink but the discount
Veterinary products for poultry, swine and cattle shall be limited only to a single serving of an alcoholic beverage.
Nipa shingle, plyboard and construction nails
Batteries Cigarettes/cigars are not the food or essential items deemed subject to
Electrical supplies and light bulbs the 20% discount.
Steel wire
Toll fees are not the same as "fares". Hence, It is not subject to the
Retailers — shall mean any natural or juridical, person engaged in the 20% Senior Citizen Discount.
business of- selling consumer products directly to consumers, which, shall-
include among others, supermarketgrocetY/FOnvenfentrstores and shops N. PERSONS WITH - DISABILITY . (RA7277-Magna Carla for Persons with
but excluding stalls in food courts, Yood carts and sari-sari stores with a Disability as amended under RA9442 and RA10754;)
capitalization of less than P100,000, Outilic and private wet markets, talipapa A person with disability shall refer to an individual suffering from restriction or
and cooperative stores. different abilities, as a result of mental, physical or sensory Impairment to
perform an activity in a manner or within the range considered normal for human
Purchase of basic necessities and prime commodities are not being (RR 1-2009).
exempt from vat. The total amount of purchases shall not exceed P1,300
per calendar week without carry-over of unused amount A purchase
booldet issued by OSCA shall be presented to the retailer upon purchase of
basic necessities and prime commodities.

554 555

RA 10754 AN ACT EXPANDING THE BENEFITS AND PRIVILEGES OF
PERSONS WITH DISABILITY (PWD)
"SEC. 32. Persons with disability shall be entitled to:
"(a) At let twenty percent pock) discount and exemption from the value-
added tax (VAT), if applicable, on the following sale of goods and services for the
exclusive use and enjoyment or availment of the PWD:
"(1):.bn the fees and charges relative to the utilization of all services in
hotels and similar lodging establishments; restaurants and recreation
centers;
On admission fees charged by theaters, cinema houses, concert halls,
circuses, carnivals and other similar places of culture, leisure and
amusement;
On the purchase of medicines loan drugstores;
On medical and dental services including diagnostic and laboratory fees
such as, but not limited to, x-rays, computerized tomography scans and
blood tests, and professional fees of attending dottors in all government
facilities, subject to the guidelines to be issued by the Department of Health
(DOH), in coordination ,,with the Philippine Health • Insurance Corporation
(PhilHearth);
."(5) On medical and dental services including diagnostic and laboratory fees,
and professional fet of attending doctors in, all private hospitals and
medical facilities, in accordance with the rules and-regulations to be issued
by the DOH, in coordinebon with the PhilHealth;
On fare for domestic air and sea travel;
On actual fare for land transportation travel-such as, but not limited to, -
public utility buses or jeepneys (PUB5/PU35), taxis, asian utility vehicles
(AUVs), shuttle services and public railways, including light Rail Transit
(LRT), Metro Rail Transit (MRT) and Philippine National Railways (PNR); and
"(8)On funeral and burial services for the death of the PWD: Provided, That
the beneficiary or any person who shall shoulder the funeral and burial
expenses of the deceased PWD shall claim the discount under this rule for
the deceased PWD upon presentation of the death certificate. Such
expenses shall cover the purchase of casket or urn, embalming, hospital
morigue, transport of the body to intinded burial site in the place of origin,
but shall exclude obituary publication brid the cost of the memorial lot.
14LAIgh,-;„
To the extent practicable and feasible, the continuance Of same benefits and
privileges given by the Government Service Insurance System (GS1S), Social Security
System (SSS), and Pag-IBIG, as the case may be, as are enjoyed by these in actual
service;
To the extent possible, the government may grant special discounts in special,
programs for PWD on purchase of basic commodities, subject to the guidelines to be
issued for the purpose by the Department of Trade and Industry (DTI) and the
Department of Agriculture (DA); and
Provision of express lanes for PWD in all commercial and government
establishments; in the absence thereof, priority shall be gWen to them.
"The abovementioned privileges are available only to PWD who are Filipino citizens
upon submission of any of the following as proof of his/her entitlement thereto:
"0) An identification card issued by the city or municipal mayor or the
barangay captain of the place where the PWD resides;'
"(ii) The passport of the PWD concerned; or
"(iii).Transpoitation discount fare Identification Card (ID) issued by the
National Council for.the Welfare of Disabled Persons (NCWDP). •
"The privileges may not be claimed if the PWD claims a higher discount as
may be granted by the commercial establishment and/or under other
existing laws or In combination with other discount program/s.
"The establishments may claim the-discounts granted in subsection (a), pafagraphs
(1), (2), (3), (5), (6), (7), and (8) as tax deductions based on the net cost of the
goods sold or services rendered: Provided, however, That the cost of the discount
shall be allowed as deduction from the gross income for the same taxable year that
the discount is granted: Provided, further, That the total amount of the claimed tax
deduction net of value-added tax, if applicable, shall be included in their gross salts
receipts for tax purposes and shall be subject to proper documentation and to the
provisions of the National Internal Revenue Code (NIRC), as amended. ,

"(b) Educational assistance to PWD, for them to pursue primary, secondary, tertiary,
post tertiary, as well as vocational or technical education, in both public and prWate
schools, through the provision of scholarships, grants, financiaF aids, subsidies and
other incentives to qualified PWD, including support for books, learning materials,
and uniform allowance to the extent feasible: Provided, That PWD shall meet the
minimum admission requirements;

556 .557
 , j

Jae (4 7
0. ADMINISTRATIVE PROVISIONS
1. INVOICING REQUIREMENTS
a A VAT registered person shall issue:
a) A VAT invoice for every sale; barter or . exchange of goods or
, t properties; and
'If A VAT official receipt for every lease of goods or properties and for
every sale, barter or exchange of services.
Single invoice/ receipt involving VAT and Non-VAT transactions '
A Vat registered taxpayer may issue a single invoice/ receipt involving
VAT and non-VAT transactions provided that the invoice or receipt shall
clearly indicate the break-down of the sales pride between its taxable,
exempt and zero-rated components and the calculation of the Value-
Added Tax on each portion of the sale shall be shown on•the invoice or
receipt,
CONSEQUENCES of issuing an erroneous invoice or official receipt .
If a person who is not a VAT registered person issues an invoice or
receipt showing his TIN followed by the word VAT, the nonVAT
person shall be liable to:
The percentage taxes applicable to his transactions.
N. The VAT due on the transactions without the benefit of any tax
credit; and
iii. A 50% surcharge.
If a NAT registered person issues a VAT invoice or official receipt for
a VAT-exempt transaction but fails to display prominently on the
invoice or receipt theterm "VAT EXEMPT SALE", the issuer shall be
liable to VAT.
NOTE: In both cases, the VAT shall, if other requisite inforrhation
required is shown on the invoice or receipt, be recognized as an input tax
credit to the purchaser.

:* Separate'invoices/ receipts invoNing VAT and Non-VAT transactions

A VAT registered person may issue Separate invoices/ eeceipts for the
taxable, exempt, and zero-rated component of its soles procaded.thatffi •
the sales is exerkpirt from value-added tax, the tenti"VAT-EXEMPT SALE"
shall be written o -printed prominently on the invbite or: receipt and if
the' sale is subject to zero percent (0%) VAT, the term "ZERO-RATED.
SALE" shall be written or printed prominently on the Inveice orreceipt. •

SALE TO SENIOR CITIZENS. The amount of sales that must be reported

for tax purposes is the undiscounted selling price and not the amOunt of
sales net of the discount. The gross selling price and theSales dikount
must be separately indicated in the official receipt or sales invoice issued
by the eStablishment for the sale of goods or services to the Senior
Citizen. With regard to the VAT exemption, the mochine tape must
properly segregate the VAT exempt sales from the taxable Sales
(Sections 7 and 10 of RR- No. 7-2010).

The business establishment giving sales discounts to qualified Senior ,

Citizens is required to keep a separate and accurate record of Sales,
which shall include the name °lithe Senior Citizen-purchaser, OSCA ID,
gross sales/receipts, sales discounts granted, dates Of transactions and ,
invoice/OR number for every sal . e transaction to Senior Citizens. The
invoicing requirements in Section 9.113-1 of Revenue Regulations No.
16-2005 must also be complied with (Sections 7 and 10 of RR No. 7-
2010).

558 559
 -1 /I n
V it

0 "A' is correct. Sale of an article not exempt from vat is not subject to vat if the
seller is not vat registered and the amount of annual sale or receipts s than the vat
Choose the letter of the correct answer. threshold.
.0 °I? is correct.. Sale of an article not exempt from vat is subject to vat if the seller is
Principles cl vat registered or the annual gross.sales or receipts exceeded the vat threshold.
0 t" is correct. The taxpayer or seller is engaged in mixed transactions, Refer,also
1 Value addp4 tax to the discussions in No. 2
Is an indirect national tax levied on the value added in the production of a good (or 0 V is wrong. To be subjected to excise tax, the product manufactured or imported
service) as it moves through the various.stages of production. that pertain to sin products and non-essential goods.
Is ad valorem tax.
c: Is preferred in place of a personal income tax by many economists because income 4. Winch of the following is not a business tax?
taxes are a disincentive to work, whereas a VAT , discourages unnecessary Excise Tax
consumption. Value-added tax
d. All of the above. Other percentage tax
Income tax
Answer: D
Answer: D
2 Which of the following is incorrect?
An article exempt from vat may be exempt from percentage tax 5. Which is correct?
An article subjected to excise tax may be subjected to vat Without a business pursued in the Philippines (except importation) by-the taxpayer,
An article subjected to vat may be subjected to percentage tax value added tax cannot be imposed,
None of the above 'In the course of trade or business!' means the regular conduct orpursuitof a .
ix
commercial or an economic activity, including transactions incidental thereto,-byani
Answer: C 'person regardless of Whether or.not the person engaged therein:is anim-,stects,-pon-
0 If an article is exempt from vat and at the same time not in the list of transaction - profit private organization or government entity. ,
subject to Percentage Taxes (sections 116-127), such article. is exempt business c, Services rendered in the Philippines by a non-resident foreign porsbn'shall:Wy„
tax such as but not limited to: considered as being rendered in the course of trade or business even if, the...
sale of agricultural marine food productS at its original state perforrnance is not regular.
sale of fertilizers, poultry feeds d. Al of the above •
sale of books -
Answer: D
0 Excise tax is in addition to vat or Percentage Tax 0 Generally, isolated transaction is not subject to vat. It is assumed to have been:
0 An article may be subjected to either vat or percentage tax, but same article cannot made not in the ordinary course of trade or business. However, isolated services
be subjected to both vat and percentage tax. A takpayer (individual or corporation): rendered by a nonresident foreign person is considered a transaction in , the
however, may be engaged in transactions that are subject to vat and transactions ordinary apse of trade or business, therefore subject to vat.
subject to percentage taxes (mixed transactions).. What is prohibited is "same
transaction or article' is subjected to vat and percentage tax. 6. Statement 1: For a person to be subjected_to.any business lax, it is necessary that he is
regularly engaged in the conduct or pursuit of an economic activity.
3 Which of the following is incorrect? Statement 2: A non-resident foretell person performing isolated transaction in the
A vat-taxable article may be exempt from •ett Philippines shall be liable to VAT. -
A vat-taxable article may be subject to vat
A. B. C. D.
A taxpayer may have two businesses where one is subject to vat and the other- is
subject to percentage tax Statement 1 . True True False False
Manufacturers and importers of goods are subject to excise tax Statement 2 True False True False

Answer: D Answer: A
0 Refer to the discussions in No. 5

560 561
 4147:177
11:

7479 /147;1741;
11e, ';1„1/ftle.. ://,;(1:

11. An individual who is not an employee nor a license professional, deriving gross sales or
7. Wnich Statement is wrong? Transactions considered In the course of trade or business', receipts not exceeding P100,000 from activities principally for subsistence or livelihood
and therefore subject to the business taxes include: Minimum Wage Eamer c. Ambulant Vendor •
Rigular conduct or pursuit of a commercial or an economic activity by a stock Marginal Income Earner d. A privileged store
private organization.
Regular conduct or pursuit of a commercial or an economic activity by a non-stock, Answer: B
norkprofit private organization. 0 Marginal Income Earners are not subject to business taxes.
Isolated services in the Philippines by non-resident foreign persons
Isolated sale of goods or services. 12 Pedro is a manufacturer of fermented liquors. In making sales, all taxes on the products
and transactions are passed on to the buyers. For purposes of be value added tax,
+ Answer: D which of the three (3) taxes listed below that he pays forms part of the gross setting
„
price?
8. Statement 1: Nonstock and nonprofit private organizations which sell exclusively to their Excise tax
members in the regular conduct or pursuit of commercial or economic activity aro exempt Value added tax
from value-added tax. Percentage tax
Statement 2: Government entities engaged in commercial or economic activity are None of the choices
generally exempt from value-added tax
Both statements are correct. C.- Answer: A
Both statements are incorrect. i() Manufacture or importation of sin products and non-essential goods is subject to
Only the first statement is correct. excise tax. However: sale of such products will be subject to vat or percentage tax.
Only the second state statement is correct. Excise tax is in addition to vat or percentage tax. -

Answer:13 iv 3 Which is correct?

-
0 As long as the •trardaction is not exempt under the law, vat- shall be tmpoSed An excise tax which imposes a tax based on weighloivolume capacity olany
regardless of the classification of the senator the buyer (gevernmenti non-stock other physical unit of measurement is called specific.tax. • -
non-profit organization, private 'entities, etc.). Refer also to litter "c* of the .next M excise tax which imposes a tax based On selling price or other specified
question. . value of the article is called ad valorem tax. .
A percentage tax which is imposed whether The transaction resulted in a gain
9. The term In the course of trade or business° does not include Or loss is called transaction tax.
Regular conduct or pursuit Of a commercial or economic activity. All of the above
Incidental business transactions.
Transactions by any person, regardless of whether or not the person engaged + Answer:
therein is a non-stock, non-profit private organization (irrespective of the disposition
of its net income and whether or not it sells exclusively to members) or government . 14 VVhich of the following taxes describes the value added tax?
entity. Income tax
None of the above Sales tax
Indirecttax
Answer: D d. Personal tax
i() Under the vat law, incidental transats (i.e., sale of asset used in business) is
subject to value added tax. Answer: C

10 Who is the one statutorily liable for the payment of VAT?

a consumer c. seller
b. buyer • d buyer or seller

Answer: C

562 563
 74-7;t1i,•/ 11,4/7(1", 1/tirey

Vat Registration
' 18. The following data were provided by spouses' Pedro and Ma. In 2018, Pedro's- gross
15 Which is incorrect? receiptsifrom his practice of profession was P2,850,000 while her wife, Ana, has gross
A1/4
itaxpayer whose annual gross receipts or sales exceed P3,000,000 shall pay vat sales of P2,200,000 derived from her trading business. Assuming they are not vat
even if not vat registered. registered, will they be subject to vat? •
A taxpayer whose annual receipts or sales do not exdeed P3,000,000 blit who is vat a. Yes, because their aggregate gross receipts/sales exceeded the ivat Threshold of
regi5lered shall pay vat. P9,000,000.
C. A non-resident lessor or foreign licensor who is not vat-registered is subject to vat. b No, because for purposes of vat threshold, husband arid wife shall be considered
d. An individual taxpayer whose gross sales or receipts do not exceed P100,000 is as separate taxpayers. •
exempt from VAT provided he pays the 3% other percentage tax. c Yes, because their gross receipts/sales are not specifically exempt from vat as
providedin the Tax Code.
4. Answer: D; (Refer to No 11) d. None of the above

16 Registration of taxpayers under the vat system may be classified as, except 4. Answer: B
Mandatory vat registration 0' VAT Threshold prior to 2018, P1,919,509 P3,000,000 beginning January 1, 2018:
Optional vat registration As a rule, husband and wife are treated as separate taxpayers,
Mixed vat registration
None of The above 19. In 2016, the following gross receipts/sales were recorded by Juan:
Gross receipts from dream of profession P1,250,000
Answer: C . Gross sales from trading activities 600,000
MANDATORY VAT REGISTRATION • Gross sales — sale of agricultural food products 475,000
Gross sales or retpts > P3,000,000 (previously P1,919,500) and not exempted.,
, under the law from value added tax Assuming Juan is ndn-vat registered, will he be subject to vat? •
i.Gross receipts preceding year > P10,000,009 and the taxpayer is ia radio and/or a No, because his gross receipts/sales in eaCh business do not' exceed the vat
television broadcasting company. • Threshold of P1.,919,500: . •• .•
Yes, because if a professional, aside from the practice of his profession, also
OPTIONAL VAT REGISTRATION • • derivies revenue from other, lines of business which are otherwise subject to VAT,
Gross sales or receipts 59,3,000,000 (previously P1,919,500) and. not exempted the same shall be combined for purposes of determining whether the thleshold has
under the law from value added tax been exceeded. '
Gross receipts preceding year 512'10,000,000 and the taxpayer is a radio and/or c No, because he is not vat registered
television broadcasting company. . d None of the above

17 IMiich of the following has an option to register under the VAT system in 2018? Answer A
I. Common, carriers by air transporting passengers, the gross receipts of Which' VAT Threshold prior to 2018 is P1,919,500. In determining whether the taxpayer
9
do not exceed P3,000.000. exceeded the vat threshold, exclude transactions expressly provided by law as vat
Radio and/or television broadcasting companies whose annual gross receipts exempt. Therefore, ignore the gross sales from sale of agricultural food product in the
of the preceding year exceeds P10,000,000 problem.
Operator of cockpit, the receipts orthich do not exceed P3,000,000 during the " P1,250,000 + 600,000 = P1,850,000. It is lower than the vat threshold prior to TRAIN
O
year. Law Of P1,919,500.
IV Seller of vat-subject services the 'brass receipts of which do not exceed
P3,000,000. 20. kis a certified public accountant. He applied for work and was hired by a Firm which is
a. IV only c. land IV only engage in Business Process Outsourcing business handling accounting work for US
b .1 and III only d. All of the above entities. He was paid for his services. How should JJ treat such paYrnent for business tax
purposes?
1'. Answer: C Subject to 12% VAT
9 II and III cannot avail the optional vat registration because these transactions, Subject to Percentage Tax
under the law, are subject to Percentage Taxes instead of value added tax. Exempt from VAT and Percentage Tax

564 __565
 74k, 447:6(774 Agicitt6

d It is a zero-rated transaction
25. The following are exempt from vat, except
C" Answer: Q Sale of marinated fish
() The payrnent he is receiving is dassifed as salaries or compensation income due to Sale of gold to the Bangko Sentra! ng Pilipinas
S Association dues, membership fees, and other assessments and charges collected '
. the presence of employer-employee relationship_ JJ is an employee of the Finn;
hence, not subject to business tar by homeowners associations and condominium corporations.
d None of the above
Vat Exempt Sales and Transactions
21. VVtiere even if There is a business, there is no vat imposable when Answer: A
A business is pursued by an individual where the aggregate gross sales and or. 0 Revenue Ruling 348-11 dated Sept 28, 2011 provides that sale of marinated fish is .
receipts do not exceed P100,000 during any twelve month period. not exempt from vat. Laws granting exemption 'from lax are construed strictly
Sale of real properties for low cost housing against the taxpayer. Exemption from payment of tax must be dearly stated in the
Ill. Sale of real properties for socialized housing language of the law.
Sale of residential lot at P1,500,000 per unit and below beginning „January 1, .0 .13" is exempt from vat beginning Jan. 1, 2018.(previously sObject to 0% van
2018 "C" is exempt from vat beginning Jan. 1,2018
Sale of house and lot and other residential dwellings valued at P2,500,000 and
below beginning January 1,2018 26. Which of the following shall be exempt from vat?
a I, II and Ill only c. III,IV and V only Services of banks.
b. II and Ill only d. All of the above Services of money changers and pawnshops.
Services of credit cooperatives
:* Answer: D All of the above

.22. Where eveh if there is no butirtess, vat is impose* on: . Answer: D . .

Importations of goods for personal use 0 "A" and "B" are subject to gross receipts tax, a percentage tax under Sections 121'
Services rendered in the Philippines by nonresident foreign persons', 'even and 122 of the Tax Code.
isolated, shall be , considered as being rendered in the course'-of 'bade or "C" is exempt from vat and OPT.
business.
a. I only c. I and II 272 Whictrof the following is exempt from VAT?
b. It only d. None of the above' a: Common carriers transporting passengers by air within the Philippines
b. Common carriers transporting passengers by sea within.the Philippines
Answer: C , c. Common carriers transporting passengers by land within the Philippines
d. Common carriers transporting cargoes by air within the Philippines
23. One of the following is not an activity subject to VAT:
Sale in retail of goods by a dealer Answer: C
Sale of Bamboo poles by a dealer
Sublease of real property in the course of business 28 Which of the following carrier shall be subject to value-added.tax?
Importation of ordinary feeds for poultry Ehicken Sea carrier classified as Resident Foreign Corporation, annual gross receipts is
P2,000,000.
Answer: D Air carrier classified as Resident Foreign Corporation, annual gross receipts is
P2,000,000.
24. The following are exempt from vat, except Sea carrier classified as Domestic Corporation, voyage is from Philippines to Japan,
Sale of 1 sack of rice annual gross receipts is P2,000,000.
Sale of lechon manok None of the choices.
Sale of pet food
Sale of newspaper Answer: C
"C" is subject to 0% vat
Answer: C

566 567
 vZe. /44e/ rite
, Determine the correct statement from the following:
0 'A and 131 are subject to Section 118.of the Tax Code, also known as common
carrier's tax on interrialtional carriers with respect to their transport of goods,
cargoes or mails originabng in the PhilipPines. As to their passenger Operations,
they are exempt both from vat and percentage tax.
26. A dealer in securities sold unlisted shares of stocks of a domestic corporation in 2018 ,
andderived a gain of P100,000 therefrom. The sale is:
Subject to capital gains tax
Subject to percentage tax of 'A of 1% of gross selling price.
Subject to 12% vat
Exempt from business tax.
VrAli.e.. /Lae/ 74
In cases where a lessor has several residential units for lease, some are leased out for a
monthly rental per unit of not exceeding P15,000 while others are leased out for. more
than P15,000 per unit, his tax liability will be:
The gross receip.. Er om rentals not exceeding P15,000 per month per unit shall be
exernpl from vat regardless of the aggregate annualgross receipts.
The gross leceipts from rentals exceeding P15,000 per Month per unit shall be
subject to vat if the annual gross receipts from said units including the gross receipts
from units leased out for net more than P15,000 exceed P3,000,000.
Both statements are correct.
Both statements are incorrect

, Answer: C Answer: A
0 'Refer to the discussions in the preceding number (No. 30).
30. Determine the business taxes of the following for 2018 taxable year
!lease of residential units with a monthly rental per unit not exceeding P15,000 32 To be subject to vat under the TRAIN Law, the lease of residential units shall have
(regardless of the amount of aggregate annual gross rentals). • Monthly rental per unit exceeding P15,000
Gross annual rental exceeding P3,000,000
'Reese of residential units with a monthly rental, per unit 'exceeding P15,000 but the
- a. Both I and It are necessary
aggregate of such rentals during the year de not exceed P3,000,000:
III.Lease of commercial units regardless of monthly rental per unit.. b Both I and tare not neeessary
•-
Only I is necessary
A B C
Only Ills necessary
I None • Pone None Vat
II OPT UPI OPT Val, 'Answer: A
III Vat OPT Vat Vat
33. To be subject to vat under the TRAIN Law, the lease of commercial u'nits shall have
Answer C I. • Monthly rental per unit exceeding- P12,800
GUIDE: It Gross annual rental exceeding P3,000,000
, Lease of commercial units generally subject to vat, regardless-of the amount of • Both land II are necessary
monthly rental per unit. Both I and II are not necessary
Only I is necessary
0 Lease of residential units Only Ills necessary
Monthly rental per unit P15,000 = exempt from business tax
Monthly rental per unit > P15,000 but the annual gross receipts from this units :• Answer
P3,000,000 = exempt from vat but subject to 3% percentage tax under
Section 116 of the Tax Code, as amended. . • 34. Sale of the following real properties prior to 2018 are exempt from vat, except
Monthly rental per unit > P15,000 and the .annual gross redeipts from this Residential lot, held for sale in the ordinary course of business, sold for P1,600,000.
units > P3,000,000 = subject to 9% vat. Residential house and lot, held IS Sale in the ordinary course of trade, sold for
P2,700,000.
Lessor is engaged in renting out iesidential units with monthly rental per unit Sale of real property used in the ordinary course of business.
of s P15,000 as well as residential units with monthly rental per unit of > Sale of real properly not primarily held for sale in the ordinary course of business.
P15,000 = treat both activities separately. The residential units With monthly
rental per unit of s j1215600 is exempt from business taxes while - the
Answer: C
residential units with monthly rental per unit of > P15,000 is either subject to
Section 116 or vat. 0 Letter 'a' is not subject to vat because the threshold for residential lot prior to
. the effectivity of TRAIN Law was P1,919,500.

568 569
 vaL /1112774 vaL Agifird6
0 The threshold for residential house and lot and other residential dwellings residential dwellings. Adjacent residential lots, house and tots, and other
prior to 2018 was P3,199,200. Consequently, letter "b" is exempt from vat residential dwellings, although covered by separate titles andlor separate tax
priorto 2018. declarations, when sold to one and the same buyer, whether covered by one
If the property sold is not for sale in the ordinary course of trade or business separate Deed of Conveyance, shall be presumed as sale of one residential
nor for use intusiness, the asset is classified as capital asset. Consequently, lot, house and lot and other residential dwellings (RR 16-2011; RR 13-2012).
not subject to vat but may be subject to capital gains tax. This however, does not include the sale of parking lot which may or may not
be included in the sale of condominium units. The sale of parking lots in a
35. Sale of :tke following real properties beginning January 1, 2018Jare subject to vat, condominium is a separate and distinct transaction and is not covered by file
except rules on threshold amount not being a residential lot, house 8 lot or a
Residential lot, held for sale in the ordinary course of business, sold for P1,600,000. residential dwelling, thus, should be abject to VAT regardless of amount of
Residential house and lot, held for sale in the ordinary course of trade, sold for selling price.". •
P2,700,000.
Sale of real property used in the ordinary course of business. 37. Statement 1: The sale of two (2) adjacent residential lots in the course of trade 'or
Sale of real property not primarily held for sale in the ordinary course of business. business to one buyer within the same taxable year for P1,000,000 each is subject to Vat
Statement 2: The sale of parking lot as an adjunct of a condominium unit in the course of
Answer: D trade or business at a gross selling price of P500,000 is exempti from vat as long as its .•
0 Under the TRAIN Law, the threshold for sale of residential lot was reduced price, together witht the unit, does not exceed P3,199,200.
from P1,919,500 to P1.500,000 while that of residential Muse and lot and A. B. C. D.
other residential dwellings was reduced from P3,199,260 to P2,500,000. Statement 1 True True False False
Applying these revised thresholds, transactions "e" and "b" are now subject to Statement 2 True False True False
12% vat beginning January 1,2018.
0 "C" is subject to vat
Answer: B
36. In 2017, Ana bought one udij of residential house and lot for 02,850,000 from Loina, a 0 . The sale of parking lot as an adjunct of a condorhinium unit is subject to vat •
regardless of selling price because it is not classified as house and lot nor
Vat registered real.estate developer, in one of the lattees subaliVision projects located in"
other residential dwellings.
Bulacan. A month after, the purchase, she teamed that •the eV/nen:if the adjacent,
resideritial house jand lot, Fe, is about to relocate, in Batangas. She.bought the adjacent
unit for .P1,500,000. 'Based on the information provided, Of the .following 38. Prior to 2018, a real estate dealer sold two (2) adjacent residential lots in the city for a
statements is.correct? price of P800,000 each, or a total price of P800,000, to a vendee who intends to erect his
The purchase of residential house and lot from Loma and Fe are subject to vat. reSidential house thereon.
Since the units are adjacent and the aggregate purchase pride,of the two (2) units The sale shall be classified as a:
(P2,850,000 and P1,500,000) is more than the vat threshold e P3,199,200, the said 12% VAItransactions
units shall be subject to 12% vat. 0% VAT transactions
Only the sale of residential house and lot by Loma is subject Id vat, regardless of VAT exempt transactions
selling price, because it was made in the course of trade or business and the seller None of the foregoing
is a vat registered.
Both acquisitions are exempt from vat, however, the sale of residential house and Answer: C
lot by Fe to Ma shall be subject to 6% epital gains tax. 0 When two adjacent lots were sold by the same seller to the same vendee
within twelve-month period, treat the same as one transaction. Consequently,
None of the above
the selling price in the problem, when.combined will not exceed the vat
a
threshold (prior to 2018) of P1,919,500.
Answer: C
0 RR 13-2012 provides, if two or more adjacent residential lots, house and lots, 39. Assume the taxable year in the preceding number is 2018. the sale shall be classified as
and other residential dwellings are sold or disposed in favor of one buyer from
12% VAT transactions
the sale seller, for the purpose of utilizing The lots, house and lots, or other
0% VAT transactions
residential dwellings as one residential area "within a 12-month period", the
sale shall be exempt from vat only if the aggregate value do not exceed VAT exempt transactions
P1,919,500 for residential lots and P3,199,200 for residential lots and other None of the foregoing

570 571
 7/J4 Age17- 4
0 Based on the data provided, even if the sale to the different vendees are not
C: Answer: A combined, the selling price per unit still exceeded the revised vat threshold of
0 The consolidated selling price (treated as one transaction), will exceed.the P2,500,00 for sale of residential house and lot and other residential dwellings,
revised vat threshold for 2018 of P1,500,000, hence, subject to vat. hence, subject to vat.

.41 Clifford purchase a condominium unit from his friend in 2017, Ronald (condo unit owner) 43 Statement 1 Lease of a parking lot attached to a residential unit at P8,000 per month is
for P3,0,90,000 and a parking lot from the subdivision developer for P800,000. The. exempt from vat.
correct amount of vat is Statement 2 Lease of 8 residential units at R18,500 per month is subject to vat.
P456,000 c. R96,000 A. B. C. D:
R360,000 d. PU
Statement 1 True True False False
4:- Answer': C Statement 2 True False True False
0 The sale tit- the condominium by Ciffor's friend is subject to 6% capital gqins
tax because the unit sold to him W classified as capital asset located.in the Answer: D
0 Statement 1 is wrong. It is subject to vat. The rules on lease of residential .
units will not apply to lease of parking space or parking lot.
0 The sale of parking lot by the subdiWon developer (threfore ordinary asset of 0 Statement 2 is wrong. The total annual gross receipts in the problem is only
the developer) is subject to vat. Such sale shall not be subjed to the P1,776,000 (8 x P18,500 x, 12 months). It will not exceed the vat threshold,
P1,500,000 (previously P1,919,500) or P2,500,000 (previously P3,199,200) prior or after the effectivity of the TRAIN Law, hence, subject only lo
threshold because sale of parking lot, under revenue regualtions, is not Percentage Tax under Section 116 of the Tax Code.
treated as a sale of residential lot nor house and lot and other residential
dwellings. This rule is applicable' before, or after the effectivity of the TRAIN 44 Statement I: Sale of drugs and medicines of pharmacy run byte hospital to outpatients
Law. are subject to VAT. . .
. .
Statement 2: Pharmacy items used in the performance of medical procedures in hospital
.41. Rios to 2018, a subdivision developer sold five (5) residential houge and lots, each. to- units such as in the operating and delivery rooms and by other departments are -
different Vendees, for P3,000,000 per lot, or a total sales of P15000,000 for the taxable considered part of medical services rendered by the hospital, hence, not subject to vat. '
period. These sales shall be classified as: .4
A. B.
12% VAT transactions
Statement 1 True True False False
OVVAT transactions
VAT exempt transactions Statement 2 True 'False True False
None &the foregoing
C- Answer: A
. • Answer: C
0 Since there are different vendees, treat each transaction separately. If not 45 Kape Ko Cooperative is an agricultural cooperative which processes coffee production of•
combined or not treated as one transaction, the selling price per unit is lower its members for sale to Nescafe Philippines, a coffee processing company Selling instant
than the required threshold of P3,199,200 (prior to 2018), therefore, not coffee. Kane Ko imported a coffee drier from abroad. After five years of active use,
subject to value added tax. Kape Ko sold the coffee drier to. one
' _ of its members, Juan Dela Cruz. Which of the "
following is subjectto vat?
42 Assume the sale in the preceding number wet' made in 2018, the sale shall be classified Importation of coffee drier.
as. The sale of coffee drier to one of its members, Juan Dela Cruz •
12% VAT transactions
Sale of coffee to Nescafe Philippines
0% VAT transactions
VAT exempt transactions Sale of coffee by members to Kape Ko Cooperative
None of the foregoing
Answer: B
C• Answer: A
t"

572 573 —
 YetL 7171,(//745, 14,L,7 /1/74774

Output Vat, 50. Sta. Lucia Really, a real estate dealer, sold a commercial lot amounting to P800,000.
This transaction is
46 Camelia really corporation sold the following real properties during 2017 the taxable . a. vat exempt c. subject to vat
year: b. zero-rated sale d. subject to OPT
2 unAs of residential house and lot at P3,000,000 each P6,000,000
4 residential lotset P2,000,000 each 8,000,000 :'• Answer C
1 consenercial lot at P3,000,000 3,000,000
51 The value added tax due on the sale of taxable goods, property and services by any
How much is the total transactions subject to VAT? person whether or not he has taken the necessary steps to bq registered.
a P6,000,000 c. P11,000,000 a. input tax c. excise tax
b. P8,000,000 d. P17,000,000 b: Output tax d. sales tax

Answer: C 4* Answer: B

'47 Using the same data in the preceding number but assuming the taxable year is 2018, 52 Gross Setting price includes all of the following except one. Which one?
how mcuh is the total transactions subject to vat? Total amount which the purchaser pays to the seller.
a P6,000,000 c. P11,000,000. Total amount which the purchaser is Obligated to pay to the seller.
b.. P8,000,000 d. P17,000,000 Excise lax.
Value-added tax.
.) Answer. D •.
• • ., • Answer: D
A telephone 'boinpany, VAT-registered, Provides services for domestic ancheverseas
calli. It is a taxpayer as far what business tax is concerned?, •• 53 Which of the following is not deductible from Gress-30110g Price for yalpurposes?
a. Value-added tax' .a. , Discounts determined and granted at the time of sale, which, are expressly indicated
b..Overseas coniniufficaltons tax; in the invoice, the amount thereof formingpart of.the gripes- sales duly recorded in
Value-added tax oh domestre calls and overseas communications tziX on overieli - the books of accounte
calls; b Discount determined and granted after the agreed Set quota is met by the buyer.
Franchise tax. c Sales discount indicated in the invoice at the time Of sale, the grant of which is-not
dependent upon the happening of a future event, deductiblewithin the samemonti
Answer; C or quarter given.
d Sales returns and allowances for which a proper Creditor refund was Made during
49 VVhich of the following is not subject to VAT by a VAT-registered seller? the montti or quarter to the buyer for sales previously recorded as taxable Sales.
Remaining inventory upon retirement from business
Sale of company's used car to its officers Ce Answer: B
Sale of goods or services to the national government
Sale of residential lot amounting to P1,000,000 54. On January 5, 2018, Pinoy Food Corporation, va-registered, sold on account goods for
P112,000 inclusive of vat The term was, 2/10, n/30. payment was made on January 10,
Answer: 2018. The total amount due is
0 'A is a transaction deemed sale4 subject' to vat. P110,000 c P112,000
0 "B° is an incidental transaction, subject to vat. P107,800 d P109,760
0 "C" is subject to yet. If the goods or service sold is not exempt under the law,
the vat shall be imposed regardless of the clasification of the buyer or seller Answer: A
(i.e., government, charitable institutions, non-profit educational institutions) 0 The buyer paid within the discout period, therefore, the 2% discount shall be
granted. However, since the discount granted is conditional (to be granted
only if paid within 10 days), the basis for the imposition of vat shall be the
selling price before deducting the discout. The total amount to be paid by the
buyer shall be computed as follows

574 575
 Vaitt 7447.4
77774 144,7/171774

Solution:
Solution: OUTPUT VAT
Sating price without discount P100,000 Sales up to Dec 15 P40,800
Less: cash diseount (2,000) TDS transaction 22800
Add: 12% vat based on P100,000 12,000 INPUT VAT
Total amount due .P110,000 On Purchases (18,000)
Deferredinputvat (3.500)
.‘
55. Mr. Andred, VAT-registered real estate dealer, transferred a parcel of land held for sale. VAT PAYABLE P42.100
to his son as gift on account of his graduation. For VAT purposes, the transfer is:
Not subject to VAT because it is a gift 58 Genson Distribution Inc., a VAT taxpayer, had the following data in a month:
Subject to VAT because it is a deemed sale transaction Cash sales P200,000
Not subject to VAT because it is subject to gift tax Open account sales 500,000 -
Subject to VAT because it is considered an actual sale - Consignment:
0 to 30 days old (on which there were remittances from
Answer: Ei consignees of P200,000) 600,000
31 to 60 dayO old 700,000
56. One of the following is not a transaction deemed sale: 61 days old and above 900,000
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. How much is the output lax?
Distribution or transfer to shareholders or investors of goods or properties as share P348,000 c. P264,000
in the profits of a VAT-registered person or creditors in payment of debt. P216,000 dt P108,000
Retirement from or cessation from business with respect to all goods on hand as of
the date of such rebreraent or cessation. . • Answer: B
Consignment of goods if.pclual sale is made within so days follOwing the date such Cash sales ' P200,000
goods were consigned. Open account sales 500,000
Remittance from 0-30 days consignment 200,000
Answer: D Consignment, 61days old and above 900,000
() Item °D° is not a transaction deemed sale. It is an actual sale. Total P1,800,000,
x Vat Rate 12%
Output vat P216,000
57. The following are the data of Davao International for the last quarter of 2018:
Sales up to Dec. 15 (invoice vakue) P380,800 59. Ma, a vat registered lessor of commercial spaces received P1,337,500 rentals during
Purchases up to Dec. 15 (net) 150,000 the year from various clients, net of the 5% creditable withholding taxon rental income.
How much is the correct output vat?
Additional information: -P154,080 c. P150,000
On December 16, 2016, the Company retired from its business and the inventory valued P142,500 d. P160,500
at P190,000 remained unsold. There is a deferred input tax from the third quarter of
P3,500. Answer: C

How much is the total value-added taxes payable of Davao Internaltional? Solution-
Amount received P1,337,500
a. P42,100 c. P22,800
Divide by (95% net + 12% vat) . 1.07
b P21,500 d. P19,300
Gross rental income excl. of vat P1,250,000
12%
Answer: A P150,000
Output vat

576 517
 71g7
,745, 17174
Check:
Rental income exclusive of vat P1,250,000 • STATUS QUO ON VAT ZERO-RATING OF SALES TO PEZAENDDES
Add: 12% vat 150,000 DOF Memorandum Circular No. 2018-003 declared 'status quo' on vat-zero rating
Less: 5% wilhhokling,1P1,250,000 x 5%) (62,500) incentive on the sale of goods/services to separate customs tenitories. It further
Amountieceived P1337,500 provides that Section 8 of the REZA Law, which provides that Special economic zones
are to be operated and managed as a separate customs territory, was not amended or
repealed by TRAIN Law. Conseduently;until a law or revenue regulation is passed or
60. Assumeipapt in the preceding number, Ana is a non-vat registered lessor, how much is issued contrary to or incompatible with the pronouncement by the DOF,. the vat zero-
her correct business tax? rating incentive being enjoyed by PEZA heaters or entities shall remain in full force and
P42,237 c. P38,118 effect.
P40,125 d. PO
62. Bobs Corporation is a local export oriented ethterase engage in the business of
Answer: A manufacturing of sardines. In 2017, it sold to Mr. Bo Huang of China under. the term FOB
Sokition: Shipping Point.
* Amount received P1,337,500 , .
Divide by 95% Mr. Huang wants a specialized packaging material for his sardines. He ordered the said
Gross rental income P1,407,895 packaging materials from another Philippine Company Norhan packaging Inc. (NPI). It
3% was agreed that NPI will deliver the packaging materialt to Bobs Corporation so that the
OPT under Section 116 P4Z237 latter can use the same for the sardines to be delivereclki Mr. Huang in China. •

61 Prior to 2048, sale of raw materials or packing materials to export-oriented enterprise is What is the tax treatrnent for vat purposes of the sale of Bobs Corporation to Mr. Huang?
considered export sales when export sales of such enterprise. a. Subject to 12%
Exceed 50% of total annual production t b. Subject to 0%
Exceed 60%.of 'total ariaal production Exempt
Exceed 70% of total anaal production None of the choices
d Exceed 80% of total annual production
Answer: B
Answer C
63. Based on the preceding number, what is the tax treatment of the sale of NPI to Mr.
GUIDE: Huang?
Sale of raw materials or packaging materials to a local export oriented enterprise may be
a.. Subject to 12%
subject to 0% valor 12% al depending bn the ratio of its exports sales over its total annual
production. lithe ratio exceeds 70%, the applicable vat rate is 0%, otherwise 12%. b. Subject to 0%
c. Exempt I
Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident d. None of the choices
local export oriented enterprise to be used in manufacturing, processing, packing or
repacking in the Philippines of the said buyers goods, paid for in acceptable currency, and. Answer: B
accounted bin accordance with the rules and regulations of the BSP, is subject to 0% vat.
64.. Suppose Bobs Corporation bought packaging materials from NPI, what is status of the
Transactions considered export. sales undt al 225, otherwise known as the Omnthus sale?
Investment Code of the Philippines, are subjekt to 0% rate
Subject to 12%
NOTE: Transactions "a to c" above will basubjected to 12% eat under the TRAIN Law
but only after the requirements set by law are fully satisfied (refer to Pages 544545). Subject to 0%
Subject to 0% only if NPI's export sales exceed 70% of total annual
Foreign Currency Denominated Sale. Means the sale to a non-resident of goods, production in the current year.
except automobile and non-essential goods, assembled or manufactured in the Subject to 0% only if Bobs Corporahon's export sales exceed 70% of total
Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign annual production in the current year.
currency and accounted for in accordance idth the rules and regulations of the BSP.
This provision was repealed under TRAIN law Therefore, subject to 12% vat Answer: D
be•innin. Janua 1,2018_

578 579
 74,4e, 74&514t:

65. Which df the following service may be subject to VAT? 68. Which statement is not correct?
a. Hospital services The excess input taxes Of a taxable month arising from domestic sales may be
b.- TESDA-registered educational services carried over to the succeeding month.
Setninars and Training services The excess input taxes of a taxable quarter arising from domestic sales may be
Employees services carried over to the succeeding quarter.
The excess input taxes of a. taxable period arising from domestic sales may be
, • 4 Answer: C refunded.
The excess input taxes of a payable period arising from exports sales may be
Input Vat refunded.
66. Tax credit for input taxes shall be allowed if:
Both the seller and the purchaser are VAT-registered Answer: C
Either one of the seller or the purchaser is VAT-registered.
Neither one of the seller or the purchaser is VAT-registered as long as VAT inVoice - Input Vat on Importations
is issued.
The seller is VAT-regittered regardless of whether the purchaser is VAT-registered 69. The vat on importation of goods which are subsequently used or sold in the course of
or not. trade or business by a vat registered importer shall be treated as
I. Tax credit
Answer: A Inventoriable cost
. If the seller is vat registered but the buyer is non-vai registered, he latter . Expense
is not allowed to recognized "input . vat' in its books. Instead, the a I only c.' Ill only .
applicable vat is recognized either as part of the article purchased or as b. II only d. none of the above
part of its operating expenses.
0 If the seller is non-vat registered, the buyer (even if vat registered) Oanhot. Answer: A
recognize input vat because the seller did not impose such tax on its sale.. 0 Items II and III are applicable only if the importer is non-vat registered.

.67. Any input tax attributable to zero-rated sales by a vat-registered person may at his option 70. Which of the following statements is incorrect? ..... ,
be': a. VAT on importation is paid to the Bureau of Customs before the ienported.goodeare
a_ Deducted from output tax released from its custody. .
b. Refunded Wien a person who enjoys. tax-exemption on his importation subseqUenthetells. in
c. Applied for a tax credit certificate (TCC) which may be used in payment of internal the Philippines such imported articles to non-exempts person, the-purChaser:non-
exempt Person shall pay the VAT on such importation. . , .
revenue taxes
d. Ail of the above Expenses incurred after the goods are released from Customs custody ere
disregarded in computing VAT on importation. , ,
Answer: D Imported goods which are subject to excise tax are no longer subject to value-added,.
0, If the exporter is non-vat registered, its export sale is exempt from vat. tax.
The input vat attributable to its,export sale may only be classified as cOst
of the article exported Of as patof the exporters operating expenses. Answer: D

TCCs may be used to pay any internal revenue taxes (BIR taxes) only. It
cannot be credited against other taxes collected by other taxing authorities
such as the Bureau of Customs and the Local Government Units.
71. VVhich pf the following importation is subject to value added tax?
Importation for personal use of the importer
Importation intended for resale
Importation of machinery for the importers factory
- of All of the above

Answer: D

580 581
 vg,
72. Francis, not a vat registered taxpayer, was sent a package of goods by his brother who
was abroad. The package was claimed by Francis. The Bureau of Customs required 76. Pacman imported brand new Jaguar, 2018 model from the USA for personal use of
him to pay vat on importation Francis refused to pay the vat on the ground that he was Jinkee. Total landed costs is P15,000,000 exclusive of customs duties of P3,000,000,
not a vpt registered and therefore not an importer. Was Francis' ground in refusing to excise tax of P2,000,000, and facilitation cost of P1,000,000. VAT payable is:
pay vat ;orrect? P240,000 c. P1,800,000
a. Yes, because only vat registered importers should be subject to vat. P360,000 d. P2,400,000
b. Norlfecause importations, unless exempted, should be subject to vat.
Yes, because the goods were for her personal use, and therefore, he was not an Answer: D
importer. 0 Unless exempt under the law, all importations, regardless of purpose, is
No, because the package of gbods sent by his brother had value. subject to value added tax.
0 Facilitation expense shall not be included in computing vat on importation.
+ Answer B 0 Vat on importation = (P15M + P3M + P2M) x 12% = P2,400,000

, 73 First statement: An importation of goods by a non-profit charitable organization shall not 77 Statement 1: The Vat on importation is always based on the dutiable value of the article
be subject to the value-added tax. imported, as determined by the Bureau of Intemal Revenue, including customs duties
Second statement In the case of importation, the importer is not the one liable for the and excise taxes.
VAT but the person who shall buy the imported goods. Statement 2: The importation by a person exempt from Vat is exempt from the1.ax -
a Both statements are correct whatever may be the ultimate destination of the article imported.
b. Only the first statement is correct a. Both statements are correct
C. Both statements are incorrect .b. Both statements are not correct
d. Only the second statement is correct Only the first statement is correct
Only the second,statement is correct
Answert
+ Answer: B
74. Which statement is cottect? Vat on importation 0 In cases where valuation from BOC is not provided, the invoice pricö shall
a: Should be paid by the tax exempt importer, if he subsequenty.sells the goods to a be used as basis in computing the vat on importation plus all addifional
non-tax exempt purchaser. , legitimate charges imposed by the BOC such as customs, duties and
b. 'Should be paid by the non-tax exempt purchaser to whom the tax exempt importer. excise taxes.
sells it. -
c. In liability, either of the tax exempt importer or the non-tax exempt purchaser. Use the following data for the next four (4) questions:
d. Should not be paid if, the importer is tax exempt but the imported article was World Power Corp. imported an article from Japan. The invoice value of the imported articles
subsequently sold to a non-exempt purchaser because the transaction was exempt , was $7,000 ($1- P50), however, customs officials valued the imported article for P500,000.
at the point of importation. The following additional costs were incurred in connection with the importation:
Insurance P 15,000
+ Answer: B Freight from Japan 10,000
0 Refer also to letter V of No. 70. Postage 5,000
Wharfage 7,000
75. VVhich of The following is not a proper inclusith for the computation of VAT on imported Arrastre charges 8,000
items? Brokerage fee 25,000
a. Custom duties on importation Facilitation fee 3,000
b, Excise tax on importation
Invoice price of the imported items .The imported article was imposed P50,000 customs duty and P30,000 excise tax.
Facilitation expense ,
The Company likewise spent P50,000 for trucking fee from the customs.warehouse to its
+ Answer: D warehouse in Quezon City. The carrier is a vat-registered entity.
0 Facilitation fee is an illegal payment (bribe), hence, shall be exluded,

582 583
 vaLAZ1z6 344.,74,a1741,-,
Soktpion
ura
78. The VAT on importation is: : ase Price (Invoice Vakre); P350,000
R60,000 c. R60,600 P7,000 x P50
P7,000 d. R80,000 Insurance
Freight from Japan " .10000
157,°°0
d• Answer: B
Postage
Wharfage TWO •
.:.t.
Affastre charges ' 8,000
Solution: .
Brokerage fee 25,000
Value of Imported Article P500,000
Customs duty .54060
Insurance 15,000 Excise fax - 30000
Freight from Japan 10,000
Total P509000
Postage 5,000
X • .r .12%
Wharfage 7.000 .
Vat on importation . -
Arrastre charges 8,000
Brokerage fee 25.000 0 Facilitation fee shall be excluded in the computation beause it is in the
Customs duty 50,000 nature of an illegal payment (bribe). .,'7.. • .
Excise tax 30,000 e i J....,
Total P650,000 Based on the preceding number, if the imported article was sold for P800,000, VAT
, ti•
x . 12% exclusive, the VAT payable is: , .'"•
Vat on importation P78,000 ' c. - R24,000 c. R36,000
4'..ili•-•4/
d. R12,000 d. R30,000
0 Facilitation fee shall be excluded in the computation because:ir is in the
4 Answer 'D ' 6:
nature of an illegal payment (bribe).
‘, Solution: 0,Z.. ' ,e „1-( P',
Clutput vat • 4P96,00e t%
70. Based on the preceding number, if the imported article Was sold for P800 000 (exclusive Input vat on iMportation .' 000,0001• fr.
r of vat), the VAT payable is:. Input vet on freight (50,000 x 12%) .4!1(4000) • i' Jr'
R24,000 ,c. R36,000 Vat payable , -1234000 'i g
srir-o ,
R12,000 ' d. R30,000 " •' e t • : "r;$4,

Answer: B Use the letbwing data for the next Swop) questions: ‘1;„,•. (''C''•NI:.''.
•
:Taxpayer is a VAT registered person. Importation were for: (thnounts are vat exclusive)
For Sale To;- Osen Use
Solution:
Invoice cost (exchange rate is $1: P45) $100,000 .4 $5,000
Output vat P96,000
Input vat on importation (78,000) Expenses based on cost.
Freight and insurance 6% 1
Input vat on freight (50.000 x 12%) (6,000)
Other expenses up to the point of removal 4%• 496'1 •
Vat payable P12,000 iPtit), . •
from customs house
Transfer expense from customs house to 2% . 2%
80. Assume the BOG did not provide the valuation for the imported article, the vat on
importation is: warehouse in Makab, net of VAT
R60,000 C. R60,600 Selling price of goods imported for sale was P8,000,000.
R42,000 d.. R80.000
The value added tax payable on importation is:
e Answer: A a. P492,800 c. P623.700
b. P491,300 d. P620,928

e Answer: C

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 34tit Alia(74, vitt 74/641
Solution.
For Sale For Own use - Solution:
Invoice Value P4,500,000 P225000 Invoice cost of importation (exchange rate is $30,000 x P56) P1,680,000
Add: additional expenses up to point of ,Expenses on the importation up to Philippine port P20,000
removal from customs house (10%) 450000 22,500 Excise tax 10,000
Total P4,950,000 P247,500 Customs duty 15,000
Vat Rate 12% 12% Customs brokerage charges paid to Aboitiz 8,000
fl Input Vat on Importation P594,000 P29,700 Total P1,733,000
TOTAL Vat onimportation P623,700 Vat rate 12%
Input Vat on importation P207,960
83 The value added tax payable on sale is
P355,200 c P366,000 0 Though the amount was paid to Aboitiz, the 'customs brokerage charges" is
P128,640 d. P720,000 considered charges imposed by the BOC. It shall be considered as
reimbursement by only by Aboitiz but it will not for part of Aboitiz fees
+ Answer A subject to income tax.
Output Vat P960,000
Less: Vat in importation (For Sale) (594,000) 85 The business tax of Aboithz Transport is
Input vat on transfer from BOC to warehouse (10,800) P3,000 value added tax
(P4,500,000 x 2% x 12%) P990 percentage tax .
Vat Payable P355,200 P3,000 value added-tax or P990 percentage tax, at the option ofAboitiz.
Exenipt from business tax
Theinput vat paid to BOC in relation to input vat on importation 'for own use",
is' non-creditable against the output vat beiatise it is.a 'non-business related + Answer: A; (P25,000 x 12%)
inportabon. IrShall be tteated as a personal expenseof the importer.
0 In general, all importation, regardless of purpose, is subjed to yet on
importation. It.shall be paid to the,B0C before the imported article is release. TiansitiOnal Input Vat
However, only importations, intended for resale in the ordinary course and
importation for business use shall be deductible from Output Vat: 86. .A person subject to Vat for the first time can have an input tax out of the inventory of
goods, material and supplies on hand at the time he become liable. This is called:
84. Aboitiz Transport, ja vat registered taxpayer, is a customs broker and forwarder, Value added tax deemed paid
representing importers at the piers and transporting their importations to warehouses all Transitional input tax
over the Philippines_ On an importation by Unilever, its costs were as follows (exclusive Presumptive input tax
of taxes): None of the above
Invoice cost of importation (exchange rate is $1:P56) . $30,000
Expenses on the importation up to Philippine port P20,000 Answer: B
Excise tax 10,000 •
Customs.duly • 15,000 87. Taxpayers who became VAT registered persons upon exceeding' the vat threshold of
Customs brokerage charges paid to Abut? 8,000 P3,000,000 in any 12-month period, or who voluntarily register even if their turnover does
Forwarding charges and brokerage fee pal0 to Aboitiz 25,000 not exceed P3,000,000 shall be entitled to a transitional input tax on the inventory on
hand as of the effectivity of their vat registration on the following, except;
The value added tax of Unilever on its importation is Supplies for use in the course of taxpayer's trade or business
a_ P173,300 c. P207.860 Goods which have been Manufactured by the taxpayer •
b. P175,800 d. P210,960 • Goods in processed for sale
Capital goods being used in the operation of the business
+ Answer: C
+ Answer: D

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/ /1/677eixt1

88. Transitional input tax can be claimed as deduction from output tax. Vtrhich of the following 91 A taxpayer registered under the VAT system on January 1,2018. His records during the
statements is correct as to when it can be allowed as deduction? month show:
It can be claimed by a vat registrable person. . . Value of inventory as of December 31, 2017 purchased from
It can be claimed by a taxpayer who registered asvat taxpayer from the inception of VAT-registered persons P112,000
basiness. VAT paid on inventory as of December 31, 2017 12,000
It can be claimed by a taxpayer who is initially subject to vat and subsequently Value of inventory as of December 31,2017 purchased, from 518,000
cancqed his vat registration. • non-VAT persons
It can be claimed by a taxpayer who is initially paying percentage tax and . . Sales, net of VAT 281,000
subsequently registered as vat taxpayer. Purchases during the month, net of VAT 70,000
Purchases during the month of vat exempt goods 50,000
Answer: D.
VAT payable is:
89 Which of the following shall be included in. the beginning. inventory for purposes of P23,080 P12,720
determining the transitional input vat? P25,320 P12,320
Goods purchased for resale in the ordinaricourse of trade or business. •
Materials purchased for further processing which have not yet undergone Answer C
processing Solution:
c Goods which have been manufactured by the taxpayer Output Vat (P281;000 x 12%) P33,720
d All of the above Less:
Purchases (P70,000 x 12%) (8,400)
Answer: D Transitional input vat (higher)
Actual P12,000
vs. 2% x (P112,000518,000)
+ P12,600 , (12,600)
90 An owner of warehouse, witch used to bevel exempt, because its arrual receipts never ,
Value Added Tai Payable P12,720 .
' exceeded P1,919,500, deciciad to register under the vat system on January 2, 2018. The ,.
following data were from the V quarter ending March 31, 2018:
. Rental from warehousing services, net of vat P336,000 0 The 2%TranNtional input vat shall be multiplied from the beginning inventory
Purchases of supplies in February, gross of vat : 112,000 regardless of .whether it 'was acquired froth vat registered or non-vat
100,000 registered suppliers.
Inventory of supplies, January 1, 2018
. Vat on inventory of supplies, January 1, 2018 • ' 10,000
How much was the vat payable for the quarter ending March 2018?
92 Centro, a VAT registered grocery and sugar dealer submitted the following data as of
P26,320 c. P14,000
Dec. 31, 2017 to the Revenue District Officer:
P18,320 d. PO
Grocery items, total value P350,000
Raw sugar cane, total value 150,000
Answer: B
Output Vat (P336,000 x 12%) P40,320
During the month of January 2018, first month as a VAT-registered taxpayer, he had the
Input vat:
Purchases of suppdes in Feb. (P112,000 x 3/28) (12,000) following sales and purchases:
Transitional Input Vat (10,000) Sales Purchases
Vat payable P18,320 Grocery, total invoice value P1,195,040 P708,400
Raw sugar cane 570,000 320,000
0 The alowable transitional input vat is the higher between the actual input vat
on the beginning inventory and 2% of the beginning inventory. The The VAT payable for the first month Is:
composition of the beginning inventory is provided in Nos. 87 and 89. P29,400 c. P45,140
0 Actual vat on beginning inventory r• P10,000; 2% of P100,000 r P2,000. The P47,400 d. P36,500
allowable transitional input vat is P10,000
Answer: C

588 589
 'Pa& 4iiie/74s 14
/ ( -14 ce/
ia• ';

Solution:
' Output Vat (P1,195,040 x 3/28) • -P128,040 Solution:
Less:
Rirchases (P708,400 x 3/28) (75.900) Output Vat (P1,000000 x 12%) P120,000
\, Transitional input vat (highei) Less:
Actual Purchases (P300k + 100k + 400K", x 12% (96,000)
vs. 2% x P350000 P7,000 (7,000) - Additional purchases (P616,600 x 3/28) - (6;600)
it
Value Added Tax Payable P45,140 Transitional input vat (higher)
RAW MATERIALS:
6 The 2%Transitional input vat shall be multiplied from the beginning inventory Actual P2,000
of 'goods subject to 'vat regardless of whether it waS acquired from vat vs. 2% x P120,000 2.400 (2,400)
registered or non-vat registered suppliers. SUPPLIES:
Actual • P4,000
Raw sugar cane is a vat exempt, hence, shall be exluded from the ' vs. 2% x P40,000 800 (4,000)
determination of transitional input vat. Value Added Tax Payable • P11000 •

"Unlike in the preceding problem (No. 91), the beginning inventory of -
'grocery items' in this particular case is silent as to how Much came from vat
'registered and non-vat registered suppliers. Applying the principle that as to
'deductions', it must be strictly construed against the taxpayer and liberally in
favor of the government, it is safe to consider the 2% as the TIV rather than -
getting the 12% vat on the entire beginning imientory,which, Some, if not all or •
majority, may,have been purchased from non-vat regilteredisuppliers.
o The input vat on the purchase of capital goods (machinery) shall not be
amortized over its useful life because the acquisition cost for the month did ,
not exceed P1,000,000.
.- O The TIV for the raw materials and supplies shall be computed separately.
k Presumptive Input Vat

93 ballaxy Corporation, a maraacturer, had the following data for the first montt of 2018: 94. krbilhich statement is wrong?
(First
. Year as a' VAT Taxpayer) a .There is a transitional input tax on sales of goods or properties.
Sales • There.is atransitional input tax on sales of services.
Export sale P2,000,000 There is a presumptive input tax on sales of goods or properties.
' Domestic sales (net) t000ma - There is a presumptive input tax on sales of services.
Purchases: •
Raw materials , 300,000 Answer:
Services 100,000
Machinery (useful fife is 2 years) 400,000 95. All of the following are allowed presumptive input tax, except for one.
. a. Processor of sardines, mackerel and milk.
On January..1, 2018, the company had inventories and taxesi paid thereon as follows' Manufacturer of refined sugar and cooking oil.
Cost Vat Paid Producers/manufacturers of packed noodles.
Raw materials P120,000 P2,000 Supplier of books and other school supplies.
Supplies 40000 4,000
Answer: D
During the month, additional raw materials wire purchased from another enterprise with
a total invoice value of P61,600, not included gbove. 96 Olive is a producer of cooking oil from coconut and corn. Previously exempt from value -
added tax, he became subject to value added tax on January 1, 2017. For January
The VAT payable of Gallaxy is: 2017, sales, vat not included, of P700,000, he had the following other data for the moth:
' a. P72,000 c. P11,000 Inventory, January 1, 2017 Cost
b. P57,000 d P66,000 Corn and coconut purchased from farmers P100,000
Packaging materials purchased from vat suppliers 22,400
4. Answer: C Supplies purchased from vat suppliers 11,200

590 591 —
 7414, 4tei74

Purchases during the month 100. Mantika Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and
Purchases during the month frdm coconut and corn 330,000 cam. It had the following data for the month of January 2018:
4mers Sales, gross of VAT P784,000
Pt:chases during the month from vat suppliers: Corn & Coconut, Dec. 31,2018 50,000
3 Purchases of Com & Coconut in 2018 330,000
Packaging materials P56,000 t.
Supblies 16,800 Com & Coconut, Jan., 1,2018 20,000
Purchases from VAT suppliers, VAT included:
The transitional input tax is Packaging Materials 56,000
P672 c P3,600 Supplies. 16,800
P762 d. P4,080 •
The value-added tax payable for the month:
) Answer: C P56,060 c.. P60,650
Colt/lion: P54,900 d. P63,000
Nord vat (P700,000 x 12%) • P84,000
Input vat: Answer: D
7W (P22,400 x 3/28) vs (P22,400 x 2%)whichever is higher P2,400 OUTPUT VAT (P784,000 x3/28) P84,000
UV (P11,200 x .3/28) vs (P11,200 x 2%) whichever is higher 1,200 LESS INPUT VAT
Presumptive (P330,000 x 4%) 13,200 Presumptive P330,000 x 4% (13,200)
From purchases of materials and suppies 06,000 + 16,800)x, 7,800 Materials and supplies (7,800)
Vat payable Total Creditable Input Vat P63,000

97 The 'presumptive input tax is';

a P13200 Input Vat on Capital Goods
b. P33,000
P6,600 101. When . is the input tax on purchases of capital asset is amortized over 60 months or
P39,600 useful fives of the capital assets if shorter than 60 months?
'a. If capital assets have been acquired from enterprises registered with and located at
4. Answer: A The export processing zones.
If the value of the capital asset purchased, excluding vat, exceeds P1,000,000..
98 The creditable input taxes are If the aggregate monthly purchases of capital assets, excluding vat, exceeds
P21,762 P1,000,000.
P24,600 If the vat taxpayer has secured prior approval for him to amortized input tax on
P25,080 purchases of capital assets.
P21,672
Answer: C
Answer: B
102. Statement 1: The input vat on purchase of capital goods valued at P1,000,000 shall be
99 The value added tax payable for the month is spread over 60 months if the life of property is equivalent to 5 years or more.
P62,328
P58,920 Statement 2: The input vat on purchase of capital goods valued at P1,000,000 shall be
P59,400 spread over the life of property if the life of property is less than 5 years.
P62,328 Both statements are correct
Only first statement is correct
Answer: C Both statements are incorrect
Only first statement incorrect

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 4/7/7
-1/a4 J
14L,4.6-4(74

0 The P1,000,000 threshold is not applied on 'per capital goods' purchased but 106. How much is the creditable input oat for The month of January?
on the 'aggregate.purchases" of capital goods for the month_ P2,000 c. P4,500
0 The aggregate purchase price for the month must exceed the P1,000,000 P2,500 d. P6,000
threshold.
Answer: C
103. A taxpayer has excess credit as a result of input taxes paid on purchases of capital
goods. bleirtay: 0 The aggregate acquisition cast for the month of January exceeds P1M, hence,
Haire his excess tax credit refunded to a VAT registered person. amortize the Input vat as follows:
Make his application for refund in the subsequent period following The period during Jan. 1 (P1.000 000 x 12%/60 mos.) P2,000
which the purchases were made. Jan. 15 (P500.000 x 12%)/24 mos. Z500
Carry-over and apply his excess tax credit against output taxes in the subsequent Tote/ allocated input vat for January P4,500
period or periods.
Use it in payment of any internal revenue tax of a VAT registered person: 107. Flow much is the creditable input vat for the month of February?
P2,000 c. P4,500
Answer: C P2,500 d P6,000

104. Pedro, vat-registered, made the following purchasedduring the-month of January, 2018: Answer: C
- Goods for sale, inclusive of VAT P 246400 • 0 Same solution with the preceding number
Supplies, exclusive of VAT 20, 000
Packaging materials, total invoice amount 56,000 108. How much is the creditable input vat for the month of March?
Home appliances for residence, gross of VAT 1T,920 . a. P4,000 c. P64,000 •
Offic&xnachines (5 pos.), 8 years useful life, net of VAT 2,000,000 b. P4,500 d. P64,500

Creditable Input taxes are: C' Answer: D

, a. P38 800 c. P37,440
b. •P34,800 d. P35,520 0 The aggregate acquisition cost for the month of March is not more than
P1,000,000.Accordingtit, the related input vat should not be spread or •
Answer A allocated during the estimated usekil ife of the assets. The entire input vat for
Input vet on goods for sale (P246,400 x 3/28) P26,400 these assets should be claimed as tax credit during the month of March.
Suppies (P20,000 x 12%) • 2400
Packaging materials (P56,000 x 3/28) 6,000 Solution:
Home appliances; (noncreditabie; personal use) Jan. 1(P1.000,000 x 12%/60 mos.) P2,000
Office machines (P2M x 12% / 60 rnongis 4 000 Jan. 15 (P500.000 x 12%)/24 mos. 2.500
Total Creditable Input Vat P38,800 For March acq. = P500,000 x 12% 60,000
Total allocated input vat for January P64,500
105.-A VAT registered taxpayer made the following acquisition of capital goodsifrom VAT
registered suppliers (net of vat) during 2017: 109. How much is the creditable input vat for the month of April?
Purchase Date Acquisition Cot' Estimated Useful Life (yrsj P2,000 c P4,500
Jan. 1-* P1,00000 10 P2,500 d. P6,000
i 15 50000 2
Mar. 2 200,000 6 Answer: C
20 300,000 2 From January Acquisition:
Oct. 6 600,000 Jan. 1 (pi.000, 000 x 12%160 nios.) P2,000
4
30 . Jan. 15 (P500,000 x 12%)/24 mos. 2,500
800,000 6
Dec 25 March Acquisition
3,000,000 1
TOTAL input tax credit for April P4,500
m The asset was sold on December 2017

594 .595___.
 144 741.1e774- 14/16 47E7'
110. How myth is the creditable input vat for the month of October? Use the folbwinq data for the next five (5)questions:
P2,500 - c. P7,600
P4,500 d. P8,000 Mother's Best Corporation is a manufacturer of cooking oil made of corn since 2010.
However, for 2018 taxable year, it started its operations as vat registered (from being VAT
+ Answer: C exempt). The following were the transactions during the first quarter taken from its books and
Solution: reco/ds,
, ,z From January Acquisition:
Jan. 1 (P1,000,000 x 1216/60 mos.) P2000 at As Sept
Jan. 15 (P500,000 x 12%)l24 mos. 2,500 SALES P780,000 P640,000 P720,000
March Acquisition . PURCHASES: -
From October Acquisition: Corn used as raw materials 125,000 160,600 210,000
Oct. 6 (P600,000 x 12%/48 mos.) P1,500 Supplies and other materials 150,000 175,000170
. 000
, .
Oct. 30 (P800,600 x 12%1/60 mos. 1,600 .
Two (2) heavy equipment (U.L.-8 yrs.) 800,000
TOTAL input tax credit for October P7,600 Four (3) heavy eqUipment (U.L.-4 yrs.) 450,000

How much is the creditable input vat for the month of November? BEGINNING INVENTORY:
a: P2,500 c. P7,600 Supplies/other materials-from vat suppliers 10,000
b. P4,500 d. P8,000
Supplies/other materials-from nonvat suppliers 60,000
Corn 25,000
+ Answer: C
0 Same Computation with the preceding number Determine the following:

FlOw much is the creditable i1/2eut vat for the month of December? 113. Transitional inPut vat is
P63,600 c. P463,600
PO c. P1,200
P268,060 d. P480,000
P200 d. P1,400

+ Answer: :C.. . + Answer: "D"

From January /Acquisition:
'Unclaimed Input vat for January 1 acquisition: P98,000
114. Vat payable for the nionth of July is
[1M x 12% - (2,000x 11 months)] r
2,500 (P80,800) c P66,475
Jan. 15 (P500,000 x 12%)/24 mos.
March Acquisition P64,575 d P66,675
From OcloberAc.quisilion:
Oct. 6 (P600,000 x 12%/48 mos.) R1,500 + Answer: "C"
Oct. 30 (P800,000 x 12%)/60 mos. 1,600
December Acquisition (P3M x 12%) (Not a capital 360,000 11-5. Val payable for the month of August is
asset) P48,000 c. P45,900
TOTAL input tax credit for Decembfr P463,600 P47,800 d. (P96,750)

"Unclaimed Input vat for January 1 4* Answer:

If the capital good is sold or disposed within the five (S) year period or prior
to exhaustion of input vat thereon, the entire unamortized input vat thereon . 116. Vat payable for the month of September is
can be claimed as input tax credit during the month or quarter when the P53,750 c. P51,850
sale/disposal is made. P53,950 d. (P88,075)

+ Answer: "A"

596 597
 TL Vite 4 gj7:16
Solution: Standard Input Vat (SIV)
July AugustSeptember
118.,What institution is required to deduct and withhold a final VAT of 5% on the purchase of
(cumulative)
goods or services subject to VAT?
Oubautiyat Po.600 P76,800 P256,800
National government or any political subdivision thereof
T1V fHiaher bet actual of P1.200 vs. (2%xP70,000)r (1,400) - (1,400) .
Government-owned or controlled corporations
4% Presumptive input vat (5,000) (6,400) - (19,800) .
Both (a) and (b)
IV on 64ip lies and other materials (18,000) (21,000) (59,400)
Neither (a) nor (b)
IV on heavy equipment (1.600) (1,600) (4,800)
1.V. on light equipment (1.125) (1,125), (3,375)
-) Answer: C
Vat liability P66,475 P47,800 P168,025
Less: Vat paid in July and August .. , (114,275) ,
119. Which of the following statements is correct regarding standard input tax?
Vat Payable -September P66,475 P47,800 . P53,750
' I. Input tax that can be directly attributable to VAT taxable sales of goods and
.. • -O. "Beginning inventory& corn shall not be Molded in the computatihn of TIV. •
services to the Government shall be credited against output taxes arising from
sales to non-Government entities.
11 The govemment or any of its political subdivisions. instrumentalities or
117. How much is the correct vat payable (excess input vat) for the month of September
agencies as well as purchasers in the course of trade or business, shall deduct
assuming the company disposed one of the:heavy equipment during the month? •
and withhold a final VAT due at the rate of fiVe percent (5%) of the gross
P8,150 c. R13,925
payment.
P7,750 d. P10,725
I only Both land 11
II only Neither I nor 11
+ Answer: "A" .
Any unclaimed input vat on capital goods shall j;le deducted from the vat liability at,
+ • Answer: D
the time of disposaNr retirement.
0 .1" is wrong. Only SW is allowed to be credited from the output vat on sale
•
attributable to the government.
July August September 0 "IP is wrong. The 5% final vat is applicable only if the buyer is the government
including its political subdivisions and government agenciesandior
(cumulative)
instrumentalities,
Output Vat . . P93.600 .P76,800 P256,800 fi
ITV Higher bet actual ot P1,200 vs. (2%xP70,000)) (t400) - (1,400) -
120.1f actual input VAT is less than the standard input lax (7% of gross payment):
4% presumptive input vat (5,000) (6,400) (19,800) 1
The excess may form part of the sellers' expense or cost.
IV on stipples and other materials (18, 000) (21,000) (59,400)
The difference must be closed to expense or cost.
on heavy equipment (1,600) (1,600) *(A009)
**(46,400) The excess shall be claimed as input tax credit from output tax on other
IV. on heavy equipment (refired)
I.V. on fght equipment (1,125) (1,125) (3,375) sales/receipts.
Vat liability P66, 475 P47,800 P122,425 None of the choices.
Less: Vat paid in July and August (114,275) '
Vat Payable -September P66,475 P47.800 P8,150 + Answer: D

131,600 + 1,600 +800 on the undtposed heavy equipment 121. Government units making payments to VAT registered business is required to withhold
"Unclaimed input vat on one heavytequipment the estimated tax corresponding to its payment. The VAT withholding tax on payment to
P400,000 cost x 12% - input vat claimed in July and August VAT registered suppfiers is
= P48,000 — (P800 x 2 months) = 46,400 3%of gross payment
To Check. 5% of gross payment
Total I.V. for the two heavy equipment for the •IT Qtr . 8.5% of gross payment
indisposed = (P400,000 x 12%)/60 x 3 months = P2,400
Disposed = P400,000 x 12% = r46,000 10% of gross payment
TOTAL for the two equipment = P50,400
Answer: B

599
598
 iL741/17;it; 14-i(e.7-1/61
,74

122_ The withholding agent of creditable value added tax is required to remit the amount of 126. How much is the output tax?
value added tax withheld within P300,000 c. P420,000
25 days following the end of month the withholding was made P120,000 d. nil
20 days following the end of month the withholding was made
15,days following the end of month the withholding was made 4 Answer: C
10 days following the end of month the withholding was made 0 Output Vat = Sales to private entities and the government
0 Output vat = (P2.5M + P1M) x 12% = P420,000
+— Answer: D
127. flow much is the standard input tax?
123. Ma sold office supplies to the City of Davao on April 1, 2018 The City of Davao shall P20,000 C. P50,000
remit the 5% final vat to the Bureau of Customs on or before: • P70.000 d. nil
a Apri111, 2018
April 20, 2018 Answer: B
C. April 30, 2018 0 Standard Input Vat (SIV) IM x 7% = 70,000
d. May 10, 2018
128. Howfnuch is the, creditable input vat (CIV)?
Answer: D a. P166,000 c. P70,000
h. P96,000 d. P180,000
124: Lorna sold office supplies to the City of Davao on April 28, 2018. The City of Davao shall
remit the 5% final vat to the Bureau of Customs on or before: ; • Answer: A
Apnl 11, 2018 0 CIV. = From purchases for sale to private entities + SIV
April 20,2018 0 CIV= P96,0011f+ 70,000 = 0166,000 • -
-April 30, 2018
May10, 2018 , 129. How much is the input tax closed to income or (expense)?
014,000 c. (P14,000) .
:Answer: D P34,000 d. (P34,000)

125;A VAT-registered supplier sold goods amounting to P500,000 to a government-Controlled. .• Answer: C

corporation during a particular quarter. VVhich of the following statements is incorrect in 0 SIV = P70,000
relation to the sale in relation to the sale of goods? 0 Actual Input vat on sale to the govemment = P700,000 x 12% = P84,000
a. The sale is subject to final withholding VAT 0 Expense.= Actual over SIV = P84,000 — P70,000 = P14,06
_b. The govemment-controlled corporation will withhold P25,000 withholding VAT. 0 If Actual- input vat is higher than SIV -= close to expense
The government-controlled corporation shall remit the withholding of VAT to the B1R
0 If SIV is higher than-Actual input vat = closet income
within 10 days following the end of the month the withholding was made...
The VAT-registered supplier may refuse the withholding of VAT as long as it‘ it
130. How much is the VAT payable to the BIR?
wilting to pay the full 12% VAT,
P404,000 c, P204,0130
P390,000 d. nil
Answer: D
Answer: C
OUTPUT VAT P420,000.
Use the folbwing data for the next five (5) questiofts: LESS INPUT VAT
A VAT-registered trader has the following transactions: SIV (70,000)
Sales of good to private entities, net of VAT P2„500,000 On purchase of goods , (96,000)
Purchases of goods sold to private entities, gross of 12% VAT 896,000 5%withholding from the government (50,000)
Sales to a government owned corporation (GOCC), net of VAT 1,000,000 Vat Payable P204,000
Purchases of goods sold to GOCC, net of 12% VAT 700,000
OR

600 601
 9

v.de 74a-rb vaite (f,1,6774

OR
133. Leomar, a VAT-registered person has the following data:
OUTPUT VAT (from private entities only) P300,000 Export sales, total invoice amount P3,000,000
LESS INPUT VAT Domestic sales, total invoice amount 6,720,000
On purchase of goods (96,000) Purchases used to manufacture Goods for
Vat Payable P204,000 export and domestic sales:
Raw Materials, VAT inclusive 616000
131.A VAT-reariered trader has the following transactions for the month of July 2018: Supplies, VAT inclusive 448,000
Sale of goods to private entities, net of VAT • P2,500,000 Equipment, VAT exclusive 300,000
Purchases of goods sold to private entities, gross of 12% VAT 896,000
Sales to a government owned corporation (GOCC), net of VAT 1,500,000 The amount of input tax which can be refunded or converted into tax credit certificates at
Purchases of goods sold to GOCC, net of 12% VAT 700,000 the option of Leomar is:
- Purchases of Machineries, gross of VAT, useful life is 6 years 11200,000 P120,000 c P39,600
P118,800 . d. P50,000
How much is the VAT payable to the BIR?
P280,000 c. P191,500 • Answer: D
P224,000 d. P300,000 Solution:
Raw Materials (P616,000 x 3128) P66,000
t • Answer: c, SOppies (P448, 000 x 3/28) 65,000
000
348,000
OUTPUT VAT P460,000 Equipment (P300,000 x 1236)
'LESS INPUT,VAT Total input Vat P150,000 -
Private (96,000)- X 3/9
SIV 1.. (105,000) Input vat attnbutable to export sale P50,000
Allocated InpubYat (12,599)
(1,200,000/60 x 2.5/4) • 134. Based on the preceding number, if the refundable input taxes ere not. refunded but
5% withhOlding from the government (75,000) ,. used as tax credit, the VAT due is:
Vat Payable P191,500 a. P570,000 c. P666,888
- b. • P697,888 .d. P570,000
OR
Cc, Answer: I)
OUTPUT VAT (private entities only) P300,000 Solution:
LESS INPUT VAT Output vat P720,000
Private (96,000) Total input vat (150.000)
Allocated Input Vat (12,500) Vat Payable P570,000
(1,200,000/60 x 2.5/4)
Vat Payable P191,500 135. But assuming further that the taxpayer opted to claim them as refund, the VAT due
a. P576,000 c. P746,888
132. Based on the preceding number, how much isle input tax closed to (expense) income? b.. P697,888 d. P620,000
a.P13,500 c,(13,g00)
b.P21,000 d.(P21k000) Answer D
Solution:
Answer: A • ' Output vat P720,000
0 Total actual input vat = P96,000 + 20,000 + 84,000 = P200,000 Total input vat (1(10,000)
0 Allowed = P213,500 Vat Payabk P620.000
0 Income P13,500

602 603
 L.7-laci174 vah,
b. Both statements are not correct
Sale of Real'Property .c. Only the first statement is correct
d. Only the second statement is carrect
136. Sale of real property by a real estate dealer, the initial payments of which do not exceed
twenty five percent (25%) of the gross selling price in the year of sale is considered Answer: A
a Sale of real estate by a real estate dealer on a deferred basis
b. SaleAreal estate by a real estate dealer on installment basis 140. Kaktus Realty Inc. developed a condominium in Manila. During the month of January
c.. Both "a and "b' 2013, it had the following data (VAT included,if applicable):
d. Neither "a' nor "b' Selling Pried
Cash sale of a 3 bedroom unit P5,040,000
' Answer: B Sale of parking lot 560,000
Installmentsale of 2 bedroom unit (initial
137. In the case of sale of real properties on the installment plan, the real estate dealer 'shall payments exceed 25% of the selling price) 3,920,000
be subject to VAT on the:
Selling price The 3 bedroom uhit sold for cash had a zonal Value of P5,000,000 and the 2 bedroom
Selling price or fair market value whichever is lower unit had a fair market value per Tax Declaration of P3,000,000.
Selling price of fair market value whichever is higher How much is the output tax for the month?
Installment payments, including interest and penalties, actually or constructively a. 'P920,000 c. P1,020,000
received by the seller. b., P900,000 d. P1,080,000

Answer: D Answer: D
3 Bedroom unit
138. Statement 1: On a sale'of tilt' property on installments by a real estate dealer, the seller SP = P5,040,000/1.12 = P4,5000
shall be subject to VAT on the installment payment received, including interests and ,,Z.V =P5M
penalties for late payment Output Vat = P5M x 12% P600,000

Statement 2: On sale of real property on installments by real estate dealer, where the Vat 2 Sedroodi unit
is computed not on the consideration in the deed of sale-but on the higher fair Market SP = P3,920,000 = P3,500,000
value, thaVat must be billed separately with a specific mention that it is based on the ZV= P3,000,000 60,000
market value of the property. OV = P3.5M x 12% 420,000
a. -Both statements are correct TOTAL Output Vat P1,080,000
b: . Both statements are not correct
Only the first statement is correct 141. West Star Realty Corp. sells a commercial lot in the month of November 2018 under the
Only the second statement is correct following terms (including VAT):
Total contract price P1,120,000
Answer: A Downpayment, 11-01-2018 112,000
First installment, 12-01-2018 112,000
139. Statement 1: In the case of sale on deferrit payment basis not qualifying under the
installment plan, the transaction shall be treated as cash sale and the vat is payable on The output VAT in November 2018 is:
the month of sale. a.. P12,000 c. P30,000
b. P24,000 d. P120,000
Statement 2: In the case of a sale on deferred payment basis not qualifying under the •
installment plan, payments subsequent to the initial payments shall no longer be subject Answer: A
to vat.
0 Ratio of initial payment over SP = 200/1M.= 20%
Both statements are correct
0 Type of Sale = Installment Sale
Both statements are not correct
0 Output Vat Nov. = P112,000 x 3/28 = P12,000

604 605
 142. Bahzi; Kubo Inc. is a real estate dealer. Details of its sates during the year .showed the '144. How much is the Output tax tor the month of October?
, . a. P26,500 c. P31,800
following: •
• June 2, 2014 b. P34,800 d. P40,200
; Datkof sale
bonaderation in the deed of sale P5,000,000
Fair,morket value in the assessment rolls 4,800,000 <4 Answer: 0
,ionalaelue 5,200,000
Schedule of payments: 145. The Output tax for December is
jaie 2;2014 1,000,000 ' c. P5,400 c. P6,600
2,000,000 d: P4,500 d. none
'line 24015
*me 2/206 ' 2,000,000'
t• Answer: C
L$1- Lot 2 tot 3 -TOTAL
'Pliiw.,mrith'is the output (axle be recognized for the June 2,2016 payment? 20% 35% 20% 20%
Ratio
c. P249,600
Type of Sale , Installment Deferred Sale Sale
• b.-re24000 d. P624,000
OCT P4,200 31,200 , '4,800 P40,200
1/23 Answer •C 'DEC • 4:200 • none 2,400 8,600
' 0 Ratio of iritia payment over SP = 1/5 = 20%
TYpeOf Sale = Installment Sale •
.146: Statement 1: On a sale 'of real property on installment by a real estate dealer, the seller-
, -0-41Output4attlov. 2016 ; 2/5 x 5,200,000 x 12% = P249,600 shall be subject to VAT on the installment payment received, including interests :and :
" ' penalties for late payment. . •
c.,-.40..Aisuming that ,pie.scheiltiO Payment on Jane 2, 2014 is P2000,0170,,how,:much is, the Steterhetit 2: Onsale of real prcgierty on installments by mat Sate dealer, *hire '. 'Vat' • :
. the
&Colptit tali to be leitignizeptor the „time 22016 payment? I , . is ccirnpUtetloot on the consideration in the deed of sale but on the higher "fair market •
a. tP0'...:.; • ' - • • t: P249,600 ,• • value, the Vat must be billed SeCaratelY with esgecific mention that it is bgerl: on the. I
.b:^P24,000 1 d. P624,606 niarket value of the property. • . , -• -
a.. Both statements are.coirect
4) Answer: A f.
b: 'Both statements are incorrect •
Ratio oiiritikpayment over/ SP = 2/5-= 4$.; ''. : ..
'''.0 c. only the first statement is correct
0 Type of sale = deferred sale; treated as cash Sale d. Only the second statement is correct.
0 • The entire celput vat will be paid on 2014
C' Ans-vrer A .
0 LiatilitY 2E06 = PO

Use the following data for the next two (2) questions: • .• 147. Statement 1: In the case of sale on deferred payment basis not qualifying Under the
„JJ is a real estate dealer. During the month of October 2016, he sold three (3) commercial installment•plan, the transaction shall be treated as cash sale and the-Vatisriayable on
lots under the following terms: .. 1, the month of sale. . . .
'Lot 1 Lot 2 Lo13 Statement 2: In the case of a sale on deferred payment basis not qualifying tinder the"
Selling Price - P250,000 P204100 P300,000 installment plan,-payments subsequentioiheinitialpayments shalt no longer bo subjed
Cos! 150,000 130(700 115,000 to vat.
Gain/Loss 100,000 70 000 125,000 Both statements are correct
Terms: Both statements are incorrect
Dovin: Oct. 5 25,000 50,000 40,000 Only the first statement is correct
Due: Only the second statement is correct.
12/05/ 2016 '25,000 20,000 20,000
Year 2017 260,000 ' 130,000 240,000 t• Answer A
Zonal Value 350,000 260,000 250,000

607
606
 / 4 iri ly
V el r (WY / it) 744, 4,17174
-

Sale by a Dealer in Securities

150. Lobo Sot, a senior citizen went to Jollibee to treat his 4 grandchildren on account of his
148. A dealer in securities has the following for the year 2018: retirement. They consumed foods and beverages with gross amount of P1,120 inclusive
Sales, shares held as inventory P5,000,000 of VAT. How much is amount to be paid by lobo Sot?
Sales, shares held as investment 1,500,000 P896 c. P1,056
Cos of shares, held as inventory 2,000,000 P920 ' d. P1,100
Cos oftshares, held as investment 500,000
Supplies expense, net of vat 100,000 Answer: C
Rent expense, net of vat 200,000 • 0 Allocated the GC = P1,120 x 415 = P896
0 Allocated to the SC = P1,120 x 1/5/1.12 x 80% = P160
How much is the vat payable? 'Amount to be Paid: P896 + 160: P1,056
P470,000 c P270,000
P324,000 d vat exempt 151. Gabriana Clinic, a VAT-registered entity, performed a prosthetic surgery on the legs of ,
Loyd, a person with disability. The total cost of medical operation was P500,000. Being a
+ AnsWer B disabled person, Loyd received 20% discount from Gabriana. How much is the total
Solution: amount to be paid by Loyd?
Sales, shares hekt as inventory P5, 000, 000 P400,000 c. P500,000
Cos of shares, held as inventory (2,000,000) d. P560,000
P448,000
Gross income 3,000,000
Vat rate • 12%
Answer:- A
Output vat P360,000
Les: Input vat 0 Amount to be Paid = P500,000 x 80% = P400,000
Suppliegfixpense 12,000
Rent eviepse • 24,000 (36,000) 152:Masbate Foam Inc. paid royalties to. Kama Italia Inc., ,a manufacturer of foam based in
Vat payable
Italy for allowing the former to use the tatter's newly developed technology in
P324,000 -
manufacturing foam. Which of the following statements is true as to the tax consequence
VATIDiscount on Sale to Senior Citizens and PWDs of the said paynient?
149. Lola Lite; a senior citizen, bought a medicine with a selling price of P9,520 inclusive of Masbate Foam Inc. will pay the BIR 5% final withholding VAT
VAT. How much is the net amount to be paid by Lola? b. • Kama Italia Inc. will pay the BIR 5% final withholding VAT
P8,500 • Masbate Foam Inc. will pay the BIR 12% creditable withholding VAT
c. P6,916
P7,616 d. P6,800 Kama Italia Inc. will pay the BIR 12% creditable withholding VAT

+ Answer: D Answer: C
Purchase price = P952011.12 P8500
Discount (P8,500 x 20%) (1,700)
153. The Commissioner or his authorized representative is empowered to suspend the
business operations and temporarily close the business establishment of any person for:
Amount to be paid by the SC P6,800
Failure to issue receipts or invoices of a VAT- registered entity.
Failure to file a VAT-retum for VAT-registered person as required by the tax
JOURNAL ENTRY OF THE SE4ER
Cash T P6,800 code.
Understatement of taxable sales or receipts by thirty percent (30%) or more of
SC Discount Expense 1 1,700
Sales his correct taxable sales or receipts for the taxable quarter
P8,500
All of the above
0 Record the sales at undiscounted amount
Answer: D
0 The 20% discount shall be recognized as part of operating
expenses.
0 Any input vat attributable to the sale to SC and PWDs shall be
classified as operating expenses

608 609
 "Vitt 74764(74
154. 131 Statement - Failure of any person to register as a VAT-entity shall result to his being
temporality dosed for the duration of not less than five (5) days and shall be lifted only
uncin, compliance with whatever requirements prescribed by the Commissioner in the
closure order.
rd Statement — A taxpayer may apply for VAT registration not tater than ten (10) days
before ,bp beginning of the calendar quarter and shall [ay the registration fee.unless
they have already paid at the beginning Of the year.
Both statements are correct
Both statements are incorrect
Only the first statement is correct
Only the second statement is correct.
0 Answer A
155. The-term 'grins receipts' for hotel and restaurant business operators shall include
.17Service -charges billed separately and actually distributed to waiters and employees.
ILACtual cost of long dStance and overseas telephone calls, fax, cable, telex, and
charges , of .the telecommunication companies collected by the establishment
,,for the customers/clients for the concerned telecom,munication. companies,
such as- PLDT, which are earmarked for payment to the tatter.
passed on to customers
-1111..qtral taxeS
V.RopritS,Jaunctry,,valet Services and food/beverages consumption .1
,,VI.trlandling:charges for providing telephone, cable or fax services
Vtl,Cake shop Sales, lease to concessionaires and compensation for other services
r Ylidvil orily C: V, VI and.VII Only -
b. 11;110 ghel VII only ' d. All of the above •
4. Answer: C
156. 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,
and with a total which is a correct amount is a properly prepared invoice.
c NI invoice which shows the sang prte and the value added tax separately,
but where the value added tax is wrow, which is paid by the buyer, is a
violation of the revenue regulations bn issuance of sales invoices.
d A sales invoice by a VAT taxpayer can be used only on a VAT sale.
Answer: 0
-yak Ni,11-4,
157. First statement The transitional input tax shall be 2% of the value of the beginning
inventory on hand, or actual VAT paid on such goods, materials and supplies, whichever
is higher, which amount shall be creditable against the output tax of VAT-registered
*4 persons.
Second statement The value allowed for income tax purpose's on inventories.shall be
the basis for the computation of the 2% transitional input tax, including goods that are
exempt for VAT under Sec. 109 of the Tax Code.
- a., Both statements are correct
Both statements are incorrect
Only the first statement is correct
Only the second statement is correct.
0. Answer C
158. First statement: Unused input tax of persons whose registration had been cancelled may
be converted into taX credit certificate which may be used in payment of other NIRC
taxes.
Second statement: Refund or tax credit certificate shall be granted within 25 days from
the date of submission of compete documents_
Both statements are correct.
Both statements are incorrect.
Only the first statement is correct.
- Only the second state t tatement is correct.
, • .Antiver C
159. If a person who is not VAT-registered issues an invoice or receipt showing his TIN,
followed by the word 'VAT', the erroneous issuance shall result to the following, except
which one?
The non-VAT person shall be liable to The percentage taxes applicable to his
transactions.
The non-VAT person shall be liable to the VAT due on the transactions.
The non-VAT person shall have the benefit of input tax credit.
The non-VAT person shall be liable to a 50% surcharge under Sec. 248 (B) of the
Tax Code.
Answer: C
4-
160. Which of the following statement is not correct?
Under Vat, the consumption tax is borne by the consumer.
Under Vat, the seller is merely serving as tax collector.
, Under Vat, the buyer is claiming the input Vat.
Under Vat, the final consumer is claiming the input vat as refund.

Answer: D

610 611
 PART 13

161. What instifttlion is required to deduct and withhold a final VAT of 5% on the purchase of
goods or services subject to VAT? .
a. Nationaligovernment or any political subdivision thereof
b. Gevernment-owned or controlled corporations
Ba (a) and (b)
Neither (a) nor (b)

Answer: C

162. The withholding agent- of creditable value added tax is required to remit the amount of
value added tax withheld within
e. 25 days following the end of month the withholding was made
f. 20 days following-the end of month the withholding was made
g. • 15 days following the end of month the withholding was made
h. • 10 days following the end of month the withholding was made
Cr Answer: D
63. A VAT-registered supplier sold goods amounting to P500,000 to a government-controlled
corporation during a particular quarter. VVhich of the following statements is incorrect in
relation to the sale in relation to the sale of goods?
The sale is subject to final withholding VAT.
The government-contrahfd corporation will.withhdd P25,000 withholding VAT:
The government-controlled corporation shall remit the withholding of VAT to the BIR
within 10 days following the end of the month the withholdinglwas made. .
d The VAT-registered supplier may refuse the withholding of VAT. as long as it is
willing lo pay the full 12% VAT.
Answer: D
A. TAX REMEDIES, DEFINED
On the Part of the government, these are courses of action provided by
or allowed in the law to implement the tax laws or enforce tax collection; .
On the part of the taxpayer, these are legal actions which a -taxpayer can
avail of to seek relief from the undue burden -or oppressive effect of tax
laWs; or as a means to check possible excesses by revenue officers in the
performance of their duties.
B. ASSESSMENT PROCESS
- STAGE I— TAX AUDIT OR INVESTIGATION
, The BIR conducts an audit by issuing Letter of Authority (LA).
letter.of Authority — is an official document that empowers a Revenue Officer
to examine and scutinize a taxpayer's books of accounts and other accounting
records, in - order to determine the taxpayer's correct internal revenue tax
liabilities. •
In the absence of such an authority, the assessment or examination is a nullity.
(OR vs. Sony Phils., Inc., 635 SCRA 234).

PERSONS AUTHORIZED TO ISSUE LA

TAXPAYER ' PERSON AUTHORIZED
Under the jurisdiction of the National Commissioner of Internal
Office Revenue (CIR)
Under the jurisdiction • of the regional Regional Director
offices , . --

- TAX CASES NEED NOT BE COVERED BY AN LA

1) Cases involving civil or criminal tax fraud which fall under the jurisdiction-of
the National Investigation Division (MD) under the Enforcement and
Advocacy Services (FAS) of the BIR; and
-2) Policy cases under audit by the special teams in the National Office

612 613
 &21",elies enute.4.
•
EFFECT OF TFIE ISSUANCE OF LA STAGE 3 — ISSUANCE OF FORMAL LETTER OF DEMAND/FINAL
A tax return, statement or declaration filed by a taxpayer may be modified, ASSESSMENT NOTICE (FAN)
changed or amended within three (3) years from the date of filing. WHEN ISSUED?
1) The taxpayer failed to respond to the PAN; or
However, when an LA or investigation of such tax return, statement • or 2)- The reply to the PAN was found to be without merit.
dedaratton has been actually served upon the taxpayer, amendment Shall no
lontier be allowed. PRESCRIPTIVE PERIOD
Three (3) years from:
NOTE: 4thence of Letter Notices (LN's) being served by the BIR upon taxpayers Actual filing of return; or
who were found to have underdeclared their sales pr purchases through the Return filed is not fraudulent Deadline for filing
Third Party Information Program can be considered a notice of audit or whichever is LATER.
'investigation which will prohibit the taxpayer from amending the return/5 subject . Return filed is FRAUDULENT; or
of Such audit or investigation. NO return was filed Ten (10) years from discovery.

STAGE 2 — ISSUANCE OF PRELIMINARY ASSESSMENT NOTICE (PAN). REMEDY OF THE TAXPAYER

A PAN is a Communication issued by the Regional Assessment Division or by the 1) File a protest, to the CIR or his authorized representative within 30 days
Commissioner or his duly authorized representative informing a taxpayer, who from date of receipt of the FAN.
has been audited of the findings of the revenue officer.
TYPES OF PROTEST (RR 18-2013)
The PAN shall be In writing and shall show in detail the facts and the law, rules Request for-Reconsideration
and regulations or jurisprudence on which the proposed assessment is based, Refer to a plea of re-evaluation of an assessment on the basis of existing
otherwiSe, the assessment is void. iewrds without need of additional evidence. It may involve both a question
of fact or of law or both.
MANDATORY NATURE OF SERVICE OF PAN PRIOR TO FINAL ASSESSMENT .
NOTICE (FAN1 Request for Reinvestigation• ,
As a general - rule, iSsuance of PAN prim: to FAN is part of the "due process Refer to a plea of re-evaluation of an assessment on the basis of newly
reguireniene, the absence Of which 'renders nugatory any assessment made by discoVered or additional evidence that a taxpayer intends to present in the
the tax authorities. reinvestigation. It May also involve a question of fact or of law or both.
. .
However, as an exception, PAN is not required in the following cases: 2) Submit all supporting documents within 60 days from filing of protest (in
When the finding for any defidency tax is the result of mathematical error racP of request for reinvestigation under RR 18-2013).
in the computation. of the tax as appearing on the face of the return; or
When a discrepancy has been determined between the tax withheld and - 'STAGE 4— DENIAL OF PROTEST
the amount actually remitted by the withholding agent; or WAYS TO DENY PROTEST
When a taxpayer who opted to daim a refund or tax credit of excess I) Direct denial of protest
creditable withholding tax for a taxable period was determined to have 2) Indirect denial of protest — If the OR or his duly authorized representative
carried over. and automatically applied the same amount claimed -against . fails to act on the taxpayer's protest within 180 days from date of
the estimated tax liabilities for the taxable quarter or quarters of the submission, the protest may be considered denied.
succeeding taxable year; or
When the exdse tax due on excisable artides has not been paid; or
When an article locally purchased or-pealed by an exempt-person, such DIRECT File an appeal with the Court of Tax Appeals (CIA) Division within
as, but not limited to, vehicles, capital equipment, machineries and spare- DENIAL 30 days from receipt of letter of denial.
parts, has been sold, traded or transforred to non-exempt persons. INDIRECT File an appeal with the CIA Division within 30 days from the
DENIAL lapse of the 180 day period.
REMEDY OF THE TAXPAYER OR
The taxpayer has 15 days to reply contesting the finding in the PAN. Await the final decision of the OR or his duly authorized
representative and appeal such final decision to the CIA within 30
EFFECT OF FAILURE-TO REPLY days after the receipt of a copy of such decision
The taxpayer is considered in default and the SIR will then issue a Final (RR18-2013). .
Assessment Notice.

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STAGE 5 — DENIAL OF APPEAL BY CIA DIVISION METHODS OF COLLECTION

REMEDIES OF THE TAXPAYER The SIR can collect delinquent internal revenue taxes through the following
File motion for reconsideration (MR) before -the same CIA Division within means:
15 days from receipt of the decision.
Then, if the MR is denied, file an appeal with the CIA en banc within 15 • 1) Distraint- the seizure by the government of personal property, tangible or
days from receipt Of the decision. intangible to enforce the payment of taxes.

STAGE 6— DENIAL OF APPEAL BY CIA EN BANC Actual Distraint — personal property is physically seized by the SIR
REMEDIES OF THE TAXPAYER and offered for sale at public auction. The property is sold to the
File MR before the CIA en banc within 15 days from receipt of the highest bidder and the proceeds of the sale are applied. to the payment
decision. of the tax due.
Then, if the MR is denied, file an appeal with the Supreme Court (SC) Garnishment- is the distraint of bank accounts.
Division within 15 days from receipt of the decision: Constructive Distraint — the person in pOrsession of personal
property is made to sign a receipt, undertaking that he will preserve the
STAGE 7 —DENIAL OF APPEAL BY SC DIVISION . property and will not dispose of the property without the. express
REMEDIES OF THEIAXPAYER - authority of Bureau of Internal Revenue (SIR).
1) File MR before the same SC Division within 15 days from receipt of the
decision. • Constructive distraint may be availed of in the following cases:
'2) Then, if the MR is denied, file an appeal with the SC en banc within 15 days The taxpayer is retiring from any business subject to tax.
from receipt of the decision. He intends to leave the Philippines.
He removes his property therefrom.
STAGE EI — DENIAL OF APPEAL BY SC EN BANC He performs any act tending to obstruct the proceeding for
. REMEDY OF THE TAXPAYER , collecting the tax due or which may be due from him.
File MR before the SC en banc within 15 days from receipt of the decision.
EFFECT IF MR IS DENIED 4 PERSON AUTHORIZED TO COMMENCE DISTRAINT PROCEEDINGS
The taxpayer has no More remedy. The assessment shall become final,
executory and demandable. AMOUNT INVOLVE PERSON AUTHORIZED
More than P1,000,000. OR
NOTE: From the issuance of FAN, all the periods in avaling the remedies are f11,000,000 or less Revenue District Officcer
mandatory in which failure to comply shall result in the assessment being final,
exeCutory and demandable. RIGHT OF PRE-EMPTION
If at any time prior to the consummation of the sale, all proper charges
C. COLLECTION (taxes, interest and penalties) are paid to the officer conducting the sale; -
- The SIR may avail of the remedy of collection when the assessment becomes the goods or effects distrained shall be restored to the owner. ,
final, executory and demandable.
2) Levy- the seizure by the government of real properties and interest in or
PRESCRIPTIVE PERIOD rights to such properties in order to enforce the payment of taxes.
With Prior Accessment Within 5 years from issuance
of FAN. RIGHT OF REDEMPTION
For period of one (1) year from the date of sale, the property may be
4. Three (3) years from: redeemed by the taxpayer. During this period, the taxpayer is not deprNett
? Actual filing of return; or of the possession and fruits from the property. If the taxpayer fails to
Return filed is not false Sr Deadline for filing- redeem the property, a final deed of sale is executed in favor of the buyer.
fradulent
whichever is LATER.. RIGHTS OF THE OWNER DURING THE ONE (1) - YEAR PERIOD OF
, Return filed is REDEMPTION
Without Prior FRAUDULENT; or Ten (10) years from discovery. Ddring the one (1) year period of redemption, the owner shall not be
Assessment NO return was filed deprived of the possession of the said property and shall be entitled to the
rents and other income thereof until the expiration of the time allowed for
its redemption:

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3) :liditial preteedings - G. CIVIL PENALTIES

' m Fling of ch.41 case for collection It • In addition to the basic tax assessed on the taxpayer, the following civil penalties
.1:1)-- File a criminal case (Tax Evasion) will also be collected:
1) Surcharge
D. CoMkROMISE . zy Interest
GROUNDS . 3) Penalties
: 1)' •A reasonable doubt as to the validity of the claim against the taxpayer
' - ' Mges; or • ?, .. SURCHARGE
- 2) "itte financial position of the taxpayer demonstrates a dear: inabllitY to pay A 25% surcharge shall be ccillected in any of the following' cases.
.• • :the assested tax. Failure•to file any return and pay the tax due on time.
Filing a return with an internal revenue officer other than those with whom
' . YAlleriminaLviolatioris May be compromised except: the return is required to be filed, unless authorized by the Commissioner of
'..:.1) 'tilt& already filed In court; or • InternM Revenue.. •
••••.2)
. .,.. .•ThoSeinvolvhig
. . fraud.. : 3) Failure to pay the deficiency tax within the time prescribed rot its-payment , •
I In the notice of assessment.
•
' • •MINIMUNAMOUNTS ' ` • • 4) Failure to pay the full or part elf the amount of tax shown on any return, or-
-•1) ' For ieases•of 'financial incapacity, a minimum compromise rate eqUivalent to the full amount of tax due for which no return is required to-be filed.
t 'Rep pereent (10%) of the bast assested tax.; and .. . . •
2):--.FOr.pther cases, a minimum- compromise ratelequIValent to forty pertent A 50%surcharge shall be collected in any of the following cases:
the basic asseSsed tax. , Willful neglect to file the return on time. .
• There is willful neglect if the taxpayer files only after prig notice in writing
INSTANCES WHEN APPROVAL OF THE EVALUATION BOAFtD'IS REQUIRED from the BIFt. '
1) 'Where the basic tax Involved exceeds one millionfiesos:(111,000;000); or" . .
":.2);;Wliere•thetettlerneit offered Is leis than theipreteribed minirhuM tateS.: -•. . There is siniple neglect (25% surcharge) if the takpayer voluntartr ffies.the
retum.after the deadline without notice from the BIR.
MPOSITTON OF THE TEV LUATION BOARD S
Prima fact evidence,of false oi.fraudulent return:
2) !,.FOUr,f4) tiePui9 eci'rilniiisigneii :2 • I). •SubStantialoVerstatement (more than 30%) of deductions: . •,
. • 2) Substantlal.under dedaration (more than 30%) of taxable sales., receipts or
''ABATEMiill'OR CANCELLATION OF k TALIABIlItY , Income.
. • •
GROUNDS - .
. -I) 'the- tax i..or any po —rtiOn thereof appears.co be unjuStli or excessively INTEREST
...a.S.Sessed; or IniereSt is an increrhent on any unpaid amount of tax, Assessed at the rite Of
-• The administration and collection oasts involved do not justify the collection. •• twenty percent (20%) per annum, from the date prescribed for payment until'
.of:the amount due. •. • the amount is fully paid.
. .,• . -
F. SUSPENSION OF THE 'RUNNING OF STATUTE OF LIMITATIONS KINDS OF INTEREST
The presaiptive period for assessment and the beginning of distraint or levy or a I) • Deficiency interest — refers to the interest imposed on the amount still
proceeding in court for collection of any tax deficiency may be suspended 'under , . due and collectible from a taxpayer after audit or investigation.
the following situations: tL 2) Delinquency interest — refers to interst for failure of the taxpayer to pay
'• the following:
, TaxPayer's request for reinvestigat was granted;
Taxpayer can not be located in the address given in the return; The amount of tax due on any return required to be-filed;'
' No property of the taxpayer can be located; or The amount of the tax due for which no return is required; or
9) 'The taxpayer is out of the country. A defidency tax, or any surcharge or interest thereon on the due date
appearing in the notice and demand of the OR.

' NOTE: The suspension shall be for the duration of the situation plus 60 days
thereafter.

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3) Interest on extended payment — refers to the interest imposed on the
following cases:
a; Any person who fails to pay the tax or any installment, or, any part of
such amount or installment on or before the date prescribed for its
payment; or • Choose the letter of the correct answer.
Wher the OR has authorized an extension of time within which to pay a
tax or. a.deficiency tax. 1 Preliminary assessment notice is not required in the following cases, except:
Tax deficienpy is due to mathematical error
TAX DELINOIJENCY Tax deficiency is due to unpaid VAT
TAX DEFICIENCY TM DELINQUENCY Tax deficiency is due to unpaid excise taxes
Tax deficiency is due to withholding tax
The amount still due, and Failure of the taxpayer to pay the tax due
collectible from a taxpayer on the date fixed by law or .indicated . in Answer B
'uptin audit or the assessment notice (FAN) or letter of
investigation. demand. 2. A written notice•and demand by the BIR on the taxpayer for the settlement of a due tax
liability that is there definitely set and fixed-
.11; - REFUND OF TAXES Assessment
REQUISITES:. ,
Forfeiture
I) A tax waS erroneously or illegally collected by the BIR; 'Audit engagement letter
2) The taxpayer should file a written claim for refund or tax credit with the CIR
• Institution of criminal, action
WITHIN TWO (2) YEARS from the DATE OF PAYMENT of the tax or
penalty; and •
, • 3) • If the claim for refund is denied by the OR, file a petition for refund with the , 9 Answer A
_CIA: • .
',Within 30 days from. receipt of the denial; AND 3 A pre-assessment notice is required
Within two .(2) ars from the date of payment of the tax or. penalty _ Wien a discrepancy has been determined between the amount of sales declared
. and the purchaseS recorded by the sellers customers. . f

'When a discrepancy has been determined between the tax Withheld and the amount
. actually remitted by the withholding agent.
*c. Wien an article locally-purchased or imported by an exempt person has been sold,
- traded or transferred to non-exempt persons. .
c.'
d. When the deficiency tax is the result of mathematical errors in the computations
appearing on the face of the return.

+ Answer A

4. Which of the following statements is not true?

If a taxpayer is acquitted in a criminal violation of the Tax Code, this acquittal does
not exonerate him from his civil liability to pay the taxes.
A conviction for tax evasion is not a bar for collection of unpaid taxes.
A tax assessment is necessary to a criminal prosecution-for willful attempt to defeat
and evade payment of taxes. .
Criminal proceedings under the Tax Code is now a mode of collection of intemal
revenue taxes, fees or charges:

Answer: C

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5. Where areturn was filed, as a general rule, the prescriphve period for assessment after 11 If the taxpayer did not file a 'thin, what is the prescriptive period for he issuance of
the datelhe return was due or was filed, whichever is later, is within Final Assessment Notice?
a. Three years c. Five years Three (3) years counted from the time of filing or deadline whichever is earlier
b. • Ten years d. Answer not given Three (3) years counted from the time of filing or deadline whichever is later
Ten (10) years counted from the time of filing or deadline for filing whichever is
41 Answer: A. later
Ten (10) years counted from the date of discovery by the Bureau of Internal
6. 'Allan flag his ITR for 2014 on October 15,2015. The last day for BIR to assess is on? Revenue that no return was filed.
Odrotier IS, 2020 c. April 15, 2018
October 15, 2018 d. October 14, 2018 Answer: D

* Answer: B '12. Rosalie, a compensation income earner, filed her income tax return for the taxable year
2012 on March 30, 2013. On May 20, 2016, Rosalie received an assessment notice and
7. Donor's tax return for a donation made on January 15, 2010 was.filed on. Januaty 3t letter of demand covering the taxable year 2012 but the postmark on the envelope shows
2010. Last dayfor BIR to assess is on? April 10, 2016. Her return is not a false and fraudulent return. Can Rosalie raise the
February 28, 2013 c. February 14, 2013 defense of prescription?
d. 'January 31, 2013 d. January IS, 2013 No. The 3 year prescriptive period started to run on April 15,2013, hence, it has not
- yet expired on April 10, 2016.
Answer C. Yes. The 3 year prescriptive period started to run on April 15, 2013, hence, it had
already expired by May 20, 2016.
Based on the preceding number, but assume the return filed was fraudulent and *as No. The prescriptive period started to run on March 30, 2013, hence, the 3 year
discovered on March 31, 2010 The lest day for BIR to assess is on? period ekpired on April 10, 2016.
February 28,2020 c. February 14, 2020 d. Yes. Since the 3-year prescriptive period started to run on .March•30, 2013, it
January 31,2020 4 d. March 31,2020 already expired by May 20, 2016.

, Answer. D Answer .

9 Mr..,A seasOnably riled .a protest and submitted' supporting documents with the BR..
Within how Many days that] the former await the. decision of.latter before he assumes,
that the protest tias been indirectly denied?
a: 180 days c 60 days
.b. 90 days d 30 days
Answer: A
• Yes. The BIR has 5 years from the filing of the protest within which to collect.
10. Fortuna Hotel-Inc., using calendar year accounting period, Overpaid its 2014 second
quarter income tax and it failed to correct the said overpayment on the computation of its
Annual Income Tax. How shall the taxpayer recover the excess. tax paid?
File a claim for refund with the BIRkithin three (3) years from August 29,2014. •
File a claim for refund with the BIR 'Within three (3) years from April 15, 2015
File a claim for refund with the BIR kithin two (2) years from August 29, 2014.
File a claim for refund with the BIR within two (2) years from April 15,2015
13. On March 30, 2012 Emmett Foods, Inc. received a Niro° of assessment and a letter of
demand on its April 15, 2007 final adjustment return from the BIB Emmett Foods then
filed a request for reinvestigation together with the requisite supporting documents on
April 25, 2012. On June 2, 2012, the BIR issued a final assessment reducing the amount
of the tax demanded. Emmett Foods was satisfied with the reduction, it did not do
anything anymore. On April 15, 2017 the BIR garnished the corporation's bark deposits
to answer for the tax liability. Was the BIR action proper? •
Yes. The BIR has 5 years from the issuance of the final assessment within which to
collect. •
No. The taxpayer did not apply for a compromise.
No. Without the taxpayer's prior authority, the BIR action violated the Bank Deposit
Secrecy Law.
Answer: B

Answer: D . 14 Renesmee, Inc. received a notice of assessment and a letter from the BR demanding
the payment of P3 million pesos in deficiency income taxes for the taxable year 2008.
The financial statements of the company show that it has been suffering financial
reverses from the year 2009 up to the present Its asset position shows that it could pay
only R500,000.00 which it offered as a compromise to the BIR. Which among the

622 623

following.may the BIR require to enable it to enter into a compromise with Renesmee,
Inc.?
Renesmee must show it has faithfully paid taxes before 2009.
Renesmee must promise to pay its deficiency when financially able
Renesmee must waive its right to the secrecy of its bank deposits.
Re'hesmee r.nust immediately deposit the p500,000 with the BiR.
:* j,i,Snswer: C
15 As a rule, within what period must a taxpayer elevate to the Court of Tax Appeals a
denial of his application for refund of income tax overpayment?
a. Within 30 days from receipt of the Commissioner's denial of his application for
-refund.,
b Within 30 days from receipt of the denial which must not exceed 2 years from
payment of income tax.
c. Within 2 years from payment of the income taxes sought to be refunded. -
Within 30 days from receipt of the denial or within two years from payment;
•
J • • Answer: B
16. What is the effect on the tax liability of a taxpayer who does not protest an assessment
for deficiency taxes?
a: The tatayer may appeal his liability to the CTA since the assessmenf is t final
decision of the CommisNoper Si the matter.
The SIR could already enforce the collection of the taxpayers liability if it could.
secure authority from the CTA.
c. The taxpayers liability becomes fixed and subject to collection as the assessment
, becomes final and collectible.
The taxpayers liability remains suspended for 180 days from the expiration of the
period to protest..
Answer: C
17 The taxpayer seasonably filed his protest together with all the supporting documents. It is
already July 31, 2016, or 180 days from submission of the protest j but the BIR
Commissioner has not yet decided his protest. Desirous of an early resolution of his
protested assessment, the taxpayer should file his appeal to the Court of Tax Appeals
not later than
a August 31, 2016
j b. August 30, 2016
August 15,2016
August 1, 2016
Answer: B
624
vitien
18 Mr. Alvarez is in the retail business. He received a deficiency tax assessment from the
BIR containing only the computation of the deficiency tax and the penalties, without any
explanation of the factual and legal bases for the assessment. Is the assessment valid?
The assessment is valid; all that Mr. Alvarez has to know is the amount of the
tax.
The assessment is invalid; the law requires a statement of the facts and the
law upon which the assessment is based.
The assessment is valid but Mr. Alvarez can still contest it.
The assessment is invalid because Mr. Alvarez has no way to determine if the
computation is erroneous.
Answer: B
19. Which among the following circumstances negates the prima facie presumption of
correcthess of a HR assessment?
The BIR assessment was seasonably protested within 30 days from receipt,
No preliminary assessment notice was issued prior lathe assessment notice.
Proof that the assessment is utterly without foundation, arbitrary, and
capricious.
. d. The BIR did not include a formal letter of demand to pay the alleged deficiency.
j • Answer: C
20. Taxpayer Andy received on January 3,2017 a preliminary assessment notice (PAN) from
%the SIR, stating that he had fifteen (15) days from its receipt to comment or to file a
protesL Eight (8) days later (or on January 11, 2017), before he. 'could comment or
file a protest, Andy received the final assessment notice (FAN). Decide on the
validity of. the FAN. -
j a. The FAN is invalid; Andy . was not given the chance to respond to the PAN," in
violation of his due process rights
The FAN is invalid for being premature.
• The FAN is valid since it was issued before the right to assess prescribed.
The FAN is valid. There is no legal requirement that the FAN should await the
protest to the PAN because protest toile PAN is not mandatory.
C. Answer: D
21. What is the effect on the tax liability of a taxpayer who does not protest an assessment
for deficiency taxes?
The taxpayer may appeal his liability to the CTA since the assessment is a final.
decision of the Commissioner on the matter.
The BIR could already 'enforce the collection of the taxpayers liability if it could
secure authority from the CTA.
The taxpayers liability becomes fixed and subject to collection as the assessment
becomes final and collectible.
The taxpayers liability remains suspended for 180 days from the expiration of the
petiod to protest.
Answer: C
625
 d. If
If the taxpayer informs the Commissioner of any change in address.

:• Answer: D
22. Statement 1: A tax due from the taxpayer whose amount does not justify the expenses to
be incurred in collecting it may be compromised. 26 Statement 1: A lax return, statement or declaration filed by a taxpayer may be modified,
Statethent 2: In case of false or fraudulent return with intent to evade the tax, changed or amended within three (3) years from the date of filing.
assessment may be validly made on the 101^ year from discovery thereof and collection Statement 2: When a letter of authority or investigation of tax return, statement or
may beeq?cted
. within We (5) years thereafter. declaration has been actually served upon the taxpayer, amendment of such retunt shall
a. Both'statements are correct • no longer be allowed_
Both statements are not correct Statements 1 & 2 are false
Only the first statement is correct Statement 1 is true but statement 2 is false
Only The second statement is correct Statement 1 is false but statement 2 is true
Statements 1 and 2 are true
Answer: B
• • + Answer: D
Statement 1: Where the tax withheld as shown on the tax return and the actual tax
remitted by the withholding agent to the Bureau of Internal Revenue (BIR) do not match, 27. Which of the following rules governs The prescription for violation of the Tax Code?
a, final notice of assessment (FAN) may .be issued without need of a pre-assessment 10 Rub: Prescription starts from the day the law is violated and if the same is not known,
notice. prescription starts from the discovery of violation thereof.
Statement 2: The taxpayer who filed a protest case has 180 days from the filing of the 2s Rule: All violations of any provision of the Tax Code shall prescribe after 10 yrs.
written request for reinvestigation to elevate an appeal to theCourt of Tax Appeals (CTA) Both rules are correct
in case the Commissioner of Internal Revenue (CIR) fails to act on the protest. in rule wrong, 2" rule correct
j a.Bothstitements are correct • both rules are wrong
tyl3oth.stratements.are not Correct l' rulecorreet, 2" rule wrong
1.c, Only the:first statement is orrect
.ti OnlYjthe second statement is 'correct - + Answer: D

+ • answer: q 28 Which of the following statements is incorrect? .

The prescriptive period of three (3) years commences town after the date the return
'Albert received a final assessment notice (FAN) from the BIR on October.30, 20;19. He . is due (last day prescribed by law for filing) or filed, whichever comes later.
submitted his pretest and the supporting documents within the time prescribed by the If the return is filed before the last day for filing, the prescriptive period begins to ftin
Law. Aftei180 days, the subsequent stepis available to him Shall be: only from such last day.
I., Elevate the case on appeal to the CTA, 'alleging inaction of the CIR, within 30 If the return is filed after the last day or due date, the period shall.be Counted from
days, from the 1801^ day since he submitted the supporting documents on his the day the return is filed. •
protest. • d. If the return was amended substantially, the period starts from the due date ofthe
II. Wait for the decision of the Commissioner of Internal Revenue(CIR) and if return.
adverse, appeal the case before the CTA within thirty days.
+ Answer: D
a I only b. II only and 11 d. I or 11
29 Zenaida filed her 2013 Income Tax Return (ITR) on April 10, 2014. On June 20, 2014,
+ Answer: D she filed an amended return which is substantially different from the original return. The
last day to release, mail or send an assessment is-
25 The running of the prescriptive period for assessment is suspended Apri110, 2017 c. June 20. 2017
When the taxpayer requests for a reinvestigation which is granted by the April 15, 2017 d. June 20, 2019
Commissioner of Internal Revenue,
When the taxpayer is out of the Philippines, :• Answer: C
c When the warrant of distraint has been duly served upon the taxpayer and no
property could be located;

626 - 627
 Ney_rbeefiea
30 VVhich of the following prescriptive period for the BAR. to conduct a tax audit is Correct?
a Teu (10) years when no return is filed 36. A taxpayer received an assessment notice on January 5, 2015. He files a motion for
b. Ten (10) years when return filed is false or fraudulent reconsideration with the SIR on January 15, 2015. When is the last day for the
C. Three (3) years from actual filing of return or from the deadline for filing if the return " submission of complete documents to support his motion for reconsideration?
filtd is not fraudulent. a. February 4,2015 c. January 15, 2017
d. mid the above , b. March 16,2015 d. Not required to submit

.44nswer: D Answer: D

31 Marceline tiled her 2013 Income Tax Return and paid - the tax due thereon on Aoril 1, 37. A taxpayer.disdosed the following information:
2014. The last day for the Bureau of Internal Revenue to send an assessment is Date of filing 2011 ITR May 12, 2012
April 1,2017 c. April 15, 2017 Received assessment of October 10, 2013
Apti115, 2019 d. April 15, 2024 deficiency income tax
Protest was filed October 30, 2013
Answer: C Submission of supporting documents December 5,2013
Received denial of protest April 20, 2014
32. Apolonio filed his Income Tax Return (ITR) for taxable year 2013 on May 2,2014. After
an investigation, it was discovered that the tax paid was deficient. The last day for the 'The last day to appeal the decision of the BIR to the Court of.Tax Appeals is
BIR to send an assessment: June 4,2014 - c. May 19, 2014
April 16,2017 c. May 2, 2016 May 20, 2014 d. June 20, 2014
May 2,2017 d. April 15, 2016
Answer: 8
Answer: B
38 Mang Ben filed an income tax return for the calendar year 2011 on Math 10, 2012. The
A taxpayer disclosed to you the following information' BIR issued a Formal Letter of Demand/Final Assessment Notice on April 10, 2014 which •
Dale of filing the Income Tax Return: Mar. 28, 2012 has beconie final, executorty and demandable. When is the last day for the BIR to
Date assessment was received: June 20, 2014 collect?
Request for, reinvestigation was filed:. July 4,2014 a. Peril 10,2019 c. April 15, 2017
Thrilast day for the taxpayer to submit relevantisupporting docUmentS is b. April 15, 2015 d. March 10, 2015
, a. September 4, 2014 c. September 2.2014
6, July 20,2014 d. April IS, 2015 + Answer: A

Answer: C - 39 Which of the statements regarcting collection of tax assessment is incorrect?

Wthin five (5) years from assessment
Assuming that the taxpayer submitted the documents supporting his motion on August Within ten (10) years in case there is no assessment and in case of false or
26, 2014. The Bureau of Internal Revenue should act on the protest not later than fraudulent returns with intent to evade the tax.
a: September 26,2014 c. February 26, 2014 a. I only b. Both I and II
b. April 15, 2015 d. Februal 22, 2015 c. II only d. Neither I nor II

Cs Answer: D • ••':. Answer: D

35 Based on the preceding number, assuming that the SIR did not act on the protest, the 40. The distinction between actual distraint and constructive distraint is that:
last day for the taxpayer to appeal to the Court of Tax Appeals (in case he opted to Actual distraint may be made on the property of any taxpayer whether delinquent or
elevate the case to the CTA after indirect denial) is not while constructive distraint is made on the property only of a delinquent
March 22, 2014 c. March 23, 2014 taxpayer.
March 24, 2015 d. April 15, 2016 In actual distraint, there is a taking of possession, while in constructive distraint, the
taxpayer is merely prohibited from disposing of the property..
:* Answer: 8

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 \cifte 7<cuteMeo
Actual distraint is effected by requiring the taxpayer to sign a receipt of the property First statement is true while second statement is false.
or by the revenue officer preparing and leaving a list of the distrained property or by First statement is false while second statement is true.
seevice of a warrant of distraint or garnishment Both statements are true.
Answer not given Both statements are false.

el
it Answer: B Answer: C

41. The property of a delinquent taxpayer shall not be placed under constructive distraint by
the Commissioner of Internal Revenue if in his opinion the taxpayer is
Retiring from any business subject to tax;
Intending to leave the country or to remove his property' Therefrom;
Doing all possible legal means to dispute the assessment;
d: Performing an act tending to obstruct the proceedings for collecting the tax due..
Answer: C
42 A car dealer cotild not pay his taxes on sales.. The dealer delivered several units of the
car to the Bureau of Internal Revenue in payment of the faxes. Which of the following
statements is correct?
This is a valid payment of the tax.
This is in effect collections of the tax by distraint.
This is a valid forfeiture etproperty.
This is not a valid procedure for collection of a tax..
+ AnsWer D
43 -Acontracterhereby the taxpayer and the government by reciprocal concessions avoid a •
litigation or,put an end to one already commenced,
46 A civil penalty of 50% of the basic tax is imposed in case of -
Failure to file the return on time.
Filing the return with unauthorized revenue officer.
Willful neglect to file the return on time.
Failure to pay the deficiency tax within the time prescribed for payment..
Answer: C
47. In - which of the following cases where the civil penalties of 25% or 50% imposed by the
Tax Codeis not applicable?
In case a false or fraudulent return is willfully made.
Failure to pay the full amount of tax shown on any return required to be filed under
the law.
Failure to file certain information required by the tax code.
Failure or willful neglect to file the tax return within the period prescribed by law:
Answer. C
48. iere any national internal revenue tax is alleged to haveteen erroneously or illegally
' -collectedbythe BIR, the taxpayer should first
- a. File a claim for refund or credit with the CIR

,a. Confiscation c. Distraint File an action for refund with the RTC
b. Compromise d. Suspension File an action for refund with the CTA
Answer not given
Answer: B
Answet: A
44 One of the following violations cannot be subject to compromise?
Failure to keep/preserve books of accounts and accounting records. 49. From the date of payment, claim for refund of taxes erroneously or illegally received or
Failure to keep books of accounts or records in a native language or English. penalties imposed without authority must be filed within:
Failure to have books of accounts audited and have financial statements attached to 2 years c. 5 years
income tax return certified by independent CFA 3 years d. 7 years
Keeping two sets of books of accounts lords.
+ Answer: A
+ Answer: D
50 Bam paid his income tax liability for 2012 on April 15, 2013. It was found out later on
June 30, 2013 that he overpaid by more than P100000. The last day to file a claim for
45 Statement I. The Commissioner of Internal Revenue is authorized to inquire into the
bank deposit of a taxpayer who has filed an application for compromise of his tax liability tax refund is?
by reason of financial incapacity to pay. April 15, 2015 c. June 30. 2015
Statement 2. A compromise for a tax liability on.the ground of financial incapacity to pay April 15, 2016 d. June 30, 2016
shall still involve a payment of tax from the taxpayer at a 'minimum compromise rate of
10% of the basic assessed tax. 4. Answer: A

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56 The following information was disclosed to you.
Erroneous payment of tax April 15, 2011
51. Assuming his claim for fax refund in the preceding number was denied and he denial Claim for refund was filed Feb. 18, 2012
was received on April 30, 2016. The proper remedy available to Bam is? Receipt of BIR decision denying July 5,2012
Appeal to Court of Tax Appeals on or before May 15, 2016 • claim for refund
Apseal to Court of Tax Appeals on or before May 20, 2016
File a motion for reconsideration on or before May 30, 2016 The last day to appeal to the Court of Tax Appeals is -
No more remedy since the 2-year period already expired August 5,2012 c. August 6, 2012
tit August 4,2012 d. April 15, 2013
46 Answer: C
40 Answer: B
52. Mr. Bong filed his 2011.income tax return and paid the tax due on April 1,2012 case of
Overpayment, the last day to file claim for refund is on , 57 Which statement is correct? in case of a tax erroneously collected.
a: April 1,2014 c. April 1,2015 A case for refund may be filed with the Court simultaneously with the filing of a claim
b. April 15, 2014 d. April 15, 2017 for refund with the Bureau of Internal Revenue.
. . A case for refund May be filed with the courteven without filing a claim for refund
4 Answer: A with the Bureau of Internal Revenue.
A claim for .refund-must first be filed with the Bureau of Internal Revenue and a
53. The last day for. the taxpayer to claim refund if the tax was paid in installment is decision of the Bureau must, under any circumstance, be.awaited before a case for
Two-(2) years from the date of first installment payment. refund may be filed with the court.
Two (2) years from the date of final payment. A CUM for refund must first be filed with the-Bureau of Internal Revenue and, in a
c. Five (5) years.from the date of first installment payment given situation, a case for refund may be filed with the court without awaiting the
d. Five (5) years from the date of second installment payment. decision Of the Bureau. •
I.
- Answer B 4, Answer D

54. Statement 1: The filing of quarterly income tax returns and payment of guartedy-inaome 58. Statement 1— The Cornmissioner may refund a tax even without a-claim for refund from
tax by corporations are mere installments and therefore, not the basis in Computing the the taxpayer *hare on the face Of the return upon which the payment was made, such
twaryear prescriptive period for-refund. payment clearly appears to have been erroneously made.
Statement 2: If the tax has beeh Withheld from source (withholding on wages), the Statement 2. No Silii or proceeding shall be brought for refund of lax after two years from
Oreecriptive period for refund is counted from the date it falls due at the end of the' . the date of payment, regardless of any supervening cause that may arise after payment.
taxable year. a. .Both statements are correct.
Tnie, False. c. False. False Both statements are wrong.
False, True d. True, True First statement is correct while second statement is wrong.
d. First- statement is wrong while second statement is correct.
Answer: D
4 Answer: A
55. Arhount of tax per ITR P30,000
Withholding tax 20,000.1, 59 The books of accounts must be kept-in- - —
10 installment payment March 28, 2i11 Any language.depending on the preference of the taxpayer.
2i,d installment July 1, 20114 English language only.
Last day to claim refund Native languageor English only
March 28,2013 c July 1,2013 Native language, English or Spanish
April 15, 2011 d July 1,2016
4 Answer: 0
4 Answer: C

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